Alarm.com Q1 Earnings Call Highlights

07 May 2026, 18:10 by Jessica Moore · The Cerbat Gem

Alarm.com (NASDAQ:ALRM) executives said first-quarter 2026 results exceeded internal expectations, driven by strong subscription revenue retention and outperformance at its EnergyHub business, while also flagging near-term hardware uncertainty tied to tariffs and memory component costs.

Quarterly results topped expectations

CEO Steve Trundle said the company delivered first-quarter results “that exceeded our expectations,” with SaaS and license revenue of $181.5 million, up 10.8% year-over-year, and adjusted EBITDA of $49.6 million. Trundle described performance as broad-based across the portfolio, noting that “nearly every area” was “running at or slightly above the plan we set out for the year.”

Trundle also noted a timing-related item in EnergyHub: “We had a bit of revenue in the EnergyHub business move forward from the third quarter,” which he characterized as a “modest anomaly.”

CFO Kevin Bradley said the SaaS and license revenue result exceeded the midpoint of guidance by $5.6 million. He cited two main drivers: a revenue retention rate “of over 95% for the quarter” and continued strength at EnergyHub. In the Q&A, Trundle and Bradley put the retention figure at about 95.4%.

Bradley quantified the impact of elevated retention, saying the difference between 95.4% and the high end of the company’s historical range around 94% equates to about “$2 million-$2.5 million per quarter.” He added EnergyHub contributed another roughly $2 million to the SaaS beat, with “about half of that pulled forward from Q3.”

Weather and supply chain volatility created “bumps”

Despite the stronger-than-expected quarter, management described operational headwinds. Trundle said new home building and other business activity were affected in January and February by “the long spell of snow and ice” across much of the U.S., reducing installation activity “for about three weeks” before demand “bounced back strong and accelerated through March.”

Toward the end of the quarter, Trundle said the company began seeing “supply chain volatility related to standard memory availability” as manufacturers shifted output toward high-bandwidth memory used in AI data centers. He said the market shift led to “substantial cost increases for the memory we use in cameras and other products,” adding the company expects these challenges “to continue until the memory market corrects.”

Commercial AI features highlighted at OpenEye

Trundle emphasized the company’s mix of residential, commercial, and energy businesses and described AI as a key lever across connected-device orchestration. In commercial security and video, he said AI use cases are particularly valuable where enterprises may operate dozens or hundreds of cameras.

Trundle highlighted two OpenEye releases during the quarter:

AI Visual Check, which can send real-time notifications for scenarios such as blocked fire exits, restocking needs, or unattended security posts.
AI Visual Search, which enables natural-language search across video footage to retrieve relevant forensic results.

He said both are included in OpenEye’s premium video subscription service and that end-customer adoption “is rapidly growing.” In response to a question about competition, Trundle said OpenEye’s pipeline “looks solid” and that customers are increasingly evaluating products “through an AI lens.” He provided an example of a specialty grocery retailer using Visual Check to monitor whether fresh sushi inventory is stocked during key hours, illustrating how camera deployments can support operational outcomes beyond traditional security.

Financial details: revenue, margins, cash flow, and repurchases

Bradley reported hardware and other revenue of $83.7 million, up 11.5% year-over-year, bringing total revenue to $265.2 million, up 11%.

He said the company began passing through higher tariff rates effective January 1, tied to tariffs implemented under the International Emergency Economic Powers Act, and that approximately $5 million of first-quarter hardware revenue reflected those pass-throughs.

Hardware gross margin was 25.2%, which Bradley attributed to product mix “skewing towards commercial products generally, and in particular, in the commercial video business.”

Operating expenses (excluding certain items adjusted for non-GAAP purposes) were $125.1 million, up 9.3% year-over-year. Bradley noted sales and marketing expense included ISC West, the company’s largest trade show, which shifted from the second quarter last year into the first quarter this year.

R&D expense, inclusive of stock-based compensation, was $72.1 million, up 5.4% year-over-year. Bradley said the company ended the quarter with 1,140 employees in R&D functions, up 1% year-over-year.

GAAP net income was $23.6 million, down from $28.0 million a year earlier, primarily due to “lower interest income” after the company retired $500 million of convertible notes in January 2026. Non-GAAP adjusted net income was $34.7 million, up from $32.2 million in the prior-year quarter, and non-GAAP EPS was $0.65, up 14% year-over-year.

The company ended the quarter with $497.4 million in cash and generated $49.7 million of free cash flow. It repurchased 428,000 shares for $20 million during the quarter. Trundle said the company purchased more than 800,000 shares over the last two quarters, and Bradley said total repurchases since the beginning of 2025 totaled 1.2 million shares. The board authorized up to $150 million of repurchases over the next two years.

Guidance raised; hardware outlook tempered by tariffs and memory costs

For the second quarter of 2026, Bradley guided to SaaS and license revenue of $185.5 million to $185.7 million. For the full year, the company raised its SaaS and license revenue outlook to $749.5 million to $750.5 million, which Bradley said is a $6 million increase at the midpoint.

Total revenue guidance for 2026 was raised to $1.0595 billion to $1.0705 billion, including hardware and other revenue of $310 million to $320 million. Bradley said the hardware midpoint was modestly reduced from the February update due to “a couple of exogenous dynamics,” led by the February 2026 Supreme Court ruling that the tariffs implemented under the International Emergency Economic Powers Act were unauthorized.

He said the company will lower tariff pass-through fees once inventory imported under the prior tariff regime is sold through, and expects the shift “towards the end of Q2.” Bradley added that, as a “general rule of thumb,” the new tariffs are “about half” the prior levels, and that if the company was running at $5 million of tariff pass-through fees per quarter in Q1, the change implies “approximately $5 million less” in pass-through fees during the second half of the year versus the prior outlook.

Bradley also cited uncertainty around memory prices. He said the company expects it will need to increase prices for products that use memory and does not yet know “if or how these price increases will affect demand,” prompting a cautious hardware revenue stance despite Q1 outperformance.

The company raised its 2026 non-GAAP adjusted EBITDA outlook to $215 million to $216 million, a $1.5 million midpoint increase. Bradley said the midpoint implies a 20.2% adjusted EBITDA margin, consistent with prior guidance and representing 30 basis points of year-over-year expansion. Non-GAAP adjusted net income is projected at $151.5 million to $152.0 million, or $2.81 to $2.82 per diluted share, with a weighted average diluted share count of about 56.9 million. The non-GAAP tax rate is expected to remain 21%, and stock-based compensation expense is projected at $35 million to $37 million for the year.

On longer-term margin goals, Bradley told analysts there were “no changes” to the company’s expectation of exiting 2027 at about a 21% adjusted EBITDA margin, while noting hardware margins are “harder to pin down” given uncertainty around tariffs and memory prices.

Bradley also said the company will update its non-GAAP profitability definitions to exclude mark-to-market gains and losses on equity positions held in its treasury portfolio, arguing those fluctuations do not reflect operating performance. He provided recalculated 2025 non-GAAP metrics under the new definition, including adjusted EBITDA of $201.3 million versus $206.0 million previously reported on that basis.

In closing remarks, management reiterated confidence in business momentum while acknowledging near-term hardware-related volatility. Trundle said the company views AI “primarily an opportunity” for Alarm.com and intends to remain positioned for both share repurchases and opportunistic acquisitions.

About Alarm.com (NASDAQ:ALRM)

Alarm.com Holdings, Inc provides a cloud-based software platform for connected properties, enabling residential and commercial customers to monitor, manage and control security, energy and home automation solutions. The company’s interactive services connect security systems, smart thermostats, door locks, lights and video cameras through cellular, broadband and Z-Wave networks, offering real-time alerts and remote access via mobile and web applications.

Through its platform, Alarm.com delivers an integrated suite of products that includes intrusion detection, video monitoring and cloud recording, energy management features such as smart thermostat scheduling, and home automation controls for lighting, garage doors and connected appliances.