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Alarm.com Holdings, Inc. (ALRM)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 was a clean beat: Total revenue $254.3M (+8.8% YoY) and non-GAAP adjusted EBITDA $48.4M (+13.0% YoY), with diluted non-GAAP EPS $0.60; management raised FY 2025 guidance across SaaS & license, total revenue, adjusted EBITDA, and adjusted net income .
  • Versus consensus, ALRM beat Q2 revenue ($254.3M vs $244.0M*) and diluted non-GAAP EPS ($0.60 vs $0.51*), driven by broad-based strength and hardware outperformance; gross profit rose to $166.8M with ~40 bps gross margin improvement YoY . Values retrieved from S&P Global.
  • Guidance catalysts: Q3 SaaS & license guide set at $171.4–$171.6M, and FY 2025 raised by ~$5.2M at the midpoint for SaaS & license, with increases to total revenue and adjusted EBITDA; share-count assumption trimmed partly due to Q2 buybacks, supporting FY adjusted EPS $2.40 .
  • Strategic momentum: growth initiatives (commercial/OpenEye, EnergyHub, international) approached ~30% of SaaS revenue at ~25% YoY growth; new AI/video features and platform extensions (e.g., Apple CarPlay) should support engagement and cross-sell .

What Went Well and What Went Wrong

What Went Well

  • Hardware revenue outperformed, supporting EBITDA and reinforcing ALRM’s efficient go-to-market; management noted hardware gross profits historically cover >50% of sales & marketing customer acquisition costs .
  • Gross profit rose to $166.8M (+9.4% YoY) with ~40 bps gross margin improvement, aided by revenue mix and quality .
  • Growth initiatives momentum: commercial/OpenEye AI analytics, EnergyHub secular demand and device expansion, and faster international growth in LatAm/Middle East (strong RVM adoption) .

What Went Wrong

  • Operating cash flow moderated in 1H 2025 ($46.8M vs $72.8M 1H24), translating to lower non-GAAP FCF ($36.1M vs $67.8M), partially reflecting Section 174 cash tax timing earlier in the year .
  • Retention rate normalized from ~95% in Q1 to 94.1% in Q2 (still high), with management expecting ~93.7–94% in 2H amid housing turnover dynamics .
  • Tariff uncertainty required a June price pass-through (baseline 10% tariff; ~7.5% pricing to partners given margin) which may slightly dilute margins, even as gross profit dollars remain roughly unchanged; some partner inventory build likely pulled demand forward .

Financial Results

MetricQ2 2024Q1 2025Q2 2025Q2 2025 Consensus
Total Revenue ($USD Millions)$233.8 $238.8 $254.3 $244.0*
SaaS & License Revenue ($USD Millions)$155.9 $163.8 $170.0 —
Hardware & Other Revenue ($USD Millions)$77.9 $75.0 $84.3 —
GAAP Diluted EPS ($)$0.62 $0.52 $0.63 —
Non-GAAP Diluted EPS ($)$0.58 $0.54 $0.60 $0.51*
GAAP Net Income Attrib. to Common ($USD Millions)$33.5 $28.0 $34.6 —
Adjusted EBITDA ($USD Millions)$42.8 $43.5 $48.4 —

Values retrieved from S&P Global for consensus estimates.

Segment revenue breakdown:

SegmentQ2 2024Q1 2025Q2 2025
SaaS & License ($USD Millions)$155.9 $163.8 $170.0
Hardware & Other ($USD Millions)$77.9 $75.0 $84.3
Total ($USD Millions)$233.8 $238.8 $254.3

Margins (S&P Global):

MetricQ2 2024Q1 2025Q2 2025
EBITDA Margin (%)14.15%*14.57%*14.77%*
Net Income Margin (%)14.33%*11.70%*13.59%*
Diluted EPS – Continuing Ops ($)$0.62*$0.52*$0.63*

Values retrieved from S&P Global.

KPIs:

KPIQ4 2024Q1 2025Q2 2025
Cash & Cash Equivalents ($USD Billions)$1.22 $1.19 $1.02
Non-GAAP Free Cash Flow ($USD Millions)$54.0 $17.9 $18.2
Subscriber Retention Rate (%)—~95% (rounded) 94.1%
Gross Profit ($USD Millions)——$166.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SaaS & License Revenue ($M)Q3 2025N/A$171.4–$171.6 Set
SaaS & License Revenue ($M)FY 2025$675.8–$676.2 $681.0–$681.4 Raised
Total Revenue ($M)FY 2025$975.8–$991.2 $990.0–$996.4 Raised
Hardware & Other Revenue ($M)FY 2025$300.0–$315.0 $309.0–$315.0 Maintained upper bound, raised lower bound
Adjusted EBITDA ($M)FY 2025$190.0–$193.0 $195.0–$196.5 Raised
Adjusted Net Income Attrib. to Common ($M)FY 2025$131.5–$132.5 $136.0–$136.5 Raised
Non-GAAP Tax Rate (%)FY 202521.0 21.0 Maintained
Weighted Avg Diluted Shares (M)FY 202560.5 60.3 Lowered
Adjusted EPS (Non-GAAP, $)FY 2025$2.32–$2.33 $2.40 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
AI/technology initiativesExpanded AI analytics, AID deterrence, cloud cameras (Q3/Q4), EnergyHub/GM partnership (Q1) OpenEye launched AI-powered video search; platform innovation continues Strengthening
Supply chain/tariffsOngoing tariff exposure flagged historically June price pass-through for baseline 10% tariff (~7.5% to partners); margins slightly diluted; inventory build by partners Managed, modest headwind
Product performanceContinued video/RVM enhancements; new thermostat line (HQ) New T25 smart thermostat; Apple CarPlay extension Broadening portfolio
Regional trendsDiverse revenue base; international scaling Faster growth in LatAm and Middle East; rapid RVM adoption Improving internationally
Regulatory/legal/taxSection 174 capitalized R&D cash headwind in 1H Federal budget change eliminates ~<$200M cash taxes over five years; medium-term FCF tailwind Positive tailwind
R&D executionElevated R&D to drive platform innovation R&D $69.1M (+5.1% YoY); excluding SBC $63.2M (+8%) Consistent investment

Management Commentary

  • “The major components of our business performed well… Revenue outperformance, particularly in hardware revenue, resulted in stronger adjusted EBITDA.”
  • “Their [commercial, EnergyHub, international] collective contributions to our consolidated SaaS revenue approached 30%… combined YoY growth rate around 25%.”
  • “Gross margins improved by 40 bps… total gross profit grew 9.4% YoY to $166.8M.”
  • “Hardware gross profits… cover over 50% of our sales and marketing customer acquisition costs.”
  • “We implemented a price increase in early June to reflect the 10% baseline tariff… pass-through will slightly dilute margins, but gross profit dollars will remain roughly unchanged.”
  • “Federal budget… allows companies to transition back to immediately and fully deducting all domestic R&D… eliminates just under $200M in total cash tax payments over the next five years.”

Q&A Highlights

  • Growth durability: EnergyHub benefits from AI data center/manufacturing-driven utility demand; commercial benefits from cloud migration and unfortunate security events; international growth driven by market build-outs; combined growth ~25% with components within ±500 bps; investment may scale in 2026 .
  • Hardware and tariffs: 2H hardware revenue implied ~$150M (slightly skewed to Q3); tariff pass-through (~7.5% pricing) keeps gross profit dollars roughly unchanged; no structural change to acquisition economics .
  • Retention: Q2 rounded to 94% (actual 94.1%), normalizing from ~95% in Q1; 2H expected ~93.7–94% depending on housing/macros .
  • Pricing: No broad-based SaaS price hikes planned for 2H or 2026 despite tariff pass-through on hardware .
  • International: LatAm and Middle East outpaced expectations; strong adoption of remote video monitoring .

Estimates Context

  • Q2 2025 vs consensus: Revenue $254.3M vs $244.0M*; non-GAAP diluted EPS $0.60 vs $0.51*; both beats driven by hardware strength and diversified growth . Values retrieved from S&P Global.
  • Near-term consensus (Q3 2025): Revenue $251.1M*, EPS $0.61*; management’s Q3 guide is only for SaaS & license ($171.4–$171.6M), implying continued steadiness; Street models may need to reflect raised FY ranges and 2H hardware cadence . Values retrieved from S&P Global.

Q2 2025 consensus detail:

MetricQ2 2025 ConsensusActual
Revenue ($USD Millions)$244.0*$254.3
Diluted Non-GAAP EPS ($)$0.51*$0.60
# of Estimates (EPS/Revenue)8 / 7*—

Values retrieved from S&P Global.

Q3 2025 forward (consensus):

MetricQ3 2025 Consensus
Revenue ($USD Millions)$251.1*
Primary EPS ($)$0.61*

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Broad-based beat and raised FY guide underline durable growth across segments; hardware outperformance supported EBITDA and highlights the flywheel between device installs and recurring SaaS .
  • Hardware tariff pass-through (~7.5% to partners) and available inventory mitigate 2025 tariff risk; margins may see slight dilution but gross profit dollars remain stable—a manageable near-term headwind .
  • Growth initiatives (commercial/OpenEye, EnergyHub, international) are now a meaningful ~30% of SaaS at ~25% YoY growth, with product innovation (AI search, deterrence) and regional expansion as catalysts .
  • Strong cash balance ($1.02B) and improving medium-term FCF outlook from Section 174 reversal support capital flexibility (organic/inorganic investments, buybacks) .
  • Retention remains high (94.1%) and expected to hover ~93.7–94% in 2H, reflecting resilient demand for professional-grade security and smart property solutions despite mixed macros .
  • Q3 setup: SaaS & license guide $171.4–$171.6M; 2H hardware implied ~$150M (Q3 modestly above Q4), which should anchor revenue cadence and EBITDA delivery .
  • Tactical trading: Raised FY ranges and visible hardware cadence are near-term positive supports; watch tariff codification details and housing turnover (retention) for incremental volatility; product announcements (e.g., Apple CarPlay, new T25 thermostat) add engagement levers .
Note: Asterisked values are consensus estimates. Values retrieved from S&P Global.