Alarm.com Holdings, Inc.

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 68% of our revenue during the three and six months ended June 30, 2026, as compared to 67% and 68% in the same periods 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 68% of our revenue during the three and nine months ended September 30, 2026, as compared to 68% in the same periods in the prior year.

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 32% of our revenue during the three and six months ended June 30, 2026, as compared to 33% and 32% in the same periods 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 32% of our revenue during the three and nine months ended September 30, 2026, as compared to 32% 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

Highlights of our financial performance for the periods covered in this Quarterly Report include:

Current wording

Highlights of our financial performance for the periods covered in this Quarterly Report include (dollars in thousands):

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 and six months ended June 30, 2026 and 2025.

Current wording

Please see the Other Business Metrics —Non-GAAP Adjusted EBITDA section below in this Quarterly Report for a discussion of the limitations of non-GAAP adjusted EBITDA (a non-GAAP measure) and Non-GAAP Measures below in this Quarterly Report for 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 nine months ended September 30, 2026 and 2025.

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 and six months ended June 30, 2026 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2026, which is increasingly true in periods of 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 nine months ended September 30, 2026 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2026, which is increasingly true in periods of 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

We regularly monitor a number of financial and operating metrics in order to measure our current performance and estimate our future performance. Our other business metrics may be calculated in a manner different from the way similar business metrics used by other companies are calculated and include the following (dollars in thousands):

Current wording

We regularly monitor a number of financial and operating metrics, including SaaS and license revenue, non-GAAP adjusted EBITDA and SaaS and license revenue renewal rate, in order to measure our current performance and estimate our future performance. Our other business metrics may be calculated in a manner different from the way similar business metrics used by other companies are calculated.

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, 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 $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 income / (expense), net, provision for income taxes, loss / (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; loss / (income) from equity method investments, net; amortization of debt issuance costs for the $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 with readily determinable fair values and without readily determinable fair values and on 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.

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 income / (expense), net including gains, losses or impairments on investments with readily determinable fair values and without readily determinable fair values and on 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 loss / (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

We have included non-GAAP adjusted EBITDA in this report because it 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. We also use non-GAAP adjusted EBITDA, a non-GAAP financial measure, as a performance measure under our executive bonus plan. Further, we believe 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 expense and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance. Accordingly, we believe non-GAAP adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

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. We also use non-GAAP adjusted EBITDA as a performance measure under our executive bonus plan. 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. Accordingly, we believe non-GAAP adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Previous wording

Because of these and other limitations, you should consider non-GAAP adjusted EBITDA alongside our other GAAP-based financial performance measures, net income and our other GAAP financial results. The following table presents a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measure, for the periods indicated (in thousands):

Current wording

Because of these and other limitations, you should consider non-GAAP adjusted EBITDA alongside our other GAAP-based financial performance measures, net income and our other GAAP financial results. Please see the Non-GAAP Measures section in this Quarterly Report for a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measurement, for the three and nine months ended September 30, 2026 and 2025.

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. As of June 30, 2026 and 2025, we had 66 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. As of September 30, 2026 and 2025, we had 65 and 76 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. While the U.S. Supreme Court invalidated these tariffs in February 2026, the U.S. government may continue to impose tariffs under alternative statutory authorities, and the situation remains fluid. On April 20, 2026, the U.S. Customs and Border Protection began accepting refund requests through its Consolidated Administration and Processing of Entries portal, and we subsequently filed for an estimated $14.5 million in tariffs previously paid under the International Emergency Economic Powers Act, or IEEPA. During the three and six months ended June 30, 2026, we recorded less than one third of the estimated $14.5 million as a reduction to cost of hardware and other revenue and processed a commensurate amount of refunds to customers, excluding certain processing fees, as a reduction to hardware and other revenue. As of June 30, 2026, we have not recorded any additional receivables related to potential refunds for previous tariffs we paid because we are unable to assess the probability of their recovery. The United States and/or countries into which we import products have adjusted and/or imposed and 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 since announced several tariff framework agreements, including with countries where a significant portion of our hardware is produced, which have impacted our hardware revenue margins. 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, the outcome of any new legal challenges to their validity, the process and timing for obtaining any refunds for previously paid tariffs, how other countries respond to the U.S. tariffs, and the specific timing of when we implement any additional pass-through costs.

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. While the U.S. Supreme Court invalidated these tariffs in February 2026, the U.S. government may continue to impose tariffs under alternative statutory authorities, and the situation remains fluid. On April 20, 2026, the U.S. Customs and Border Protection began accepting refund requests through its Consolidated Administration and Processing of Entries portal, and we subsequently filed for $14.5 million in tariffs previously paid under the International Emergency Economic Powers Act, or IEEPA, related to our primary manufacturer. During the nine months ended September 30, 2026, we recorded substantially all of the $14.5 million as a reduction to cost of hardware and other revenue. After applying a management fee due to our primary manufacturer, we also provided or committed to providing refunds to our customers for a majority of the refund request amount, which we recorded as a reduction to hardware and other revenue. The United States and/or countries into which we import products have adjusted and/or imposed and 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 since announced several tariff framework agreements, including with countries where a significant portion of our hardware is produced, which have impacted our hardware revenue margins. 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, the outcome of any new legal challenges to their validity, the process and timing for obtaining any refunds for previously paid tariffs, how other countries respond to the U.S. tariffs, and the specific timing of when we implement any additional pass-through costs.

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 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 2,048 employees as of June 30, 2025 to 2,051 employees as of June 30, 2026, and remained constant at 2,051 employees as of March 31, 2026. We may 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 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 decreased from 2,075 employees as of September 30, 2025 to 2,055 employees as of September 30, 2026, and grew from 2,051 employees as of June 30, 2026. 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 599 as of June 30, 2025 to 612 as of June 30, 2026 and decreased from 615 as of March 31, 2026. We expect to continue to invest in our sales and marketing activities to expand our business both domestically and internationally. 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.

Current wording

The number of employees in sales and marketing functions increased from 614 as of September 30, 2025 to 615 as of September 30, 2026 and increased from 612 as of June 30, 2026. We expect to continue to invest in our sales and marketing activities to expand our business both domestically and internationally. 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 decreased from 238 as of June 30, 2025 to 225 as of June 30, 2026 and decreased from 230 as of March 31, 2026. 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 decreased from 231 as of September 30, 2025 to 222 as of September 30, 2026 and decreased from 225 as of June 30, 2026. 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 increased from 1,136 as of June 30, 2025 to 1,148 as of June 30, 2026 and increased from 1,140 as of March 31, 2026. 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 1,154 as of September 30, 2025 to 1,153 as of September 30, 2026 and increased from 1,148 as of June 30, 2026. 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, including the impacts of fluctuations in foreign currency exchange rates as well as gains and losses on equity securities.

Current wording

Other income / (expense), net primarily consists of non-operating and miscellaneous expense and income, including the impacts of fluctuations in foreign currency exchange rates as well as gains and losses on equity securities.

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 and six months ended June 30, 2026, our effective tax rate was above the 21.0% statutory rate primarily due to the impact of state taxes, foreign withholding taxes, a shortfall from employee stock-based compensation and other nondeductible expenses, partially offset by the impact of 2026 research and development tax credits claimed and the foreign derived deduction eligible income deduction. 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 nine months ended September 30, 2026, our effective tax rate was above the 21.0% statutory rate primarily due to the impact of state taxes, foreign withholding taxes, a shortfall from employee stock-based compensation and other nondeductible expenses, partially offset by the impact of 2026 research and development tax credits claimed and the foreign derived deduction eligible income deduction. 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

Income from equity method investments, net primarily consists of our share of the net assets and net income / (losses) of our investees accounted for under the equity method, including the impacts of amortization expense related to basis differences.

Current wording

Loss / (income) from equity method investments, net primarily consists of our share of the net assets and net income / (losses) of our investees accounted for under the equity method, including the impacts of amortization expense related to basis differences.

Previous wording

Comparison of the Three and Six Months Ended June 30, 2026 to June 30, 2025

Current wording

Comparison of the Three and Nine Months Ended September 30, 2026 to September 30, 2025

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 and six months ended June 30, 2026 and June 30, 2025.

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 nine months ended September 30, 2026 and September 30, 2025.

Previous wording

The $23.4 million increase in total revenue for the three months ended June 30, 2026 as compared to the same period in the prior year was primarily the result of a $18.8 million, or 11%, increase in our SaaS and license revenue, and a $4.6 million, or 6%, increase in our hardware and other revenue. The SaaS and license revenue for the Alarm.com segment increased $8.8 million primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2025. The SaaS and license revenue for our Other segment increased $10.0 million primarily due to an increase in sales of our energy management and demand response solutions, including revenue from the purchase of RGS on November 21, 2025. The increase in hardware and other revenue was primarily from the $4.5 million increase in hardware and other revenue, net of intersegment eliminations, in the Other segment primarily due to sales of energy credits related to the acquisition of Bridge to Renewables, Inc., or BTR, on August 15, 2025, as well as increased sales related to our property management and Heating, Ventilation and Air Conditioning solutions. Hardware and other revenue, net of intersegment eliminations, in our Alarm.com segment increased $0.1 million from an increase in hardware sold related to our video surveillance software as well as price increases we have implemented on certain products to cover a portion of our increases in costs. These increases in hardware and other revenue were partially offset by a decrease in hardware and other revenue related to tariff refunds we provided to our customers, excluding certain processing fees.

Current wording

The $23.0 million increase in total revenue for the three months ended September 30, 2026 as compared to the same period in the prior year was primarily the result of a $15.8 million, or 9%, increase in our SaaS and license revenue, and a $7.2 million, or 9%, increase in our hardware and other revenue. The SaaS and license revenue for the Alarm.com segment increased $8.2 million primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2025. The SaaS and license revenue for our Other segment increased $7.6 million primarily due to an increase in sales of our energy management and demand response solutions, including revenue from the purchase of RGS on November 21, 2025. The increase in hardware and other revenue was primarily from the $7.4 million increase in hardware and other revenue, net of intersegment eliminations, in the Alarm.com segment due to an increase in the volume of video cameras sold as well as price increases we have implemented on certain products to cover a portion of our increases in costs. These increases in hardware and other revenue were partially offset by a decrease in hardware and other revenue related to IEEPA tariff refunds we provided or committed to providing to our customers. Hardware and other revenue, net of intersegment eliminations, in our Other segment decreased $0.2 million primarily due to decreased sales related to our property management solution.

Previous wording

The $49.8 million increase in total revenue for the six months ended June 30, 2026 as compared to the same period in the prior year was primarily the result of a $36.5 million, or 11%, increase in our SaaS and license revenue and a $13.3 million, or 8%, increase in our hardware and other revenue. The SaaS and license revenue for the Alarm.com segment increased $18.5 million for the six months ended June 30, 2026 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 2025. The SaaS and license revenue for our Other segment increased $18.0 million for the six months ended June 30, 2026 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 including revenue from the purchase of RGS on November 21, 2025. The increase in hardware and other revenue for the six months ended June 30, 2026 as compared to the same period in the prior year was primarily from the $6.8 million increase in hardware and other revenue, net of intersegment eliminations, in the Alarm.com segment arising from an increase in hardware sold related to our video surveillance software as well as price increases we have implemented on certain products to cover a portion of our increases in costs. These increases in hardware and other revenue were partially offset by a decrease in hardware and other revenue related to tariff refunds we provided to our customers, excluding certain processing fees. Hardware and other revenue, net of intersegment eliminations, in our Other segment increased $6.5 million for the six months ended June 30, 2026 as compared to the same period in the prior year, primarily due to sales of energy credits related to the acquisition of BTR on August 15, 2025, as well as increased sales related to our property management and Heating, Ventilation and Air Conditioning solutions.

Current wording

The $72.8 million increase in total revenue for the nine months ended September 30, 2026 as compared to the same period in the prior year was primarily the result of a $52.3 million, or 10%, increase in our SaaS and license revenue and a $20.5 million, or 9%, increase in our hardware and other revenue. The SaaS and license revenue for the Alarm.com segment increased $26.7 million for the nine months ended September 30, 2026 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 2025. The SaaS and license revenue for our Other segment increased $25.6 million for the nine months ended September 30, 2026 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 including revenue from the purchase of RGS on November 21, 2025. The increase in hardware and other revenue for the nine months ended September 30, 2026 as compared to the same period in the prior year was primarily from the $14.2 million increase in hardware and other revenue, net of intersegment eliminations, in the Alarm.com segment arising from an increase in hardware sold related to our video surveillance software as well as price increases we have implemented on certain products to cover a portion of our increases in costs. These increases in hardware and other revenue were partially offset by a decrease in hardware and other revenue related to IEEPA tariff refunds we provided to our customers. Hardware and other revenue, net of intersegment eliminations, in our Other segment increased $6.3 million for the nine months ended September 30, 2026 as compared to the same period in the prior year, primarily due to sales of energy credits related to the acquisition of BTR on August 15, 2025, as well as increased sales related to our property management and Heating, Ventilation and Air Conditioning solutions.

Previous wording

The $8.2 million increase in cost of revenue for the three months ended June 30, 2026 as compared to the same period in the prior year was the result of a $6.3 million, or 26%, increase in cost of SaaS and license revenue, and a $1.9 million, or 3%, increase in cost of hardware and other revenue. The cost of SaaS and license revenue for the Other segment increased $5.5 million primarily due to an increase in sales of our energy management and demand response solutions, including from our acquisition of RGS on November 21, 2025, 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 $0.8 million 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 Other segment increased $4.1 million primarily due to costs associated with sales of energy credits related to the acquisition of BTR on August 15, 2025, and an increase in the number of hardware units shipped related to our property management solution. The cost of hardware and other revenue for the Alarm.com segment decreased $2.2 million primarily due to recording a partial amount of the IEEPA tariff refunds we previously paid during the three months ended June 30, 2026, partially offset by a change in the mix of product sales to more hardware with higher costs related to tariffs and supplier price increases.

Current wording

The $5.1 million increase in cost of revenue for the three months ended September 30, 2026 as compared to the same period in the prior year was the result of a $5.2 million, or 21%, increase in cost of SaaS and license revenue, and a $0.1 million decrease in cost of hardware and other revenue. The cost of SaaS and license revenue for the Other segment increased $4.3 million primarily due to an increase in sales of our energy management and demand response solutions, including from our acquisition of RGS on November 21, 2025, 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 $0.9 million 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 Other segment decreased $0.6 million primarily due to costs associated with sales of energy credits related to the acquisition of BTR on August 15, 2025. The cost of hardware and other revenue for the Alarm.com segment increased $0.5 million primarily due to higher volume of hardware sold as well as a change in the mix of product sales to more hardware with higher costs related to tariffs and supplier price increases, partially offset by the IEEPA tariff refunds from our primary manufacturer recorded during the three months ended September 30, 2026.

Previous wording

Cost of hardware and other revenue as a percentage of hardware and other revenue was 74% and 76% for the three months ended June 30, 2026 and 2025, respectively. Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 16% and 14% for the three months ended June 30, 2026 and 2025, respectively.

Current wording

Cost of hardware and other revenue as a percentage of hardware and other revenue was 72% and 78% for the three months ended September 30, 2026 and 2025, respectively. Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 15% and 14% for the three months ended September 30, 2026 and 2025, respectively.

Previous wording

The $20.5 million increase in cost of revenue for the six months ended June 30, 2026 as compared to the same period in the prior year was the result of a $12.6 million, or 28%, increase in cost of SaaS and license revenue and a $7.9 million, or 7%, increase in cost of hardware and other revenue. The cost of SaaS and license revenue for the Other segment increased $10.4 million during the six months ended June 30, 2026 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, including from our acquisition of RGS on November 21, 2025, 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 $2.2 million during the six months ended June 30, 2026 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 Other segment increased $5.5 million primarily due to costs associated with sales of energy credits related to the acquisition of BTR on August 15, 2025, and an increase in the number of hardware units shipped related to our property management solution. The cost of hardware and other revenue for the Alarm.com segment increased $2.4 million during the six months ended June 30, 2026 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 related to tariffs and supplier price increases, partially offset by recording a partial amount of the IEEPA tariff refunds we previously paid during the three months ended June 30, 2026.

Current wording

The $25.6 million increase in cost of revenue for the nine months ended September 30, 2026 as compared to the same period in the prior year was the result of a $17.8 million, or 26%, increase in cost of SaaS and license revenue and a $7.8 million, or 4%, increase in cost of hardware and other revenue. The cost of SaaS and license revenue for the Other segment increased $14.7 million during the nine months ended September 30, 2026 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, including from our acquisition of RGS on November 21, 2025, 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 $3.1 million during the nine months ended September 30, 2026 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 Other segment increased $4.8 million primarily due to costs associated with sales of energy credits related to the acquisition of BTR on August 15, 2025. The cost of hardware and other revenue for the Alarm.com segment increased $2.9 million during the nine months ended September 30, 2026 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 related to tariffs and supplier price increases, partially offset by the IEEPA tariff refunds from our primary manufacturer recorded during the nine months ended September 30, 2026.

Previous wording

Cost of hardware and other revenue as a percentage of hardware and other revenue was 74% for the six months ended June 30, 2026 and 76% for the same period in the prior year. Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 16% for the six months ended June 30, 2026 and 14% for the same period in the prior year.

Current wording

Cost of hardware and other revenue as a percentage of hardware and other revenue was 73% for the nine months ended September 30, 2026 and 76% for the same period in the prior year. Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 16% for the nine months ended September 30, 2026 and 14% for the same period in the prior year.

Previous wording

The $1.8 million increase in sales and marketing expense for the three months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $1.7 million increase in personnel and related costs for our Other segment, attributable in part to increases in the headcount for our sales team. Personnel and related costs includes salary, benefits, stock-based compensation and travel expenses. Sales and marketing expense for our Alarm.com segment decreased $0.1 million primarily due to a $1.4 million decrease in marketing conference costs, partially offset by a $1.1 million increase in personnel and related costs.

Current wording

The $3.9 million increase in sales and marketing expense for the three months ended September 30, 2026, as compared to the same period in the prior year, was primarily due to a $1.6 million increase in personnel and related costs for our Other segment, attributable in part to increases in the headcount for our sales team. Personnel and related costs includes salary, benefits, stock-based compensation and travel expenses. Sales and marketing expense for our Alarm.com segment increased primarily due to a $1.4 million increase in marketing costs, including conference costs, and a $0.8 million increase in personnel and related costs.

Previous wording

The $7.7 million increase in sales and marketing expense for the six months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $3.2 million increase in personnel and related costs for our Other segment, attributable in part to increases in the headcount for our sales team. Sales and marketing expense from our Alarm.com segment increased primarily due to a $2.4 million increase in personnel and related costs and a $1.2 million increase in marketing conference costs. The number of employees in sales and marketing functions increased from 599 as of June 30, 2025 to 612 as of June 30, 2026.

Current wording

The $11.6 million increase in sales and marketing expense for the nine months ended September 30, 2026, as compared to the same period in the prior year, was primarily due to a $4.8 million increase in personnel and related costs for our Other segment, attributable in part to increases in the headcount for our sales team. Sales and marketing expense from our Alarm.com segment increased primarily due to a $3.2 million increase in personnel and related costs and a $2.7 million increase in marketing costs, including conference costs. The number of employees in sales and marketing functions increased from 614 as of September 30, 2025 to 615 as of September 30, 2026.

Previous wording

The $9.6 million increase in general and administrative expense for the three months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $9.2 million increase in legal costs related to intellectual property legal matters and a $1.5 million increase in personnel and related costs for our Alarm.com segment. These increases within our Alarm.com segment were partially offset by a $1.7 million decrease in the provision for credit losses and a $0.4 million decrease in rent expense. General and administrative expenses from our Other segment increased by $1.9 million primarily due to an increase in the provision for credit losses.

Current wording

The $3.5 million increase in general and administrative expense for the three months ended September 30, 2026, as compared to the same period in the prior year, was primarily due to a $4.2 million increase in legal costs related to intellectual property legal matters and a $0.2 million increase in the provision for credit losses. General and administrative expenses from our Other segment decreased by $1.2 million primarily due to a decrease in the provision for credit losses.

Previous wording

The $10.0 million increase in general and administrative expense for the six months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $9.2 million increase in legal costs related to intellectual property legal matters and a $2.1 million increase in personnel and related costs for our Alarm.com segment. These increases within our Alarm.com segment were partially offset by a $1.6 million decrease in the provision for credit losses and a $0.4 million decrease in rent expense. General and administrative expenses from our Other segment increased by $1.6 million primarily due to an increase in the provision for credit losses. The number of employees in general and administrative functions decreased from 238 as of June 30, 2025 to 225 as of June 30, 2026.

Current wording

The $13.5 million increase in general and administrative expense for the nine months ended September 30, 2026, as compared to the same period in the prior year, was primarily due to a $13.4 million increase in legal costs related to intellectual property legal matters and a $1.8 million increase in personnel and related costs for our Alarm.com segment. These increases within our Alarm.com segment were partially offset by a $1.4 million decrease in the provision for credit losses and a $0.6 million decrease in rent expense. General and administrative expenses from our Other segment increased by $0.4 million primarily due to an increase in the provision for credit losses. The number of employees in general and administrative functions decreased from 231 as of September 30, 2025 to 222 as of September 30, 2026.

Previous wording

The $1.9 million increase in research and development expense for the three months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $3.0 million increase in research and development expense for our Other segment, due to increases in personnel and related costs as well as expenses for external consultants, attributable in part to an increase in headcount of employees in research and development functions from the acquisitions of BTR on August 15, 2025 and RGS on November 21, 2025. Research and development expense from our Alarm.com segment decreased by $1.1 million primarily due to a decrease in personnel and related costs.

Current wording

The $3.1 million increase in research and development expense for the three months ended September 30, 2026, as compared to the same period in the prior year, was primarily due to a $3.9 million increase in research and development expense for our Other segment, due to increases in personnel and related costs as well as expenses for external consultants, attributable in part to an increase in headcount of employees in research and development functions from the acquisition of RGS on November 21, 2025. Research and development expense from our Alarm.com segment decreased by $0.9 million primarily due to a decrease in personnel and related costs.

Previous wording

The $5.6 million increase in research and development expense for the six months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $6.0 million increase in research and development expense for our Other segment, due to increases in personnel and related costs as well as expenses for external consultants, attributable in part to an increase in headcount of employees in research and development functions from the acquisitions of BTR on August 15, 2025 and RGS on November 21, 2025. Research and development expense from our Alarm.com segment decreased by $0.4 million primarily due to decreases in personnel and related costs and expenses for external consultants. The overall number of employees in research and development functions increased from 1,136 as of June 30, 2025 to 1,148 as of June 30, 2026.

Current wording

The $8.7 million increase in research and development expense for the nine months ended September 30, 2026, as compared to the same period in the prior year, was primarily due to a $10.0 million increase in research and development expense for our Other segment, due to increases in personnel and related costs as well as expenses for external consultants, attributable in part to an increase in headcount of employees in research and development functions from the acquisition of RGS on November 21, 2025. Research and development expense from our Alarm.com segment decreased by $1.3 million primarily due to decreases in personnel and related costs and expenses for external consultants. The overall number of employees in research and development functions decreased from 1,154 as of September 30, 2025 to 1,153 as of September 30, 2026.

Previous wording

Amortization and depreciation increased $1.4 million and $3.5 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to intangible assets that were acquired in connection with the acquisition of BTR on August 15, 2025, the acquisition of RGS on November 21, 2025, as well as changes in depreciation expense related to property and equipment.

Current wording

Amortization and depreciation increased $0.6 million and $4.1 million for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to intangible assets that were acquired in connection with the acquisition of BTR on August 15, 2025, the acquisition of RGS on November 21, 2025, as well as changes in depreciation expense related to property and equipment.

Previous wording

Interest expense decreased $0.8 million and $1.4 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to the maturity of the 2026 Notes on January 15, 2026.

Current wording

Interest expense decreased $0.8 million and $2.2 million for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to the maturity of the 2026 Notes on January 15, 2026.

Previous wording

Interest income decreased $7.3 million and $14.8 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to a decrease in interest income earned on cash and cash equivalents from lower amounts of cash and cash equivalents due to the $500.0 million paid in aggregate principal amount to holders of the 2026 Notes on January 14, 2026, and lower average interest rates.

Current wording

Interest income decreased $6.4 million and $21.2 million for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to a decrease in interest income earned on cash and cash equivalents from lower amounts of cash and cash equivalents due to the $500.0 million paid in aggregate principal amount to holders of the 2026 Notes on January 14, 2026, and lower average interest rates.

Previous wording

Other expense, net increased $2.2 million and $3.4 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to an increase in loss on equity securities and fluctuations in foreign currency exchange rates.

Current wording

Other income / (expense), net decreased $2.0 million and $5.4 million for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to an increase in losses on equity securities and fluctuations in foreign currency exchange rates.

Previous wording

The provision for income taxes increased by $2.3 million and $0.8 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year. Our effective tax rate was 24.9% and 22.6% for the three and six months ended June 30, 2026, respectively, as compared to 13.8% and 17.1% for the same periods in the prior year. The increase in the provision for income taxes was primarily due to a decrease in our research and development tax credits claimed during the three and six months ended June 30, 2026 as compared to the same periods in the prior year.

Current wording

The provision for income taxes decreased by $3.3 million and $2.5 million for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in the prior year. Our effective tax rate was 25.5% and 23.9% for the three and nine months ended September 30, 2026, respectively, as compared to 30.2% and 22.4% for the same periods in the prior year. The decrease in the provision for income taxes was primarily due to a decrease in income before income taxes during the three and nine months ended September 30, 2026 as compared to the same periods in the prior year.

Previous wording

Income from equity method investments, net increased $0.5 million and $0.8 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year. The increase in the income from equity method investments, net was due to the increase in our share of the net assets and net income of our investees accounted for under the equity method, partially offset by amortization expense related to basis differences in our equity method investments.

Current wording

Loss / (income) from equity method investments, net increased $3.3 million and $2.5 million for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in the prior year. The change in the loss / (income) from equity method investments, net was due to the net decrease in our share of net income of our investees accounted for under the equity method.

Previous wording

We have two reportable segm ents: Alarm.com and Other. Our Alarm.com segment represents our cloud-based and Software platforms for intelligently connected properties and related solutions that contributed 87% and 88% of our revenue, net of intersegment eliminations, for the three and six months ended June 30, 2026, respectively, as compared to 92% 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. Management evaluates the performance of its segments and allocates resources to them based on operating income / (loss) as compared to prior periods and current performance levels.

Current wording

We have two reportable segm ents: Alarm.com and Other. Our Alarm.com segment represents our cloud-based and Software platforms for intelligently connected properties and related solutions that contributed 88% of our revenue, net of intersegment eliminations, for the three and nine months ended September 30, 2026, as compared to 90% and 91% 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. Management evaluates the performance of its segments and allocates resources to them based on operating income / (loss) as compared to prior periods and current performance levels.