Alarm.com Holdings, Inc. (NASDAQ:ALRM) Q3 2023 Earnings Call Transcript

Adam Tindle: Got it, thank you.

Operator: [Operator Instructions] Our next question comes from Saket Kalia with Barclays. Your line is open.

Saket Kalia: Okay, great. Hey, guys, thanks for taking my questions here. Steve Trundle, maybe for you, can you just talk a little bit about the growth businesses that you touched on last quarter? I can’t remember if it was 30% of the business growing at 25%, or vice versa. But it was a really interesting stat. I don’t expect it to change much in just one quarter, but curious if you could just expand on what you’re seeing in a couple of those biggest growth businesses?

Stephen Trundle: Yes, the first year recollection is correct, that, I think, what we communicated last quarter was 30% of the — the growth businesses represented around 30% of the SaaS, and we’re growing at around 25%. So, that’s continued. The drivers there really EnergyHub being one, where did recently put out a press release about this past year being really sort of a record-setting year for us with the number of events called and the number of — I think it was over 1,800 events we’ve called year-to-date, meaning demand response events on behalf of utilities. And moved around quite a few gigawatt hours of power, I believe more than 200% more power we moved off the grid at key moments this year versus last year. So, just seeing a lot more usage there which allows us to keep growing that business.

And then the team is focused right now on expanding into the broader resource space to include EVs in particular, so a lot of work going on there. And we see that as sort of another growth vector in that business. The other couple places are the international business, which continues to clip along at roughly that same growth rate. In terms of their SaaS growth, can be a little lumpy. But we still see mostly green fields internationally, where we’re in the early days of a bunch of new relationships and trying to help partners get up to scale, and to adopt the full platform, sort of move from the basic interactive security offering to a full offering that includes video and elements of our automation solution. And then the next would be just the overall commercial play, both commercial intrusion, commercial access, I guess I should say also commercial video, still fairly early there for us.

Continue to make good headway there, both in our core business and with the OpenEye video segment. As I noted in my comments, and as Steve noted, in the third quarter there was a little bit of a slowdown in the amount of hardware being sold through that channel. But overall, SaaS growth rates were the same. And we expect that to continue, and to give us some tailwinds next year.

Saket Kalia: Got it. Maybe for my follow-up, for you, Steve Valenzuela, so always very helpful to get a preliminary look at next year, here in Q3. And I know it is preliminary, but curious how you’re thinking about legal costs for 2024?

Steve Valenzuela: Yes, it’s a good point. Clearly we have factored in some legal costs. It’s important to point out though that a good portion of the legal spend for the major programs are now adjusted out. They get to a certain stage, so we’ve factored that out — that into our adjusted EBITDA guide.

Saket Kalia: Got it, very helpful. Thanks, guys.

Steve Valenzuela: Thank you.

Stephen Trundle: Thank you.

Operator: [Operator Instructions] Our next question comes from Darren Aftahi with ROTH. Your line is open.

Darren Aftahi: Hey, guys, thanks for taking my questions, and congrats on the quarter. If I could double tap Steve Trundle on the commercial comment, I’m just trying to understand the relationship between is the sort of cycle for hardware a little elongated, and that’s what contributed to maybe some of the weakness in the quarter, but the underlying strength for the commercial demand is still there. Am I hearing that correctly?