Alarm.com Holdings, Inc.

Previous wording

Alarm.com is the leading platform for the intelligently connected property. Our cloud-based platform offers an expansive suite of Internet of Things, or IoT, solutions addressing global opportunities in the residential, multi-family, small business and enterprise commercial markets. Alarm.com’s solution suite includes security, video and video analytics, energy management, access control, electric utility grid management, indoor gunshot detection, water management, health and wellness, personal safety and data-rich emergency response. During 2024, our platforms processed more than 345 billion data points generated by over 160 million connected devices. We believe this scale of subscribers, connected devices and data operations makes us the leader in the connected property market.

Current wording

Alarm.com is the leading platform for intelligently connected properties. Our cloud-based platform offers an expansive suite of Internet of Things, or IoT, solutions addressing global opportunities in the residential, multi-family, small business and enterprise commercial markets. Alarm.com’s solution suite includes security, video surveillance and video analytics, energy management, access control, electric utility grid management, active shooter detection, water management, health and wellness, personal safety and data-rich emergency response. During 2024, our platforms processed more than 345 billion data points generated by over 160 million connected devices. We believe this scale of subscribers, connected devices and data operations makes us the leader in the connected property market.

Previous wording

We primarily generate SaaS and license revenue, our largest source of revenue, through our service provider partners, who resell our services and pay us monthly fees. Our service provider partners sell, install and support Alarm.com solutions that enable residential and commercial property owners to intelligently secure, connect, control and automate their properties. Our subscribers consist of all of the properties maintained by those residential and commercial property owners to which we are delivering at least one of our solutions. We derive a portion of our revenue from licensing our intellectual property to third parties on a per customer basis. SaaS and license revenue represented 69% of our revenue during the three months ended March 31, 2025, as compared to 67% in the same period in the prior year.

Current wording

We primarily generate SaaS and license revenue, our largest source of revenue, through our service provider partners, who resell our services and pay us monthly fees. Our service provider partners sell, install and support Alarm.com solutions that enable residential and commercial property owners to intelligently secure, connect, control and automate their properties. Our subscribers consist of all of the properties maintained by those residential and commercial property owners to which we are delivering at least one of our solutions. We derive a portion of our revenue from licensing our intellectual property to third parties on a per customer basis. SaaS and license revenue represented 67% and 68% of our revenue during the three and six months ended June 30, 2025, respectively, as compared to 67% in the same periods in the prior year.

Previous wording

We also generate SaaS and license revenue from monthly fees charged to service providers on a per subscriber basis for access to our non-hosted software platform, or Software platform. The non-hosted software for interactive security, automation and related solutions is typically deployed and operated by the service provider in its own network operations center. Software license revenue represented 2% of our revenue during each of the three months ended March 31, 2025 and 2024.

Current wording

We also generate SaaS and license revenue from monthly fees charged to service providers on a per subscriber basis for access to our non-hosted software platform, or Software platform. The non-hosted software for interactive security, automation and related solutions is typically deployed and operated by the service provider in its own network operations center. Software license revenue represented 2% of our revenue during each of the three and six months ended June 30, 2025 and 2024.

Previous wording

We also generate revenue from the sale of many types of hardware, including video cameras, video recorders, cellular radio modules, smart thermostats, image sensors, gunshot detection sensors and other peripherals, that enable our solutions. Our hardware and other revenue also includes our revenue from the sale of perpetual licenses that provide our customers in the commercial market the right to use our video surveillance software for an indefinite period of time in exchange for a one-time license fee. Additionally, our hardware and other revenue includes our revenue from the sale of licenses that provide our customers the right to use our gunshot detection solution in exchange for license fees. Hardware and other revenue represented 31% of our revenue during the three months ended March 31, 2025, as compared to 33% in the same period in the prior year. We typically expect hardware and other revenue to fluctuate as a percentage of total revenue.

Current wording

We also generate revenue from the sale of many types of hardware, including video cameras, video recorders, cellular radio modules, smart thermostats, image sensors, gunshot detection sensors and other peripherals, that enable our solutions. Our hardware and other revenue also includes our revenue from the sale of perpetual licenses that provide our customers in the commercial market the right to use our video surveillance software for an indefinite period of time in exchange for a one-time license fee. Additionally, our hardware and other revenue includes our revenue from the sale of licenses that provide our customers the right to use our gunshot detection solution in exchange for license fees. Hardware and other revenue represented 33% and 32% of our revenue during the three and six months ended June 30, 2025, respectively, as compared to 33% in the same periods in the prior year. We typically expect hardware and other revenue to fluctuate as a percentage of total revenue.

Previous wording

•SaaS and license revenue increased 9% to $163.8 million during the three months ended March 31, 2025 from $150.3 million during the three months ended March 31, 2024. Included in SaaS and license revenue was software license revenue, which decreased to $4.7 million during the three months ended March 31, 2025 from $5.2 million during the three months ended March 31, 2024.

Current wording

•SaaS and license revenue increased 9% to $170.0 million during the three months ended June 30, 2025 from $155.9 million during the three months ended June 30, 2024. SaaS and license revenue increased 9% to $333.8 million during the six months ended June 30, 2025 from $306.3 million during the six months ended June 30, 2024. Included in SaaS and license revenue was software license revenue, which decreased to $4.5 million during the three months ended June 30, 2025 from $5.2 million during the three months ended June 30, 2024. Software license revenue decreased to $9.2 million during the six months ended June 30, 2025 from $10.4 million during the six months ended June 30, 2024.

Previous wording

•Net income increased to $27.7 million during the three months ended March 31, 2025, as compared to $23.4 million during the three months ended March 31, 2024. Net income attributable to common stockholders increased to $28.0 million during the three months ended March 31, 2025, as compared to $23.6 million during the three months ended March 31, 2024.

Current wording

•Net income increased to $34.2 million during the three months ended June 30, 2025, as compared to $32.5 million during the three months ended June 30, 2024. Net income increased to $61.9 million during the six months ended June 30, 2025, as compared to $55.9 million during the six months ended June 30, 2024. Net income attributable to common stockholders increased to $34.6 million during the three months ended June 30, 2025, as compared to $33.5 million during the three months ended June 30, 2024. Net income attributable to common stockholders increased to $62.5 million during the six months ended June 30, 2025, as compared to $57.1 million during the six months ended June 30, 2024.

Previous wording

•Non-GAAP adjusted EBITDA, a non-GAAP measurement of operating performance, increased to $43.5 million during the three months ended March 31, 2025 from $37.0 million during the three months ended March 31, 2024.

Current wording

•Non-GAAP adjusted EBITDA, a non-GAAP measurement of operating performance, increased to $48.4 million during the three months ended June 30, 2025 from $42.8 million during the three months ended June 30, 2024. Non-GAAP adjusted EBITDA increased to $92.0 million during the six months ended June 30, 2025 from $79.9 million during the six months ended June 30, 2024.

Previous wording

Please see Non-GAAP Measures below in this section of this Quarterly Report for a discussion of the limitations of non-GAAP adjusted EBITDA (a non-GAAP measure) and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable measurement in accordance with accounting principles generally accepted in the United States, or GAAP, for the three months ended March 31, 2025 and 2024.

Current wording

Please see Non-GAAP Measures below in this section of this Quarterly Report for a discussion of the limitations of non-GAAP adjusted EBITDA (a non-GAAP measure) and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable measurement in accordance with accounting principles generally accepted in the United States, or GAAP, for the three and six months ended June 30, 2025 and 2024.

Previous wording

The global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of the Macroeconomic Conditions. These Macroeconomic Conditions have and may continue to create supply chain disruptions, inventory disruptions, and fluctuations in economic growth, including fluctuations in employment rates, inflation, tariffs, energy prices and consumer sentiment. It remains difficult to assess or predict the ultimate duration and economic impact of the Macroeconomic Conditions. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2025, which is increasingly true in periods of extreme uncertainty, such as the uncertainty caused by the Macroeconomic Conditions. Prolonged uncertainty with respect to the Macroeconomic Conditions could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.

Current wording

The global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of the Macroeconomic Conditions. These Macroeconomic Conditions have and may continue to create supply chain disruptions, inventory disruptions, and fluctuations in economic growth, including fluctuations in employment rates, inflation, tariffs, energy prices and consumer sentiment. It remains difficult to assess or predict the ultimate duration and economic impact of the Macroeconomic Conditions. The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2025, which is increasingly true in periods of extreme uncertainty, such as the uncertainty caused by the Macroeconomic Conditions. Prolonged uncertainty with respect to the Macroeconomic Conditions could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.

Previous wording

Non-GAAP adjusted EBITDA is a non-GAAP measure that represents our net income before interest expense, interest income, certain activity within other expense, net, provision for income taxes, amortization and depreciation expense, stock-based compensation expense, acquisition-related expense, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation. We do not consider these items to be indicative of our core operating performance. The non-cash items include amortization and depreciation expense; amortization of debt issuance costs for the January 20, 2021 issuance of $500.0 million aggregate principal amount of 0% convertible senior notes due January 15, 2026, or the 2026 Notes, included in interest expense; amortization of debt issuance costs for the May 31, 2024 issuance of $500.0 million aggregate principal amount of 2.25% convertible senior notes due June 1, 2029, or the 2029 Notes, included in interest expense; and stock-based compensation expense related to restricted stock units and other forms of equity compensation, including, but not limited to, the sale of common stock. We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

Current wording

Non-GAAP adjusted EBITDA is a non-GAAP measure that represents our net income before interest expense, interest income, certain activity within other expense, net, provision for income taxes, income from equity method investments, net, amortization and depreciation expense, stock-based compensation expense, acquisition-related expense, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation. We do not consider these items to be indicative of our core operating performance. The non-cash items include amortization and depreciation expense; income from equity method investments, net; amortization of debt issuance costs for the January 20, 2021 issuance of $500.0 million aggregate principal amount of 0% convertible senior notes due January 15, 2026, or the 2026 Notes, included in interest expense; amortization of debt issuance costs for the May 31, 2024 issuance of $500.0 million aggregate principal amount of 2.25% convertible senior notes due June 1, 2029, or the 2029 Notes, included in interest expense; and stock-based compensation expense related to restricted stock units and other forms of equity compensation, including, but not limited to, the sale of common stock. We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

Previous wording

We record interest expense primarily related to our 2026 Notes and 2029 Notes. We exclude interest expense in calculating non-GAAP adjusted EBITDA because we believe the exclusion of interest expense will provide for more meaningful information about our financial performance. We exclude interest income and certain activity within other expense, net including gains, losses or impairments on investments without readily determinable fair values and other assets, gains and losses from equity method investments, gains on settlement fees and losses on the early extinguishment of debt, when applicable, from non-GAAP adjusted EBITDA because we do not consider it part of our ongoing results of operations. We exclude the impact related to our provision for income taxes from non-GAAP adjusted EBITDA because we do not consider this tax adjustment to be part of our ongoing results of operations.

Current wording

We record interest expense primarily related to our 2026 Notes and 2029 Notes. We exclude interest expense in calculating non-GAAP adjusted EBITDA because we believe the exclusion of interest expense will provide for more meaningful information about our financial performance. We exclude interest income and certain activity within other expense, net including gains, losses or impairments on investments without readily determinable fair values and other assets, gains on settlement fees and losses on the early extinguishment of debt, when applicable, from non-GAAP adjusted EBITDA because we do not consider it part of our ongoing results of operations. We exclude the impact related to our provision for income taxes and income from equity method investments, net from non-GAAP adjusted EBITDA because we do not consider these adjustments to be part of our ongoing results of operations.

Previous wording

Non-GAAP adjusted EBITDA is a key measure our management uses to understand and evaluate our core operating performance and trends to generate future operating plans, to make strategic decisions regarding the allocation of capital, and to make investments in initiatives that are focused on cultivating new markets for our solutions. In particular, the exclusion of certain expenses in calculating non-GAAP adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related adjustments and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance. Non-GAAP adjusted EBITDA is not a measure calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Please see Non-GAAP Measuresin this section for a discussion of the limitations of non-GAAP adjusted EBITDA and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measurement, for the three months ended March 31, 2025 and 2024.

Current wording

Non-GAAP adjusted EBITDA is a key measure our management uses to understand and evaluate our core operating performance and trends to generate future operating plans, to make strategic decisions regarding the allocation of capital, and to make investments in initiatives that are focused on cultivating new markets for our solutions. In particular, the exclusion of certain expenses in calculating non-GAAP adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related adjustments and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance. Non-GAAP adjusted EBITDA is not a measure calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Please see Non-GAAP Measuresin this section for a discussion of the limitations of non-GAAP adjusted

Previous wording

Our cost of SaaS and license revenue primarily includes the amounts paid to wireless network providers and, to a lesser extent, the costs of running our network operations centers which are expensed as incurred, as well as patent and royalty costs in connection with technology licensed from third-party providers and amounts paid to distributed energy resource providers. Our cost of SaaS and license revenue also includes our cost of software license revenue, which primarily includes the payroll and payroll-related costs of the department dedicated to providing service exclusively to those service providers that host the Software platform. As of March 31, 2025 and 2024, we had 76 and 75 employees who manufacture hardware for oursuite of IoT solutions, respectively. Our cost of hardware and other revenue primarily includes cost of raw materials, tooling, freight shipments and amounts paid to our third-party manufacturer for production and fulfillment of our cellular radio modules and image sensors, and procurement costs for our video cameras, video recorders, smart thermostats and gunshot detection sensors, which we purchase from an original equipment manufacturer, and other devices. Cost of hardware and other revenue also includes material costs and labor cost related to our employees who manufacture hardware for oursuite of IoT solutions. Additionally, our cost of hardware and other revenue includes royalty costs in connection with technology licensed from third-party providers.

Current wording

Our cost of SaaS and license revenue primarily includes the amounts paid to wireless network providers and, to a lesser extent, the costs of running our network operations centers which are expensed as incurred, as well as patent and royalty costs in connection with technology licensed from third-party providers and amounts paid to distributed energy resource providers. Our cost of SaaS and license revenue also includes our cost of software license revenue, which primarily includes the payroll and payroll-related costs of the department dedicated to providing service exclusively to those service providers that host the Software platform. As of June 30, 2025 and 2024, we had 75 and 79 employees who manufacture hardware for oursuite of IoT solutions, respectively. Our cost of hardware and other revenue primarily includes cost of raw materials, tooling, freight shipments and amounts paid to our third-party manufacturer for production and fulfillment of our cellular radio modules and image sensors, and procurement costs for our video cameras, video recorders, smart thermostats and gunshot detection sensors, which we purchase from an original equipment manufacturer, and other devices. Cost of hardware and other revenue also includes material costs and labor cost related to our employees who manufacture hardware for oursuite of IoT solutions. Additionally, our cost of hardware and other revenue includes royalty costs in connection with technology licensed from third-party providers.

Previous wording

In April 2025, the U.S. government announced a baseline tariff of 10% on all products imported into the United States (with certain limited exceptions) and additional individualized tariffs based on country of origin at different rates per country. Certain of these tariffs have been subsequently paused or modified, and the situation remains fluid. The United States and/or countries into which we import products may, in the future, adjust and/or impose new quotas, duties, tariffs or reciprocal tariffs or other restrictions. A significant portion of our hardware is produced outside the United States, including in Vietnam, Thailand and Taiwan. The ultimate impact of any tariffs will depend on various factors, including how long such tariffs remain in place, the ultimate levels of such tariffs and how other countries respond to the U.S. tariffs. Given these tariffs did not become effective until April 2025, there was no impact to our cost of hardware revenue for these new tariffs during the three months ended March 31, 2025. As we look forward, we continue to monitor the changes in tariffs and consider whether we will pass through some or all of the cost of the tariffs to our customers consistent with our contractual rights. Depending on how much, if any, of the cost of tariffs we pass through to our customers, our hardware revenue margins may be impacted. If tariffs are increased through reinstatement of the previously announced tariffs or are expanded to apply to more of our products, such actions may increase our cost of hardware revenue and reduce our hardware revenue margins further. We continue to closely monitor changes in tariff policy and retain flexibility in response.

Current wording

In April 2025, the U.S. government announced a baseline tariff of 10% on all products imported into the United States (with certain limited exceptions) and additional individualized tariffs based on country of origin at different rates per country. Certain of these tariffs have been subsequently paused or modified, and the situation remains fluid. The United States and/or countries into which we import products may, in the future, adjust and/or impose new quotas, duties, tariffs or reciprocal tariffs or other restrictions. A significant portion of our hardware is produced outside the United States, including in Vietnam, Thailand and Taiwan. The U.S. government has announced several tariff framework agreements, and when the terms of such agreements are finalized, we will assess their potential impact on our business. The ultimate impact of any tariffs will depend on various factors, including how long such tariffs remain in place, the ultimate levels of such tariffs and how other countries respond to the U.S. tariffs. During the second quarter of 2025, we passed through most of the cost of the baseline tariffs to our customers consistent with our contractual rights. Our hardware revenue margins are expected to decline slightly in the future because a component of our hardware revenue now incorporates a pass-through cost. If tariffs are modified beyond the baseline tariff of 10% or are expanded to apply to more of our products, such actions may increase our cost of hardware revenue and reduce our hardware revenue margins further. We continue to closely monitor changes in tariff policy and retain flexibility in response.

Previous wording

Our operating expenses consist of sales and marketing, general and administrative, research and development and amortization and depreciation expenses. Salaries, bonuses, stock-based compensation, benefits and other personnel related costs are the most significant components of each of these expense categories, excluding amortization and depreciation. We include stock-based compensation expense in connection with the grant of restricted stock units and other forms of equity compensation, including equity compensation with performance conditions, in the applicable operating expense category based on the respective equity award recipient’s function (sales and marketing, general and administrative or research and development). We grew from 2,002 employees as of March 31, 2024 to 2,020 employees as of March 31, 2025, and grew from 2,010 employees as of December 31, 2024. We expect to continue to hire new employees to support the projected future growth of our business.

Current wording

Our operating expenses consist of sales and marketing, general and administrative, research and development and amortization and depreciation expenses. Salaries, bonuses, stock-based compensation, benefits and other personnel related costs are the most significant components of each of these expense categories, excluding amortization and depreciation. We include stock-based compensation expense in connection with the grant of restricted stock units and other forms of equity compensation, including equity compensation with performance conditions, in the applicable operating expense category based on the respective equity award recipient’s function (sales and marketing, general and administrative or research and development). We grew from 2,033 employees as of June 30, 2024 to 2,048 employees as of June 30, 2025, and grew from 2,020 employees as of March 31, 2025. We may continue to hire new employees to support the projected future growth of our business.

Previous wording

The number of employees in sales and marketing functions increased from 564 as of March 31, 2024 to 579 as of March 31, 2025 and increased from 572 as of December 31, 2024. We expect to continue to invest in our sales and marketing activities to expand our business both domestically and internationally and we expect to increase our marketing expense in 2025 as compared to 2024. We intend to increase the size of our sales force and our service provider partner support team to provide additional support to our existing service provider partner base to drive their productivity in selling our solutions as well as to enroll new service provider partners in North America and in international markets.

Current wording

The number of employees in sales and marketing functions increased from 576 as of June 30, 2024 to 599 as of June 30, 2025 and increased from 579 as of March 31, 2025. We expect to continue to invest in our sales and marketing activities to expand our business both domestically and internationally and we expect to increase our marketing expense in 2025 as compared to 2024. We may increase the size of our sales force and our service provider partner support team to provide additional support to our existing service provider partner base to drive their productivity in selling our solutions as well as to enroll new service provider partners in North America and in international markets.

Previous wording

The number of employees in general and administrative functions increased from 224 as of March 31, 2024 to 236 as of March 31, 2025 and decreased from 237 as of December 31, 2024. Excluding intellectual property litigation and acquisition-related expense, we expect general and administrative costs to increase prospectively as our business grows. This includes cost increases related to human resources, accounting, finance, and legal personnel, additional external legal, audit fees and other expenses associated with regulations governing public companies. While somewhat unpredictable, we also expect to continue to incur costs related to litigation involving intellectual property. See the section of this Quarterly Report titled "Legal Proceedings" for additional information regarding litigation matters.

Current wording

The number of employees in general and administrative functions increased from 223 as of June 30, 2024 to 238 as of June 30, 2025 and increased from 236 as of March 31, 2025. Excluding intellectual property litigation and acquisition-related expense, we expect general and administrative costs to increase prospectively as our business grows. This includes cost increases related to human resources, accounting, finance, and legal personnel, additional external legal, audit fees and other expenses associated with regulations governing public companies. While somewhat unpredictable, we also expect to continue to incur costs related to litigation involving intellectual property. See the section of this Quarterly Report titled "Legal Proceedings" for additional information regarding litigation matters.

Previous wording

The number of employees in research and development functions decreased from 1,139 as of March 31, 2024 to 1,129 as of March 31, 2025 and increased from 1,127 as of December 31, 2024. Our research and development efforts are focused on innovating new features and enhancing the functionality of our platforms and the solutions we offer to our service provider partners and subscribers. We will also continue to invest in efforts to extend our platforms to adjacent markets and internationally to maintain our leadership position in the development of intelligently connected property technology, and continued enhancement of our Partner Services Platform, a comprehensive suite of enterprise-grade business management solutions for our service provider partners.

Current wording

The number of employees in research and development functions decreased from 1,155 as of June 30, 2024 to 1,136 as of June 30, 2025 and increased from 1,129 as of March 31, 2025. Our research and development efforts are focused on innovating new features and enhancing the functionality of our platforms and the solutions we offer to our service provider partners and subscribers. We will also continue to invest in efforts to extend our platforms to adjacent markets and internationally to maintain our leadership position in the development of intelligently connected property technology, and continued enhancement of our Partner Services Platform, a comprehensive suite of enterprise-grade business management solutions for our service provider partners.

Previous wording

Other expense, net primarily consists of non-operating and miscellaneous expense and income.

Current wording

Other expense, net primarily consists of non-operating and miscellaneous expense and income, including the impacts of fluctuations in foreign currency exchange rates.

Previous wording

We are subject to U.S. federal, state and local income taxes as well as foreign income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. As a result, we recognize tax liabilities based on estimates of whether additional taxes will be due. For the three months ended March 31, 2025, our effective tax rate was below the 21.0% statutory rate primarily due to 2025 research and development tax credits claimed and the foreign derived intangible income deduction, partially offset by the impact of state taxes, foreign withholding taxes and other nondeductible expenses. We recognize stock-based compensation tax shortfalls and excess tax windfall benefits on a discrete basis during the quarter in which they occur, and we anticipate our effective tax rate will vary from quarter to quarter depending on our stock price as well as the vesting and exercises of various forms of equity compensation under our equity incentive plans each period, including restricted stock units and stock options.

Current wording

We are subject to U.S. federal, state and local income taxes as well as foreign income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. As a result, we recognize tax liabilities based on estimates of whether additional taxes will be due. For the three and six months ended June 30, 2025, our effective tax rate was below the 21.0% statutory rate primarily due to 2025 research and development tax credits claimed, the foreign derived intangible income deduction and a favorable true-up adjustment of our 2024 income tax provision estimate associated with research and development tax credits, partially offset by the impact of state taxes, foreign withholding taxes and other nondeductible expenses. We recognize stock-based compensation tax shortfalls and excess tax windfall benefits on a discrete basis during the quarter in which they occur, and we anticipate our effective tax rate will vary from quarter to quarter depending on our stock price as well as the vesting and exercises of various forms of equity compensation under our equity incentive plans each period, including restricted stock units and stock options.

Previous wording

Comparison of the Three Months Ended March 31, 2025 to March 31, 2024

Current wording

Comparison of the Three and Six Months Ended June 30, 2025 to June 30, 2024

Previous wording

The following tables in this section set forth our selected condensed consolidated statements of operations (in thousands), data for the percentage change and data as a percentage of revenue for the three months ended March 31, 2025 and March 31, 2024.

Current wording

The following tables in this section set forth our selected condensed consolidated statements of operations (in thousands), data for the percentage change and data as a percentage of revenue for the three and six months ended June 30, 2025 and June 30, 2024.

Previous wording

The $15.5 million increase in total revenue for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily the result of a $13.5 million, or 9%, increase in our SaaS and license revenue, and a $2.1 million, or 3%, increase in our hardware and other revenue. Our software license revenue included within SaaS and license revenue decreased $0.5 million to $4.7 million during the three months ended March 31, 2025 as compared to $5.2 million during the same period in the prior year primarily due to the result of the continuing transition of customers from non-hosted software to our cloud based hosted platform. The SaaS and license revenue for the Alarm.com segment increased $9.8 million for the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2024. The SaaS and license revenue for our Other segment increased $3.7 million for the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions as well as our property management solution. The increase in hardware and other revenue for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily from the $1.7 million increase in hardware and other revenue, net of intersegment eliminations, in the Alarm.com segment arising from an increase in the average selling price of cameras sold. Hardware and other revenue, net of intersegment eliminations, in our Other segment increased $0.4 million for the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to increased sales related to our property management solution.

Current wording

The $20.5 million increase in total revenue for the three months ended June 30, 2025 as compared to the same period in the prior year was primarily the result of a $14.1 million, or 9%, increase in our SaaS and license revenue, and a $6.4 million, or 8%, increase in our hardware and other revenue. Our software license revenue included within SaaS and license revenue decreased $0.7 million to $4.5 million during the three months ended June 30, 2025 as compared to $5.2 million during the same period in the prior year primarily due to the result of the continuing transition of customers from non-hosted software to our cloud-based hosted platform. The SaaS and license revenue for the Alarm.com segment increased $10.2 million for the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2024. The SaaS and license revenue for our Other segment increased $3.9 million for the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions as well as our property management solution. The increase in hardware and other revenue for the three months ended June 30, 2025 as compared to the same period in the prior year was primarily from the $5.6 million increase in hardware and other revenue, net of intersegment eliminations, in the Alarm.com segment arising from an increase in the volume of video cameras sold. Hardware and other revenue, net of intersegment eliminations, in our Other segment increased $0.8 million for the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to increased sales related to our property management solution.

Previous wording

The $1.7 million increase in cost of revenue for the three months ended March 31, 2025 as compared to the same period in the prior year was the result of a $1.1 million, or 6%, increase in cost of SaaS and license revenue, and a $0.6 million, or 1%, increase in cost of hardware and other revenue. Our cost of software license revenue included within cost of SaaS and license revenue was $0.1 million and $0.2 million for the three months ended March 31, 2025 and 2024, respectively. The cost of SaaS and license revenue for the Other segment increased $0.8 million during the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions, which drove a corresponding increase in amounts paid to distributed energy resource providers. The cost of SaaS and license revenue for the Alarm.com segment increased $0.3 million during the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers. The cost of hardware and other revenue for the Alarm.com segment increased $0.3 million during the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to a change in the mix of product sales to more hardware with higher costs. The cost of hardware and other revenue for the Other segment increased $0.3 million during the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to an increase in the number of hardware units shipped related to our property management solution.

Current wording

The $6.2 million increase in cost of revenue for the three months ended June 30, 2025 as compared to the same period in the prior year was the result of a $4.6 million, or 8%, increase in cost of hardware and other revenue, and a $1.6 million, or 7%, increase in cost of SaaS and license revenue. Our cost of software license revenue included within cost of SaaS and license revenue was $0.1 million for each of the three months ended June 30, 2025 and 2024. The cost of hardware and other revenue for the Alarm.com segment increased $4.0 million during the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in the number of hardware units shipped. The cost of hardware and other revenue for the Other segment increased $0.6 million during the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in the number of hardware units shipped related to our property management solution. The cost of SaaS and license revenue for the Other segment increased $1.1 million during the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions, which drove a corresponding increase in amounts paid to distributed energy resource providers. The cost of SaaS and license revenue for the Alarm.com segment increased $0.5 million during the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers.

Previous wording

Cost of hardware and other revenue as a percentage of hardware and other revenue was 76% for the three months ended March 31, 2025 and 77% for the same period in the prior year. The decrease in cost of hardware and other revenue as a percentage of hardware and other revenue for the three months ended March 31, 2025 as compared to the same period in the prior year is primarily a reflection of the mix of product sales during the periods. Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 13% for three months ended March 31, 2025 as compared to 14% for the same period in the prior year. Cost of software license revenue as a percentage of software license revenue was 3% for each of the three months ended March 31, 2025 and 2024.

Current wording

Cost of hardware and other revenue as a percentage of hardware and other revenue was 76% for each of the three months ended June 30, 2025 and 2024. Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 14% for each of the three months ended June 30, 2025 and 2024. Cost of software license revenue as a percentage of software license revenue was 2% for the three months ended June 30, 2025 as compared to 3% for the same period in the prior year.

Previous wording

The $3.1 million increase in sales and marketing expense for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily due to a $1.5 million increase in personnel and related costs for our Alarm.com segment, attributable in part to increases in the headcount for our sales team to support our growth, and a $0.6 million increase in marketing expense for our Alarm.com segment. Personnel and related costs includes salary, benefits, stock-based compensation and travel expenses. Sales and marketing expense from our Other segment increased $1.0 million for the three months ended March 31, 2025 as compared to the same period in the prior year, primarily due to an increase in personnel and related costs, attributable in part to increases in the headcount for our sales team. The number of employees in sales and marketing functions increased from 564 as of March 31, 2024 to 579 as of March 31, 2025.

Current wording

The $3.3 million increase in sales and marketing expense for the three months ended June 30, 2025 as compared to the same period in the prior year was primarily due to a $1.5 million increase in personnel and related costs for our Alarm.com segment, attributable in part to increases in the headcount for our sales team to support our growth, and a $1.0 million increase in marketing expense for our Alarm.com segment. Personnel and related costs includes salary, benefits, stock-based compensation and travel expenses. Sales and marketing expense from our Other segment increased $0.7 million for the three months ended June 30, 2025 as compared to the same period in the prior year, primarily due to an increase in personnel and related costs, attributable in part to increases in the headcount for our sales team.

Previous wording

The $2.3 million decrease in general and administrative expense for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily due to a $4.3 million decrease in the provision for credit losses for our Alarm.com segment, driven by a $4.0 million loan we provided to an affiliated entity of one of our distribution partners. This decrease in general and administrative expense was partially offset by a $1.0 million increase in consulting costs. General and administrative expenses from our Other segment increased by $1.2 million for the three months ended March 31, 2025 as compared to the same period in the prior year, primarily due to an increase in the provision for credit losses. The number of employees in general and administrative functions increased from 224 as of March 31, 2024 to 236 as of March 31, 2025.

Current wording

The $1.3 million decrease in general and administrative expense for the six months ended June 30, 2025 as compared to the same period in the prior year was primarily due to a $2.5 million decrease in the provision for credit losses for our Alarm.com segment primarily related to credit loss expense recorded during the six months ended June 30, 2024 related to a loan we previously provided to an affiliated entity of one of our distribution partners that did not occur during the six months ended June 30, 2025. This decrease in general and administrative expense was partially offset by a $0.7 million increase in personnel and related costs for our Alarm.com segment due in part to increases in the headcount to support our operational growth. General and administrative expenses from our Other segment increased by $0.7 million for the six months ended June 30, 2025 as compared to the same period in the prior year, primarily due to an increase in legal costs. The number of employees in general and administrative functions increased from 223 as of June 30, 2024 to 238 as of June 30, 2025.

Previous wording

The $2.4 million increase in research and development expense for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily due to a $0.7 million increase in our expenses for external consultants, a $0.7 million increase in expenses for software licenses and a $0.2 million increase in personnel and related costs for our Alarm.com segment. Research and development expense from our Other segment increased by $0.6 million for the three months ended March 31, 2025 as compared to the same period in the prior year, primarily due to an increase in personnel and related costs attributable in part to an increase in headcount of employees in research and development functions. The overall number of employees in research and development functions decreased from 1,139 as of March 31, 2024 to 1,129 as of March 31, 2025.

Current wording

The $5.8 million increase in research and development expense for the six months ended June 30, 2025 as compared to the same period in the prior year was primarily due to a $1.8 million increase in our expenses for external consultants, a $1.1 million increase in expenses for software licenses, a $0.4 million increase in rent expense and a $0.3 million increase in personnel and related costs for our Alarm.com segment. Research and development expense from our Other segment increased by $1.2 million for the six months ended June 30, 2025 as compared to the same period in the prior year due to an increase in personnel and related costs. The overall number of employees in research and development functions decreased from 1,155 as of June 30, 2024 to 1,136 as of June 30, 2025.

Previous wording

Amortization and depreciation decreased $0.3 million for the three months ended March 31, 2025, as compared to the same period in the prior year, primarily due to changes in amortization expense related to the intangible assets we previously acquired, partially offset by the intangible assets that were acquired in connection with the purchase of 81% of the issued and outstanding shares of capital stock of CHeKT on February 10, 2025.

Current wording

Amortization and depreciation increased $0.5 million and $0.1 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year, primarily due to an increase in depreciation expense related to property and equipment as well as intangible assets that were acquired in connection with the purchase of 81% of the issued and outstanding shares of capital stock of CHeKT, Inc., or CHeKT, on February 10, 2025.

Previous wording

Interest expense increased $3.5 million for the three months ended March 31, 2025, as compared to the same period in the prior year, primarily due to the interest expense and amortization of the debt issuance costs related to the 2029 Notes.

Current wording

Interest expense increased $2.4 million and $5.9 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year, primarily due to the interest expense and amortization of the debt issuance costs related to the 2029 Notes.

Previous wording

Interest income increased $3.8 million for the three months ended March 31, 2025, as compared to the same period in the prior year, primarily due to an increase in interest income earned on cash and cash equivalents from higher amounts of cash and cash equivalents during the three months ended March 31, 2025 as compared to the same period in the prior year.

Current wording

Interest income increased $1.0 million and $4.8 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year, primarily due to an increase in interest income earned on cash and cash equivalents from higher amounts of cash and cash equivalents during the six months ended June 30, 2025 as compared to the same period in the prior year.

Previous wording

Other expense, net increased $2.4 million for the three months ended March 31, 2025, as compared to the same period in the prior year, primarily due to a $2.3 million unrealized loss on equity securities during the three months ended March 31, 2025, which did not occur during the three months ended March 31, 2024.

Current wording

Other expense, net decreased $1.1 million for the three months ended June 30, 2025 as compared to the same period in the prior year, primarily due to a $1.9 million gain on fluctuations in foreign currency exchange rates and a $0.5 million reduction in expenses related to a program to help our service providers resell our solutions and hardware to our subscribers. These decreases in other expense, net were partially offset by a $1.5 million unrealized loss on equity securities during the three months ended June 30, 2025, which did not occur during the three months ended June 30, 2024. Other expense, net increased $1.3 million for the six months ended June 30, 2025 as compared to the same period in the prior year, primarily due to a $3.8 million unrealized loss on equity securities during the six months ended June 30, 2025, which did not occur during the six months ended June 30, 2024. This increase in other expense, net was partially offset by a $1.6 million gain on fluctuations in foreign currency exchange rates and a $0.8 million reduction in expenses related to a program to help our service providers resell our solutions and hardware to our subscribers.

Previous wording

The provision for income taxes increased by $4.6 million for the three months ended March 31, 2025, as compared to the same period in the prior year. Our effective tax rate was 20.9% for the three months ended March 31, 2025, as compared to 10.5% for the same period in the prior year. The increase in the provision for income taxes for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily due to the increase in income before income taxes, an increase in foreign withholding taxes, a tax shortfall in employee stock-based compensation during the three months ended March 31, 2025 as opposed to a windfall tax benefit recognized during the three months ended March 31, 2024 and an increase in other nondeductible expenses, partially offset by an increase in our research and development income tax credits. Further, the net $1.7 million tax benefit recognized during the three months ended March 31, 2024 from the closure of the 2018 and 2019 Internal Revenue Service examination did not recur during the three months ended March 31, 2025.

Current wording

The provision for income taxes increased by $4.6 million and $9.1 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year. Our effective tax rate was 13.8% and 17.1% for the three and six months ended June 30, 2025, respectively, as compared to 2.6% and 6.1% for the same periods in the prior year. The increase in the provision for income taxes for the three and six months ended June 30, 2025 as compared to the same periods in the prior year was primarily due to the increase in income before income taxes, a tax shortfall in employee stock-based compensation during the three and six months ended June 30, 2025 as opposed to a windfall tax benefit recognized during the three and six months ended June 30, 2024 and a less favorable true-up adjustment of our 2024 income tax provision estimate associated with research and development tax credits recorded during the three months ended June 30, 2025 as compared a similar true-up adjustment of our 2023 income tax provision estimate associated with research and development tax credits recorded during the same period in the prior year. These increases in the provision for income taxes for the three and six months ended June 30, 2025 as compared to the same periods in the prior year were partially offset by an increase in our 2025 research and development income tax credits. Further, the net $1.7 million tax benefit recognized during the three months ended March 31, 2024 from the closure of the 2018 and 2019 Internal Revenue Service examination did not recur during the six months ended June 30, 2025.

Previous wording

We have two reportable segm ents: Alarm.com and Other. Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that contributed 93% of our revenue, net of intersegment eliminations, for the three months ended March 31, 2025, as compared to 94% for the same period in the prior year. Our Other segment is focused on researching, developing and offering residential and commercial automation solutions and energy management products and services in adjacent markets. The consolidated subsidiaries that make up our Other segment are in the investment stage and have incurred significant operating expenses relative to their revenue.

Current wording

We have two reportable segm ents: Alarm.com and Other. Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that contributed 92% of our revenue, net of intersegment eliminations, for the three and six months ended June 30, 2025, respectively, as compared to 93% for the same periods in the prior year. Our Other segment is focused on researching, developing and offering residential and commercial automation solutions and energy management products and services in adjacent markets. The consolidated subsidiaries that make up our Other segment are in the investment stage and have incurred significant operating expenses relative to their revenue.

Previous wording

Our Alarm.com segment decreased from 1,780 employees as of March 31, 2024 to 1,774 employees as of March 31, 2025 and increased from 1,773 employees as of December 31, 2024. Our Other segment increased from 222 employees as of March 31, 2024 to 246 employees as of March 31, 2025 and increased from 237 employees as of December 31, 2024. Inter-segment revenue includes sales of hardware between our segments.

Current wording

Our Alarm.com segment decreased from 1,801 employees as of June 30, 2024 to 1,795 employees as of June 30, 2025 and increased from 1,774 employees as of March 31, 2025. Our Other segment increased from 232 employees as of June 30, 2024 to 253 employees as of June 30, 2025 and increased from 246 employees as of March 31, 2025. Inter-segment revenue includes sales of hardware between our segments.

Previous wording

Our SaaS and license revenue for the Alarm.com segment included software license revenue of $4.7 million for the three months ended March 31, 2025, as compared to $5.2 million for the same period in the prior year. There was no software license revenue recorded for the Other segment during the three months ended March 31, 2025 and 2024. Additions to property and equipment were $8.0 million for the Alarm.com segment for the three months ended March 31, 2025, as compared to $3.9 million for the same period in the prior year. Additions to property and equipment were less than $0.1 million for the Other segment for each of the three months ended March 31, 2025 and 2024.

Current wording

Our SaaS and license revenue for the Alarm.com segment included software license revenue of $4.5 million and $9.2 million for the three and six months ended June 30, 2025, respectively, as compared to $5.2 million and $10.4 million for the same periods in the prior year. There was no software license revenue recorded for the Other segment during the three and six months ended June 30, 2025 and 2024. Additions to property and equipment were $5.0 million and $13.0 million for the Alarm.com segment for the three and six months ended June 30, 2025, respectively, as compared to $1.9 million and $5.8 million for the same periods in the prior year. Additions to property and equipment were less than $0.1 million for the Other segment for each of the three and six months ended June 30, 2025 as compared to less than $0.1 million and $0.1 million for the Other segment for the three and six months ended June 30, 2024, respectively.

Previous wording

As of March 31, 2025, we had $1.19 billion in cash and cash equivalents. We consider all highly liquid instruments purchased with an original maturity from the date of purchase of three months or less to be cash equivalents. To date, we have principally financed our operations through cash generated by operating activities and through private and public equity and debt financings. We mitigate the risk of loss for our cash and cash equivalents by depositing funds with a number of reputable financial institutions and monitoring both the risk profiles and investment strategies of money market funds.

Current wording

As of June 30, 2025, we had $1.02 billion in cash and cash equivalents. We consider all highly liquid instruments purchased with an original maturity from the date of purchase of three months or less to be cash equivalents. To date, we have principally financed our operations through cash generated by operating activities and through private and public equity and debt financings. We mitigate the risk of loss for our cash and cash equivalents by depositing funds with a number of reputable financial institutions and monitoring both the risk profiles and investment strategies of money market funds.

Previous wording

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 amended Internal Revenue Code Section 174, or Section 174, to eliminate the option to immediately deduct research and development expenditures in the year incurred, requiring these expenditures to be capitalized and amortized over five years for domestic expenditures and over 15 years for foreign expenditures. We calculated the 2023 federal and state cash tax increase from Section 174 to be $43.5 million, which we paid in April 2024, and we calculated the 2024 federal and state cash tax increase from Section 174 to be $33.5 million, which we paid in April 2025. The Section 174 impact on 2025 cash flows from operating activities will depend on, among other factors, our 2025 operating results and the level of 2025 research and development activity. Based on information currently available to us, we estimate the 2025 Section 174 federal and state cash tax payable for our 2025 taxable income to be in the range of $25.0 million to $30.0 million if the requirement to capitalize and amortize research and development expenditures is not modified or repealed. This estimate is based on the limited information that is currently available and is subject to change. While the largest impact has been to cash flow from operating activities, the impact for domestic research and development expenditures would continue over the five-year amortization period beginning in 2022, but has decreased over that period and is expected to continue to decrease in the upcoming years. There is discussion of prospectively repealing the requirement to capitalize domestic research and development costs, but there is no assurance such legislation will be enacted.

Current wording

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 amended Internal Revenue Code Section 174, or Section 174, to eliminate the option to immediately deduct research and development expenditures in the year incurred, requiring these expenditures to be capitalized and amortized over five years for domestic expenditures and over 15 years for foreign expenditures. We calculated the 2023 federal and state cash tax increase from Section 174 to be $43.5 million, which we paid in April 2024, and we calculated the 2024 federal and state cash tax increase from Section 174 to be $33.5 million, which we paid in April 2025.

Previous wording

We believe our existing cash and cash equivalents and our future cash flows from operating activities will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. Over the final nine months of fiscal year 2025, we expect our capital expenditure requirements to be between $10.0 million and $13.0 million, primarily related to purchases of computer software and equipment as well as the continued build out of our leased and owned office space, excluding any leasehold improvements related to tenant improvement allowances. Maturities of lease liabilities for our various office, data center and equipment leases as of March 31, 2025 are as follows: $10.2 million for the remainder of 2025, $13.0 million in 2026, $13.2 million in 2027, $12.6 million in 2028, $12.2 million in 2029 and $48.6 million in 2030 and thereafter.

Current wording

We believe our existing cash and cash equivalents and our future cash flows from operating activities will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. Over the final six months of fiscal year 2025, we expect our capital expenditure requirements to be between $4.0 million and $7.0 million, primarily related to the continued build out of our leased and owned office space, excluding any leasehold improvements related to tenant improvement allowances, as well as purchases of computer software and equipment. Maturities of lease liabilities for our various office, data center and equipment leases as of June 30, 2025 are as follows: $6.9 million for the remainder of 2025, $13.0 million in 2026, $13.2 million in 2027, $12.6 million in 2028, $12.2 million in 2029 and $48.6 million in 2030 and thereafter.

Previous wording

On January 30, 2025, we entered into a senior secured loan agreement with a service provider partner, under which a term loan was provided to the service provider partner in the original principal amount of $21.5 million, which loan is collateralized by the assets of the service provider partner. Quarterly principal payments begin in the second quarter of 2027. Interest on the outstanding principal accrues at a rate per annum equal to the overnight financing rate published by the Federal Reserve Bank of New York for a period of three months, plus 3.0%. For the first two years of the loan, monthly interest payments can be payable in kind at the election of the borrower. The maturity date of the loan is January 30, 2030.

Current wording

On January 30, 2025, we entered into a senior secured loan agreement with Safe Streets, under which a term loan was provided to them in the original principal amount of $21.5 million, which loan is collateralized by the assets of Safe Streets. Quarterly principal payments begin in the second quarter of 2027. Interest on the outstanding principal accrues at a rate per annum equal to the overnight financing rate published by the Federal Reserve Bank of New York for a period of three months, plus 3.0%. For the first two years of the loan, monthly interest payments can be payable in kind at the election of the borrower. The maturity date of the loan is January 30, 2030.