Good day, and welcome to Alarm.com Q3 2021 Earnings Conference Call. At this time, all participants are on listen only mode. After the speakers presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star then one on your touchtone telephone. If anyone should require assistance during the conference, please press star then zero to reach an operator. I would now like to turn the call over to David Chung, Vice President, Investor Relations. Thank you. Good afternoon, everyone, and welcome to Alarm.com's Q3 2021 earnings conference call. As a reminder, this call is being recorded. Joining us today from Alarm.com are Steve Trundle, President and CEO, and Steve Valenzuela, CFO. Before we begin, a quick reminder to our listeners. Management's discussion during the call today will include forward-looking statements which include projected financial performance for the Q4 2021 and full year 2021 and 2022, the impact of emerging market dynamics and trends on our business and on anticipated market demand for our offerings, including new product offerings, the impact of the COVID pandemic on our global supply chain and the global economy, our business strategies, plans and objectives for future operations and integration of recent acquisitions, continued enhancements to our platform and offerings, opportunities for growth in our current markets and our plans to expand into new markets and other forward-looking statements. These forward-looking statements are based on our current expectations and beliefs and on information currently available to us. Statements containing words such as anticipate, began, believe, continue, could, estimate, expect, forecast, may, plan, project, trend, will, and other similar words are intended to identify such forward-looking statements. These statements are subject to risks and uncertainties, including those contained in the Risk Factors section of our most recent quarterly report on Form 10-Q, filed with the Securities and Exchange Commission on August 5, 2021, and in subsequent reports that we file with the Securities and Exchange Commission from time to time, including our quarterly report on Form 10-Q for the quarter ended September 30, 2021, that we intend to file with the Securities and Exchange Commission shortly after this call. That could cause actual results to differ materially from those contained in the forward-looking statements. Please note that the forward-looking statements made during this conference call speak only as of today's date, and Alarm.com undertakes no obligation to update these statements to reflect subsequent events or circumstances, except to the extent required by law. Also during this call, mana gement's commentary will include non-GAAP financial measures and provide non-GAAP guidance. Management believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in understanding the company's performance and trends, but notes that the presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Reconciliation between GAAP and non-GAAP metrics for our reported results can be found in the financial statement tables of our earnings press release, which we have posted to our investor relations website at investors.alarm.com. This conference call is being webcast and is also available on our investor relations website. The webcast of this call will be archived and a telephone replay will also be available on our website. With these formalities out of the way, I'd now like to turn the call over to Steve Trundle. You may begin. Thank you, David. Good afternoon, and welcome to everyone. We are pleased to report another quarter of strong results. Our SaaS and license revenue in the Q3 was $118.1 million, up 17.9% over the same period last year. Our adjusted EBITDA in the Q3 was $37.6 million. I wanna thank our service provider partners and the Alarm.com team for their continued strong performance. I'll start by updating you on several new products that we recently introduced and discuss how they support our long-term goals. During the Q3, we introduced a new outdoor camera that we call the Seven Twenty-four and a new capability powered by our video analytics engine that we call Perimeter Guard. The new Seven Twenty-four camera offers premium image quality and field of view. It also includes the addition of an onboard microphone and a powerful speaker and LED light. We married these new hardware capabilities with our advanced video analytics software to enable a new set of customer experiences. Perimeter Guard identifies people anywhere around the perimeter of a property and triggers the 724 camera to respond with both audible alerts and a flashing red LED light. This capability immediately puts any potential intruder on notice that they are being actively watched. Subscribers can easily configure the conditions that trigger Perimeter Guard. For example, it can be instructed to respond based on a person's direction of travel or only when they loiter in a specific location for a specific period. It can also be set to respond based on various parameters and rules. For example, it can be configured to trigger both while the system is armed and the subscriber is home for the night or when they are out during the day. The uptake and engagement with Perimeter Guard among existing subscribers is running above our expectations. Tens of thousands of Perimeter Guard rules were customized and activated within the first few weeks of its introduction. Our goal is to continue to develop our video offering to address high-value use cases that will drive higher video attachment rates in the residential segment. Shifting to the commercial market, we launched a new lineup of commercial-grade video cameras as well as a package of video analytics software capabilities that we call Business Activity Analytics. The Pro Series commercial-grade camera lineup is designed for the mid-market commercial segment. These customers tend to have more nuanced and diverse video surveillance requirements than small businesses. The Pro Series cameras were designed for our service providers to flexibly address these customer needs. For example, the Pro Series line includes a range of form factors with 4-megapixel image sensors and varifocal lenses that greatly expand the forensic image quality of recorded video. These capabilities allow technicians to utilize more location options for camera placements while providing the coverage area and image quality their security installations require. The Pro Series line enables our sophisticated new video analytics service for commercial customers. Business Activity Analytics identifies and tracks the movements of people and captures business performance and operational data. It enables occupancy tracking, people counting, queue monitoring, detection of crowd gathering, and occupancy heat mapping. Each analytics capability can be customized with specific virtual tripwires, multidirectional counting configuration rules, and ground zone demarcations that can monitor activity in specified areas. We designed Business Activity Analytics to keep managers and business owners aware of issues in their business. For example, a manager can customize alerts so that they can know in real time if the customer wait time in a checkout line exceeds a predetermined limit or if occupancy restrictions are exceeded. Lastly, Business Activity Analytics provides robust enterprise business intelligence reporting. Commercial subscribers can analyze activity trends, monitor and measure foot traffic and customer flows, allowing them to optimize operations and staffing levels. Our goal with these enhancements to our commercial video software is to enable our service providers to introduce Alarm.com's video solutions to a larger segment of their commercial customers. As we build our inventory of Pro Series products, our partners will be able to service more of their mid-market commercial customers with our fully integrated security and video solutions. This benefits both our partners and their customers. We will continue to invest in our video platform to expand our market opportunity and build new revenue for our service providers. We also provide a broad suite of tools and solutions for service providers through our Partner Services platform. These cutting-edge, enterprise-grade capabilities unlock the full breadth of opportunities and value enabled by IoT technology. Partner Services enables our service providers to leverage data and insights from connected property solutions to optimize business operations, lower their cost to serve, build customer lifetime value, and dramatically enhance and differentiate the professional monitoring services they provide. We work closely with our partners to identify and develop innovative new solutions for our Partner Services platform. We recently launched a package of enterprise software updates that we call Jetstream. The focus of Jetstream is to drive efficiency and reduce cost by enabling our software capabilities to further support our service providers' internal operations. Jetstream includes Appointments, which is a feature that seamlessly pushes information about customer support appointments from a service provider's CRM system to the Alarm.com customer-facing mobile app and web interface. This capability automates and unifies customer communications. It can also reduce missed service appointments when traditional email confirmations are inaccurately filtered as potential spam or junk mail. Jetstream also includes our Service Dashboard. This new tool is designed for service managers with day-to-day responsibilities overseeing technicians and customer support operations. Service Dashboard provides a unified interface for monitoring key operational metrics and customer experience indicators generated by Alarm.com. It displays scores for technician performance, system reliability, and customer engagement and highlights critical trouble conditions across the account base. The Service Dashboard also supports service managers in implementing operational efficiency goals through our full range of service provider solutions, including the award-winning On-Site Wrap Up capability and our System Check tool. We believe that our Partner Services software platform adds significant mutual value to our relationship with service providers and contributes to our competitive advantage in the market. Lastly, I want to update you on a new agreement that we reached with Brinks Home that extends our partnership for another three years. In addition to enabling our ongoing partnership, the agreement will support a significant opportunity that Brinks Home is managing to upgrade AT&T Digital Life customers to Brinks Home services in 2022. The agreement also ties in our deep integration of IoT devices with new market verticals and opportunities that Brinks Home is pursuing. For example, Brinks Home can both reduce carbon emissions and generate additional revenue each time one of their customers enrolls an energy management device in a demand response program that is managed by EnergyHub. We are excited to continue our long-term partnership with the Brinks Home team, and we're pleased to have completed this renewal in the Q3. In summary, I'm pleased with our Q3 results and with our execution against our plans. I wanna thank our service provider partners and our team for their hard work and our investors for their continued trust in our business. With that, let me turn things over to Steve Valenzuela to review our financial results and provide guidance. Steve? Thanks, Steve. I'll begin with a review of our Q3 2021 financial results and then provide our updated guidance before opening the call for questions. SaaS and license revenue in the Q3 grew 17.9% from the same quarter last year to $118.1 million. We saw solid growth in new subscribers and continued increase in video attachment rates based on the strength of our video and video analytics offering. Connect software license revenue in the Q3 was approximately $7.9 million, down as expected from $9.5 million in the year-ago quarter. Our SaaS and license revenue visibility remains high with a revenue renewal rate of 96% in the Q3, which is above our historical range of 92%-94%. It's encouraging to see our renewal rate continue to increase. However, some of the increase could be the result of fewer people moving homes at the start of the pandemic, and we continue to anticipate that this measure could revert to our long-term historical range. Hardware and other revenue in the Q3 was $74.3 million, up 26.5% over Q3 2020. Strong hardware sales were driven by increased adoption of our video cameras in the residential segment and improvement in our North American commercial business with OpenEye and Alarm.com for Business continuing to show good momentum coming out of the pandemic. Total revenue of $192.3 million for the Q3 grew 21.1% year-over-year. SaaS and license gross margin for the Q3 was 85.2%, up slightly by 40 basis points quarter-over-quarter. Hardware gross margin was 15.2% for the Q3, down from 20.5% in Q2 2021 due to higher prices and increased shipping costs. The global supply chain continues to present challenges which require us to expedite shipments and incur higher airfreight costs. Total gross margin in the Q3 was 58.2%, down from 61.5% in the year-ago quarter, mainly due to the lower hardware gross margins and mix. I'll now turn to operating expenses. R&D expenses in the Q3 were $44.1 million compared to $36.9 million for the Q3 of 2020 as we continue to add R&D capacity to help us address the large opportunities we see in our markets, both in our residential and commercial businesses. We ended the Q3 with 819 employees in R&D, up from 750 employees in the same quarter last year. Total headcount increased to 1,482 employees in the Q3 compared to 1,361 employees a year ago. Sales and marketing expenses in the Q3 were $22.6 million or 11.7% of total revenue compared to $18.4 million or 11.6% of revenue in the same quarter last year. During the Q3, we attended and exhibited at the annual ISC West Security Conference held in Las Vegas, which was canceled last year due to the pandemic and moved to July for this year. Our G&A expenses in the Q3 were $18.7 million, up from $17.4 million in the same quarter last year. G&A expense in the Q3 includes non-ordinary course litigation expense of $1.6 million compared to $2.4 million for Q3 2020. Non-ordinary course litigation expenses are part of our adjusted measures and are excluded from our measurement of our non-GAAP financial performance. Moving on to our profitability. Non-GAAP adjusted EBITDA in the Q3 was $37.6 million, up from $34.5 million in the Q3 of 2020. In the Q3, GAAP net income was $13.5 million. In the year-ago quarter, GAAP net income was $36.1 million, which included a gain of $24.7 million resulting from an investment we had in a company that was acquired by an unrelated third party. We reflected the gain in our GAAP P&L as other income. However, we excluded this from our operating income and our non-GAAP financial results as it was not related to our operating performance. Non-GAAP adjusted net income increased to $27.4 million, or $0.53 per diluted share in the Q3, compared to $24.8 million or $0.49 per share for the Q3 of 2020. Turning to our balance sheet. We ended the Q3 with $700.3 million of cash and cash equivalents. We have a strong balance sheet, which provides us significant flexibility going forward. In the Q3, we generated approximately $37.9 million in cash flow from operations compared to $18.6 million for the Q3 of 2020. Our free cash flow for the Q3 was $36.3 million compared to $15.1 million for the same quarter last year. On a year-to-date basis through the first nine months of 2021, we generated $74.3 million of free cash flow, up from $56 million for the same period in 2020. In the Q3, our capital equipment purchases were about $1.6 million, down from $3.6 million in the Q3 of 2020, mainly due to less facility build-out costs. Turning to our financial outlook. For the Q4 of 2021, we expect SaaS and license revenue of $118.1 million-$118.3 million. For the full year of 2021, we believe SaaS and license revenue will be between $456.7 million-$456.9 million, up from our prior guidance of $452.3 million-$452.8 million. We are now projecting total revenue for 2021 of $721.7 million-$731.9 million, increased from our prior guidance of $707.3 million-$717.8 million, which includes estimated hardware and other revenue of $265 million-$275 million. We expect continued challenges and higher shipping costs with the global supply chain, which we have factored into our guidance based on the information we have available today. We estimate that non-GAAP adjusted EBITDA for 2021 will be between $138 million-$140 million, up from our prior guidance of $133 million-$134.5 million. Non-GAAP net income for 2021 is projected to be $97.3 million-$98 million or $1.87-$1.88 per diluted share, up from our prior guidance of $93 million-$93.7 million or $1.77-$1.79 per diluted share. We project our non-GAAP tax rate for 2021 to remain at 21% under current tax rules. EPS is based on an estimate of 52.1 million weighted average diluted shares outstanding. We expect full year 2021 stock-based compensation expense of $38 million-$40 million. Finally, while we are in the initial planning stages, I will provide some early thoughts on 2022 with the caveat that there could be further disruptions from the COVID pandemic and the global supply chain challenges among other unforeseen events which could impact us and our service providers in the new year. With that said, we currently believe our SaaS and license revenue for 2022 will be between $503 million-$504 million. Total revenue for 2022 could range between $780 million-$800 million. We currently project our non-GAAP adjusted EBITDA for 2022 to be between $148 million-$150 million. We will provide our initial guidance for 2022 when we report our Q4 2021 results early next year. In summary, we are pleased with how our service providers and our Alarm.com teams continue to perform during these challenging times. We are focused on executing on our business strategy and investing in our growth opportunities while continuing to deliver profitable growth. With that, operator, please open the call for Q&A. Our first question comes from Adam Tindle with Raymond James. Your line is open. Hi, this is Alex on for Adam. Thanks for taking our question. I understand the model centers around software, but hardware enables software, and I was just curious how you think your supply looks relative to demand as we get closer to the end of the year here. Well, this is Steve Trundle speaking. Our team has pulled out as many stops as we can to keep our supply chain as healthy as it can be. I think as we look through the end of this year, we're not sounding any alarms at this point. We feel pretty good about where we are for the most part. Could there be one or two SKUs in one particular category where we're suffering a backlog? Yeah, there are. Overall, right now looking throughout the rest of 2021, we feel good. We're working hard so that hopefully by the next time we update you, we feel that way about 2022 as well. most of the work right now is going into the 2022 supply chain. Perfect. Thanks. Just how should we think about EnergyHub given macro developments? You'd imagine that demand would be increasing materially for that offering. What can you do to accelerate that business to become even more meaningful and more of a driver going forward? Yeah, that's a great question. You're correct. Yeah, the macro trends are favorable to EnergyHub. You know, the business has continued to grow nicely in the sort of year-over-year mid-30% range, maybe a tad higher than that. You know, we've lined up. We've got kind of a marquee list of partners, so lined up 16 of the top 50 utilities already in the U.S. and are getting to a wider number of homes in terms of where we execute distributed energy resource management programs. In terms of going further, it's primarily going to be driven by our ability to lengthen the lead that we have in terms of product capability by investing more in R&D to expand the range and the capabilities of the product in a number of different types of solutions and the range of solutions that we can provide. As you probably remember, we started, or they started with demand response primarily on thermostats. We've been working to drive that out to really sort of be an overall edge resource management platform, managing batteries, solar inverters, pool pumps, anything that's consuming energy, and then advancing the algorithms that we use to allow the utility to see exactly where they are at any given point in time in terms of managing the grid. We also will work and will continue to work to increase the number of actual consumers who enroll their devices in an EnergyHub programs. There's some marketing there, usually done in tandem with our partner. I would say overall it's a business that's confirming nice growth. You know, when they do that gives us confidence that we should increase investment in the platform that they take out to their partners. That's our primary objective at the moment. Fantastic. Thank you so much. Our next question comes from Sterling Auty with JP Morgan. Your line is open. Hi, this is Rachit on for Sterling. Can you give color on, like, how, if Europe is opening up and how the business on international front is? Sure. Was it just international or were you asking about something else before international? I think it was international. Just international. Okay. Yeah. Gotcha. International, sort of, I would say, still in a steady state at the moment, meaning we sort of entered COVID at a certain production level international, and we've continued to execute at that level of production for most of this year. We've been sort of holding our breath, waiting for some of the clouds to part in rest of world markets so that we can go back to accelerating. now that said, the way things work, if you're installing hypothetically 15,000 properties a month in a market and you continue to do that forever, you keep growing. International is growing as a percentage of revenues and in terms of its contribution to Alarm.com, but we see an opportunity to have it grow, or we expect it to actually grow at a faster clip than we've seen thus far in 2021. We're hoping to see some kind of a positive inflection there, not be talking about steady state, but instead sort of accelerated pace of deployment sometime in the middle part of next year, probably. International in the quarter was a little bit over 4% of our revenue, and a year ago it was around 3%. It is growing, as Steve said, but being held back by COVID. Yes. Just a quick follow-up on that. How does Europe compare on that front? Like, how is the business on the Europe front? Is Europe opening up on- We have obviously we have a number of service providers in Europe, and we have some in Asia, South America. I would say Europe is representative of international. I mean, we probably have a very strong presence relative to the international base in Europe. But we also have South America. We have Australia, New Zealand. Europe has been certainly a growth engine for us, but again, that's also been held back given the issues you see in London, in England, I should say, and then also on the continental Europe. I would say it's representative of what Steve talked about for international in total. Yep. Thanks, guys. Yeah, thank you. Our next question comes from Brian Ruttenbur with Imperial Capital. Your line is open. Yes. Thank you very much. First, margin, they were down year-over-year and sequentially. Can we expect stabilization from Q3 to Q4 and then into 2022? Brian, your line broke up a bit at the very beginning. We missed the beginning part of your question. Would you mind repeating that? Yes. I guess I need to pay my cell phone. I apologize. Hardware gross margins, they were down both year-over-year and sequentially. Can we talk a little bit about what you expect sequentially going forward? I think your dog has some of the same views I do right now. He's not happy about those hardware gross margins, right? Yes, we'll try to improve there. We have been dealing, as I think I had a call a moment ago about the supply chain or a question. Yeah. Supply chain activities. Yeah, our first goal is to make sure we're maintaining a stable supply of product to our service providers. any disruption there impacts our long-term SaaS revenue growth. When we have a choice to make, in terms of whether to incur some additional costs to expedite things, we typically will choose to incur those costs and execute different types of expediting activity, whether that be securing long-term parts at inflated rates or whether it means air freighting product in. All of that activity has compounded to drive down hardware margins on the second half of this year, especially in the last quarter. I think we'll kind of see an ongoing. What you saw in the Q3 is what you likely will see in the Q4. then we'll revisit some of our strategies around hardware margins as we come into the new year. If we see a need to correct course some, we'll do so. Okay. I apologize about working from home. The next question I have is, the deal with Brinks. Can you talk a little bit about that? What does that add incrementally, from what you had before with Brinks, the relationship? Can you talk a little bit about- Yeah. Sure. in terms of growth? Yeah. It was a great new endorsement of our long-term relationship. First, Brinks had done a nice job to secure a big win for them in partnership with AT&T to provide an upgrade path to the AT&T Digital Life subscribers. That sort of represented a business that's coming to an end for AT&T, but Brinks is right there to actually take those existing subs and move them to a Brinks Home offering of course powered by Alarm.com. We were excited to be able to participate in that and to help to identify the product and the capabilities that those subscribers will receive. You know, this renewal captures that opportunity. It also created a path for Brinks to continue to drive. They're very focused on customer sat overall and actually really driving in, I would say, more of the smart home and video capabilities into the subscriber base than maybe what has been the case historically. The reason for that, of course, is the trends and the positive results they're seeing both in terms of upfront willingness by the consumer to pay for a system, but also in terms of attrition dynamics on systems when a consumer is invested in a bigger system. We worked with them for some time to identify different ways we could collaborate to help them in their programs over the next few years drive in sort of deeper adoption of the full range of smart home capabilities. All of that's captured in the this new three-year agreement. Great. Thank you very much. Thanks. Our next question comes from David Robinson with William Blair. Your line is open. Hi, guys. Thanks for taking my question. The one question I had was on the commercial business. I know you said you saw some improvement in Alarm.com for Business and OpenEye. I was wondering what was kind of driving that improvement that you saw and kind of what your expectations are for that segment as we close out the year. Sure. I'd say a couple drivers. first for the most part, business is open again. I think we saw a pause in the commercial market, really in the first and Q2s of this year. We began to sort of see in the Q3 we saw sort of businesses coming back to the table, new businesses opening a willingness by the commercial customer to invest in security in their facilities again. I think there were some macro trends working in our favor, POs loosened up, that sort of thing. The other driver, though, I would say, is that, business activity analytics, which I spoke about some, is a pretty meaningful feature upgrade and capability upgrade to what a midsize commercial customer has been able to access in the past, especially if you say that you need to have a video offering that's completely integrated with the intrusion offering and with the access control offering. well what we're doing on the analytics side now, with the inputs coming from anywhere from 5-20 video cameras to do things like identifying people that are too close to each other, monitoring queues and lines, those type of capabilities open eyes and get people a little bit more excited about pulling the trigger and making a purchase. If you're only providing security, that's great. If you're providing security and you're also driving business value, like metrics that you can use to make a decision to improve your operation, your revenue streams or your customer sat, it's a little more exciting. I think we've seen early signs that the commercial sales forces for our partners and integrators are having some luck with that message of being able to use the analytics capability for not just security. Of course, security is better, but also for driving a lot of improvement or more intel on some of the customer satisfaction and customer service metrics. Awesome. In regards to the improvement, I guess, has it been pretty broad-based across the customer size? Obviously, you're focusing on kind of the mid-market, but I was just trying to get a sense of the different size of customers on the commercial side as well. Yeah. Good question. We're kind of. I mean, the improvement has been across the spectrum, but what I would say is it's a bit more sort of early days for us, if you will, in the mid and larger size commercial customer accounts. So, in that pool, we're growing off a smaller base. In the small business segment we've got a nice base already, and we've been strong there for some time. If you look at some of the things we've done to build out the platform with OpenEye and with SDS Shooter Detection Systems, we're attaching to a increasingly larger commercial customer now. Got it. Thanks for taking my questions. Sure. Sure. Our next question comes from Darren Aftahi with ROTH Capital Partners. Your line is open. Hey, guys. Thanks for taking my questions. Nice results. Two, if I may. I think it's been about nine months since you guys launched Flex IO. I'm just kinda curious, traction in the market. For Stevie, can you give the other SaaS revenue in the quarter? Thanks. Sure. I'll start with the other SaaS. I know that's your favorite question. It was $8.9 million in the quarter, and it was up 22% year-over-year, and really driven mainly by energy. Of course, that includes PointCentral Building 36 with the smart water valve plus meter, which has been doing well. $8.9 million for SaaS revenue for Q3. Coming back to Flex IO, we've put Flex IO in the market. A number of dealers have begun to introduce that into their first getting it onto their price sheet, getting their salespeople trained on when to sell it, what types of use cases deserve a Flex IO sell. In fairness, this has been a very busy year for residential. I don't think any of us expected 2020 to be as strong on the residential side as we've seen. At some level, a lot of the sales folks have been more focused, I would say, on selling our video analytics and sort of meeting demand that's for the product that they already know. You know, we're working to get them familiar with the capability that Flex offers so that we can continue to accelerate that. We do have, I don't know, a number of service providers now that are putting that into their offering as an option. We, of course, wanna drive that option, the use of that option higher and higher because it is all sort of a green field ARPU for us and something we're working on. Great. Thank you. Thank you. This does conclude the conference. You may now disconnect. Everyone, have a great day. Thank you.