Alarm.com outlines $1.04B 2026 revenue target as SaaS and EnergyHub growth drive outlook

Earnings Call Insights: Alarm.com Holdings, Inc. (ALRM) Q3 2025

MANAGEMENT VIEW

* CEO Stephen Trundle stated, "We are pleased to report financial results for the third quarter that were above our expectations. SaaS and license revenue in the third quarter grew to $175.4 million and adjusted EBITDA was $59.2 million. We saw better-than-expected performance across the business during the quarter, with particular strength in our energy business."
* Trundle highlighted robust partner and customer enthusiasm for new residential and commercial video products, including upcoming battery cameras, and noted "a healthy uptick in commercial video account creation and our commercial access control subscriber base increased approximately 30%."
* The CEO emphasized EnergyHub's expanded partnership with Tesla, stating, "Owners of Tesla's Wall Connector EV chargers can enroll their product in EnergyHub programs directly in the Tesla App."
* President of Platforms Business Daniel Kerzner described video as "a strategic growth driver across our residential, commercial, and international markets," and introduced "AI Deterrence, an upgraded video solution that identifies individuals and delivers AI-generated verbal warnings dynamically adapted to a person's clothing, behavior, and location."
* Kerzner also pointed to AI-driven enhancements in technician support, with a generative AI chatbot upgrade increasing handled inquiries 2.5x and customer satisfaction ratings rising more than 70%.
* CFO Kevin Bradley reported, "SaaS and license revenue grew 10.1% year-over-year to $175.4 million, exceeding the midpoint of our guide of $171.5 million... Total revenue grew 6.6% year-over-year to $256.4 million during the quarter, and gross profit increased 8.4% to $168.8 million."
* Bradley noted, "Adjusted EBITDA grew 18.4% year-over-year to $59.2 million. Our adjusted EBITDA performance includes a $3.6 million benefit derived from a mark-to-market gain on a security in our treasury portfolio."

OUTLOOK

* For Q4 2025, the company expects SaaS and license revenue of between $176 million and $176.2 million.
* Full year 2025 SaaS and license revenue guidance was raised to between $685.2 million and $685.4 million, with total revenue now expected "slightly above $1 billion."
* Non-GAAP adjusted EBITDA for 2025 is now $199 million, up from $195.8 million prior guidance.
* Non-GAAP adjusted net income for 2025 is $140.5 million, or $2.53 per diluted share, up from prior guidance.
* Preliminary 2026 outlook projects SaaS and license revenue between $722 million and $724 million; total revenue is expected to range between $1.037 billion and $1.044 billion; non-GAAP adjusted EBITDA projected at $210 million to $212 million.
* Bradley stated, "We have a midterm target to exit 2027 with adjusted EBITDA margins in the 21% range."

FINANCIAL RESULTS

* SaaS and license revenue was $175.4 million for Q3 2025.
* Total revenue reached $256.4 million.
* Gross profit was $168.8 million, with a total gross margin increase of 100 basis points year-over-year.
* GAAP net income was $35.3 million, or $0.65 per diluted share; non-GAAP adjusted net income grew to $42.4 million, with non-GAAP EPS at $0.76 per diluted share.
* Free cash flow was $65.9 million, and the quarter ended with $1.1 billion in cash.
* Operating expenses, including depreciation and amortization, were $131.8 million; R&D expense was $66.6 million.

Q&A

* Adam Tindle, Raymond James: Asked about SaaS revenue growth outlook for 2026 versus 2025. CFO Bradley responded, "When we first looked at 2025, we were first looking about 6.1%, so very similar to what we're first looking 2026 right now... Throughout the course of this year, we've had the growth initiatives contributing a little bit under 30% of SaaS revenue and growing 20%, 25%."
* Tindle followed up on balancing growth and profitability. Trundle answered, "We're still primarily focused on where we can find growth and what type of investment we need to get that growth... we've been improving the efficiency of the company. We're going to continue to do that."
* William Fitzsimmons, Jefferies: Inquired about EnergyHub and market dynamics. Trundle noted, "Our key customers... are moving much faster and getting more serious about the contribution that VPP can make to their capacity challenge."
* Fitzsimmons asked about Q3 EnergyHub revenue pull forward. Bradley explained, "I would characterize it as being in the hundreds of thousands of dollars, not millions of dollars... Some of that settlement happened to occur in Q3 this year, and the rest will occur in Q4."
* Matthew Filek, William Blair: Sought EnergyHub growth durability. Trundle said, "We believe that growth is quite durable... At the moment, we have about 45 million installed connected thermostats in the U.S. The penetration... in a VPP program with us is around 3% to 5%."
* Filek followed up on subscription pricing. Trundle explained, "We've continued that practice, and we'll have to continue it. So pricing is part of it, and we're routinely surveying what inflation rates are and moving on price in that ballpark range typically."
* Eleanor Smith, JPMorgan: Asked about SaaS mix and margins. Trundle said, "SaaS has been increasingly becoming a bigger chunk of the mix. And that, of course, contributes to gross margin expansion on a percentage basis."
* Smith asked about M&A. Trundle replied, "I would characterize our current strategy as active but deliberate. We are constantly assessing opportunities... when we see the right fit... then we do strike."
* Alyssa Lee, Barclays: Asked about international growth. Trundle admitted, "International is probably a bit more of the laggard of those 3. We're not making quite as much progress there as I would like to see... but we are growing international."
* Lee followed up on renewal rates and gross adds. Trundle said, "The renewal rate came in right where it was last quarter. They both rounded down to about 94%."
* Jack Vander Aarde, Maxim Group: Asked about autonomous robotics and EnergyHub. Trundle shared, "These autonomous devices... can be mini batteries on the grid. So I would expect much as we attempt to connect to everything today, anything where there's a store of power, as these devices become more real, those batteries become attractive to us."
* Vander Aarde asked about balance sheet deployment. Trundle stated, "We're pretty focused on deploying capital in a way that helps us, for the most part, grow our core business."

SENTIMENT ANALYSIS

* Analyst questions focused on durability of EnergyHub growth, international expansion, SaaS margin mix, and capital allocation, with a neutral tone and consistent requests for forward clarity.
* Management maintained a confident tone in prepared remarks, citing "pleased with our third quarter results and the continued growth we see across the business," but acknowledged areas needing improvement, especially international.
* Compared to the previous quarter, management's tone is slightly more confident regarding growth initiatives and profitability improvement, while analysts remained consistently analytical and focused on long-term growth levers.

QUARTER-OVER-QUARTER COMPARISON

* SaaS and license revenue increased from $170 million in Q2 to $175.4 million in Q3.
* Adjusted EBITDA rose from $48.4 million in Q2 to $59.2 million in Q3.
* Gross margin improved by 100 basis points year-over-year versus a 40 basis point increase in Q2.
* Management increased full-year 2025 guidance for SaaS and license revenue, total revenue, adjusted EBITDA, and non-GAAP EPS compared to the previous quarter.
* The 2026 preliminary outlook was introduced, signaling continued revenue and margin expansion.
* Analysts' focus shifted from tariff and hardware revenue dynamics in Q2 to EnergyHub growth durability and international expansion in Q3.
* Management's confidence in durable growth from core and emerging business units is more pronounced compared to the prior quarter.

RISKS AND CONCERNS

* Hardware gross margins faced temporary headwinds due to reciprocal tariff costs and expedited shipping for new product launches; management expects normalization in January 2026.
* International growth is slower than desired, acknowledged by management.
* Macroeconomic factors, such as the housing market, continue to influence gross adds and renewal rates.
* Management executed job cuts in October as part of portfolio reallocation, indicating cost discipline in slower-growing areas.

FINAL TAKEAWAY

Alarm.com management highlighted broad-based business momentum and raised guidance for 2025 while introducing a preliminary 2026 outlook that projects further revenue and margin expansion. Key drivers include robust SaaS and EnergyHub growth, product innovation—especially in AI-driven video and energy management—and disciplined capital allocation. The company remains focused on durable recurring revenue growth, with management signaling confidence in the long-term opportunities across its core and emerging business lines, despite temporary hardware margin pressures and slower international progress.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/alrm/earnings/transcripts]

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