What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-09 · 255 added, 127 removed, 406 unchanged (48% of the section changed)

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Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Alarm.com is the leading platform for the intelligently connected property.

Alarm.com is the leading platform for intelligently connected properties.

Our cloud-based platform offers an expansive suite of Internet of Things, or IoT, solutions a ddressing global opportunities in the residential, multi-family, small business and enterprise commercial markets.

Alarm.com’s solution suite includes security, video and video analytics, energy management, access control, electric utility grid management, indoor gunshot detection, water management, health and wellness, personal safety and data-rich emergency response.

Alarm.com’s solution suite includes security, video surveillance and video analytics, energy management, access control, electric utility grid management, active shooter detection, water management, health and wellness, personal safety and data-rich emergency response.

During 2024, our platforms processed more than 345 billion data points generated by over 160 million connected devices.

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They can deploy interactive security, video monitoring, property automation, access control, energy management, gunshot detection, water management, vehicle and fleet management, and wellness and personal safety solutions as stand-alone offerings or as integrated solutions.

Highlights of First Quarter Results

Highlights of Second Quarter Results

We primarily generate SaaS and license revenue, our largest source of revenue, through our service provider partners, who resell our services and pay us monthly fees.

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We derive a portion of our revenue from licensing our intellectual property to third parties on a per customer basis.

SaaS and license revenue represented 69% of our revenue during the three months ended March 31, 2025, as compared to 67% in the same period in the prior year.

SaaS and license revenue represented 67% and 68% of our revenue during the three and six months ended June 30, 2025, respectively, as compared to 67% in the same periods in the prior year.

We also generate SaaS and license revenue from monthly fees charged to service providers on a per subscriber basis for access to our non-hosted software platform, or Software platform.

The non-hosted software for interactive security, automation and related solutions is typically deployed and operated by the service provider in its own network operations center.

Software license revenue represented 2% of our revenue during each of the three months ended March 31, 2025 and 2024.

Software license revenue represented 2% of our revenue during each of the three and six months ended June 30, 2025 and 2024.

We also generate revenue from the sale of many types of hardware, including video cameras, video recorders, cellular radio modules, smart thermostats, image sensors, gunshot detection sensors and other peripherals, that enable our solutions.

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Additionally, our hardware and other revenue includes our revenue from the sale of licenses that provide our customers the right to use our gunshot detection solution in exchange for license fees.

Hardware and other revenue represented 31% of our revenue during the three months ended March 31, 2025, as compared to 33% in the same period in the prior year.

Hardware and other revenue represented 33% and 32% of our revenue during the three and six months ended June 30, 2025, respectively, as compared to 33% in the same periods in the prior year.

We typically expect hardware and other revenue to fluctuate as a percentage of total revenue.

Highlights of our financial performance for the periods covered in this Quarterly Report include:

• SaaS and license revenue increased 9% to $163.8 million during the three months ended March 31, 2025 from $150.3 million during the three months ended March 31, 2024.

Included in SaaS and license revenue was software license revenue, which decreased to $4.7 million during the three months ended March 31, 2025 from $5.2 million during the three months ended March 31, 2024.

• Total revenue increased 7% to $238.8 million during the three months ended March 31, 2025 from $223.3 million during the three months ended March 31, 2024.

• Net income increased to $27.7 million during the three months ended March 31, 2025, as compared to $23.4 million during the three months ended March 31, 2024.

Net income attributable to common stockholders increased to $28.0 million during the three months ended March 31, 2025, as compared to $23.6 million during the three months ended March 31, 2024.

• Non-GAAP adjusted EBITDA, a non-GAAP measurement of operating performance, increased to $43.5 million during the three months ended March 31, 2025 from $37.0 million during the three months ended March 31, 2024.

Please see Non-GAAP Measures below in this section of this Quarterly Report for a discussion of the limitations of non-GAAP adjusted EBITDA (a non-GAAP measure) and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable measurement in accordance with accounting principles generally accepted in the United States, or GAAP, for the three months ended March 31, 2025 and 2024.

• SaaS and license revenue increased 9% to $170.0 million during the three months ended June 30, 2025 from $155.9 million during the three months ended June 30, 2024.

SaaS and license revenue increased 9% to $333.8 million during the six months ended June 30, 2025 from $306.3 million during the six months ended June 30, 2024.

Included in SaaS and license revenue was software license revenue, which decreased to $4.5 million during the three months ended June 30, 2025 from $5.2 million during the three months ended June 30, 2024.

Software license revenue decreased to $9.2 million during the six months ended June 30, 2025 from $10.4 million during the six months ended June 30, 2024.

• Total revenue increased 9% to $254.3 million during the three months ended June 30, 2025 from $233.8 million during the three months ended June 30, 2024.

Total revenue increased 8% to $493.1 million during the six months ended June 30, 2025 from $457.1 million during the six months ended June 30, 2024.

• Net income increased to $34.2 million during the three months ended June 30, 2025, as compared to $32.5 million during the three months ended June 30, 2024.

Net income increased to $61.9 million during the six months ended June 30, 2025, as compared to $55.9 million during the six months ended June 30, 2024.

Net income attributable to common stockholders increased to $34.6 million during the three months ended June 30, 2025, as compared to $33.5 million during the three months ended June 30, 2024.

Net income attributable to common stockholders increased to $62.5 million during the six months ended June 30, 2025, as compared to $57.1 million during the six months ended June 30, 2024.

• Non-GAAP adjusted EBITDA, a non-GAAP measurement of operating performance, increased to $48.4 million during the three months ended June 30, 2025 from $42.8 million during the three months ended June 30, 2024.

Non-GAAP adjusted EBITDA increased to $92.0 million during the six months ended June 30, 2025 from $79.9 million during the six months ended June 30, 2024.

Recent Developments

On January 30, 2025, we entered into a senior secured loan agreement with a service provider partner, under which a term loan was provided to the service provider partner in the original principal amount of $21.5 million, which loan is collateralized by the assets of the service provider partner.

Quarterly principal payments begin in the second quarter of 2027.

Interest on the outstanding principal accrues at a rate per annum equal to the overnight financing rate published by the Federal Reserve Bank of New York for a period of three months, plus 3.0%.

For the first two years of the loan, monthly interest payments can be payable in kind at the election of the borrower.

The maturity date of the loan is January 30, 2030.

On February 10, 2025, Alarm.com Incorporated, one of our wholly-owned subsidiaries, acquired 81% of the issued and outstanding shares of capital stock of CHeKT, Inc., or CHeKT.

CHeKT provides a remote video monitoring service for central station operators that is compatible with a variety of cameras.

We believe the acquisition of CHeKT will help to expand our opportunity to provide remote video monitoring solutions in the commercial and residential markets.

In consideration for the purchase of 81% of the issued and outstanding shares of capital stock of CHeKT, we paid $23.6 million in cash on February 10, 2025, after deducting $3.7 million related to agreed holdback provisions.

Pursuant to the terms of the stock purchase agreement, following the preliminary determination of the working capital of CHeKT as of the closing date, the purchase price decreased by $0.2 million.

The purchase price allocation was not finalized as of the filing date of this Quarterly Report on Form 10-Q and is pending the final determination of the working capital adjustment as well as tax adjustments, including the assessment of any net operating losses acquired and the related limitations on any identified net operating losses.

On April 28, 2025, we paid $29.1 million in cash to purchase 24.7% of the outstanding shares of Safe Streets USA, LLC.

We are still evaluating the accounting treatment for this investment, which will be finalized during the second quarter of 2025.

On April 28, 2025, we paid $29.1 million in cash to purchase 24.7% of the outstanding shares of Safe Streets USA, LLC, or Safe Streets.

We do not have a controlling financial interest in Safe Streets, but based on the legal form of Safe Streets, our level of ownership and the extent of influence, we concluded that this equity investment in Safe Streets, which is included in the Alarm.com segment, does not meet the criteria for consolidation and will be accounted for under the equity method of accounting.

On May 30, 2025, we paid $119.3 million in cash to purchase 32.5% of the outstanding shares of Safe Haven Security Services, LLC, or Safe Haven, after deducting $6.3 million related to an agreed holdback provision that is expected to be paid during the second quarter of 2026.

On June 6, 2025, we paid $19.2 million in cash to purchase 32.5% of the outstanding shares of All Access Holdings, LLC, or All Access, after deducting $1.0 million related to an agreed holdback provision that is expected to be paid during the second quarter of 2026.

After consummation of these transactions, All Access and Safe Haven were under common control.

We do not have a controlling financial interest in Safe Haven or All Access, but based on the legal form of Safe Haven and All Access, our level of ownership and the extent of influence, we concluded that the equity investments in Safe Haven and All Access, which are included in the Alarm.com segment, do not meet the criteria for consolidation and will be accounted for under the equity method of accounting.

On July 4, 2025, Public Law 119-21, commonly referred to as the One Big Beautiful Bill Act, or OBBBA, was enacted in the United States.

The OBBBA includes a broad range of tax provisions that may impact the timing and the magnitude of certain key tax deductions.

The most significant provisions to us are the permanent reinstatement of the full domestic research and development expenditure deduction in the year such costs are incurred and the 100% first-year bonus depreciation deduction.

We currently anticipate these provisions will significantly reduce our current federal income tax cash outlays over the next several years.

Certain other international tax provisions may also be favorable to us.

We continue to analyze the OBBBA tax provisions to assess their potential impact on our financial position, results of operations and cash flows.

The global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of the Macroeconomic Conditions.

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It remains difficult to assess or predict the ultimate duration and economic impact of the Macroeconomic Conditions.

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2025, which is increasingly true in periods of extreme uncertainty, such as the uncertainty caused by the Macroeconomic Conditions.

The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2025, which is increasingly true in periods of extreme uncertainty, such as the uncertainty caused by the Macroeconomic Conditions.

Prolonged uncertainty with respect to the Macroeconomic Conditions could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.

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Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

SaaS and license revenue $ 169,993 $ 155,927 $ 333,793 $ 306,271

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Non-GAAP Adjusted EBITDA

Non-GAAP adjusted EBITDA is a non-GAAP measure that represents our net income before interest expense, interest income, certain activity within other expense, net, provision for income taxes, amortization and depreciation expense, stock-based compensation expense, acquisition-related expense, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation.

Non-GAAP adjusted EBITDA is a non-GAAP measure that represents our net income before interest expense, interest income, certain activity within other expense, net, provision for income taxes, income from equity method investments, net, amortization and depreciation expense, stock-based compensation expense, acquisition-related expense, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation.

We do not consider these items to be indicative of our core operating performance.

The non-cash items include amortization and depreciation expense;

income from equity method investments, net;

amortization of debt issuance costs for the January 20, 2021 issuance of $500.0 million aggregate principal amount of 0% convertible senior notes due January 15, 2026, or the 2026 Notes, included in interest expense;

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We exclude interest expense in calculating non-GAAP adjusted EBITDA because we believe the exclusion of interest expense will provide for more meaningful information about our financial performance.

We exclude interest income and certain activity within other expense, net including gains, losses or impairments on investments without readily determinable fair values and other assets, gains and losses from equity method investments, gains on settlement fees and losses on the early extinguishment of debt, when applicable, from non-GAAP adjusted EBITDA because we do not consider it part of our ongoing results of operations.

We exclude the impact related to our provision for income taxes from non-GAAP adjusted EBITDA because we do not consider this tax adjustment to be part of our ongoing results of operations.

We exclude interest income and certain activity within other expense, net including gains, losses or impairments on investments without readily determinable fair values and other assets, gains on settlement fees and losses on the early extinguishment of debt, when applicable, from non-GAAP adjusted EBITDA because we do not consider it part of our ongoing results of operations.

We exclude the impact related to our provision for income taxes and income from equity method investments, net from non-GAAP adjusted EBITDA because we do not consider these adjustments to be part of our ongoing results of operations.

GAAP requires that operating expenses include the amortization of acquired intangible assets, which principally include acquired customer relationships, developed technology and trade names.

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Non-GAAP adjusted EBITDA is not a measure calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

Please see Non-GAAP Measures in this section for a discussion of the limitations of non-GAAP adjusted EBITDA and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measurement, for the three months ended March 31, 2025 and 2024.

Please see Non-GAAP Measures in this section for a discussion of the limitations of non-GAAP adjusted

EBITDA and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measurement, for the three and six months ended June 30, 2025 and 2024.

SaaS and License Revenue Renewal Rate

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Our cost of SaaS and license revenue also includes our cost of software license revenue, which primarily includes the payroll and payroll-related costs of the department dedicated to providing service exclusively to those service providers that host the Software platform.

As of March 31, 2025 and 2024, we had 76 and 75 employees who manufacture hardware for our suite of IoT solutions, respectively .

As of June 30, 2025 and 2024, we had 75 and 79 employees who manufacture hardware for our suite of IoT solutions, respectively .

Our cost of hardware and other revenue primarily includes cost of raw materials, tooling, freight shipments and amounts paid to our third-party manufacturer for production and fulfillment of our cellular radio modules and image sensors, and procurement costs for our video cameras, video recorders, smart thermostats and gunshot detection sensors, which we purchase from an original equipment manufacturer, and other devices.

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A significant portion of our hardware is produced outside the United States, including in Vietnam, Thailand and Taiwan.

government has announced several tariff framework agreements, and when the terms of such agreements are finalized, we will assess their potential impact on our business.

The ultimate impact of any tariffs will depend on various factors, including how long such tariffs remain in place, the ultimate levels of such tariffs and how other countries respond to the U.S.

Given these tariffs did not become effective until April 2025, there was no impact to our cost of hardware revenue for these new tariffs during the three months ended March 31, 2025.

As we look forward, we continue to monitor the changes in tariffs and consider whether we will pass through some or all of the cost of the tariffs to our customers consistent with our contractual rights.

Depending on how much, if any, of the cost of tariffs we pass through to our customers, our hardware revenue margins may be impacted.

If tariffs are increased through reinstatement of the previously announced tariffs or are expanded to apply to more of our products, such actions may increase our cost of hardware revenue and reduce our hardware revenue margins further.

During the second quarter of 2025, we passed through most of the cost of the baseline tariffs to our customers consistent with our contractual rights.

Our hardware revenue margins are expected to decline slightly in the future because a component of our hardware revenue now incorporates a pass-through cost.

If tariffs are modified beyond the baseline tariff of 10% or are expanded to apply to more of our products, such actions may increase our cost of hardware revenue and reduce our hardware revenue margins further.

We continue to closely monitor changes in tariff policy and retain flexibility in response.

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We include stock-based compensation expense in connection with the grant of restricted stock units and other forms of equity compensation, including equity compensation with performance conditions, in the applicable operating expense category based on the respective equity award recipient’s function (sales and marketing, general and administrative or research and development).

We grew from 2,002 employees as of March 31, 2024 to 2,020 employees as of March 31, 2025 , and grew from 2,010 employees as of December 31, 2024.

We expect to continue to hire new employees to support the projected future growth of our business.

We grew from 2,033 employees as of June 30, 2024 to 2,048 employees as of June 30, 2025 , and grew from 2,020 employees as of March 31, 2025.

We may continue to hire new employees to support the projected future growth of our business.

Sales and Marketing Expense.

Sales and marketing expense consists primarily of personnel and related expenses for our sales and marketing teams, including salaries, bonuses, stock-based compensation, benefits, travel, and commissions.

sales and marketing teams engage in sales, account management, service provider partner support, advertising, promotion of our products and services and marketing.

The number of employees in sales and marketing functions increased from 564 as of March 31, 2024 to 579 as of March 31, 2025 and increased from 572 as of December 31, 2024.

Our sales and marketing teams engage in sales, account management, service provider partner support, advertising, promotion of our products and services and marketing.

The number of employees in sales and marketing functions increased from 576 as of June 30, 2024 to 599 as of June 30, 2025 and increased from 579 as of March 31, 2025.

We expect to continue to invest in our sales and marketing activities to expand our business both domestically and internationally and we expect to increase our marketing expense in 2025 as compared to 2024.

We intend to increase the size of our sales force and our service provider partner support team to provide additional support to our existing service provider partner base to drive their productivity in selling our solutions as well as to enroll new service provider partners in North America and in international markets.

We may increase the size of our sales force and our service provider partner support team to provide additional support to our existing service provider partner base to drive their productivity in selling our solutions as well as to enroll new service provider partners in North America and in international markets.

General and Administrative Expense.

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Also included in general and administrative expenses are credit losses and acquisition-related expenses, which consist primarily of legal, accounting and professional service fees directly related to acquisitions and valuation gains or losses on acquisition-related contingent liabilities.

The number of employees in general and administrative functions increased from 224 as of March 31, 2024 to 236 as of March 31, 2025 and decreased from 237 as of December 31, 2024.

The number of employees in general and administrative functions increased from 223 as of June 30, 2024 to 238 as of June 30, 2025 and increased from 236 as of March 31, 2025.

Excluding intellectual property litigation and acquisition-related expense, we expect general and administrative costs to increase prospectively as our business grows.

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Also included are non-personnel costs such as consulting and professional fees paid to third-party development resources.

The number of employees in research and development functions decreased from 1,139 as of March 31, 2024 to 1,129 as of March 31, 2025 and increased from 1,127 as of December 31, 2024.

The number of employees in research and development functions decreased from 1,155 as of June 30, 2024 to 1,136 as of June 30, 2025 and increased from 1,129 as of March 31, 2025.

Our research and development efforts are focused on innovating new features and enhancing the functionality of our platforms and the solutions we offer to our service provider partners and subscribers.

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Other Expense, Net

Other expense, net primarily consists of non-operating and miscellaneous expense and income.

Other expense, net primarily consists of non-operating and miscellaneous expense and income, including the impacts of fluctuations in foreign currency exchange rates.

Provision for Income Taxes

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As a result, we recognize tax liabilities based on estimates of whether additional taxes will be due.

For the three months ended March 31, 2025, our effective tax rate was below the 21.0% statutory rate primarily due to 2025 research and development tax credits claimed and the foreign derived intangible income deduction, partially offset by the impact of state taxes, foreign withholding taxes and other nondeductible expenses.

For the three and six months ended June 30, 2025, our effective tax rate was below the 21.0% statutory rate primarily due to 2025 research and development tax credits claimed, the foreign derived intangible income deduction and a favorable true-up adjustment of our 2024 income tax provision estimate associated with research and development tax credits, partially offset by the impact of state taxes, foreign withholding taxes and other nondeductible expenses.

We recognize stock-based compensation tax shortfalls and excess tax windfall benefits on a discrete basis during the quarter in which they occur, and we anticipate our effective tax rate will vary from quarter to quarter depending on our stock price as well as the vesting and exercises of various forms of equity compensation under our equity incentive plans each period, including restricted stock units and stock options.

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Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

SaaS and license revenue $ 169,993 67 % $ 155,927 67 % $ 333,793 68 % $ 306,271 67 %

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Provision for income taxes 5,458 2 884 — 12,765 2 3,631 1

Income from equity method investments, net (316) — — — (316) — — —

Net income $ 34,217 13 % $ 32,520 14 % $ 61,929 13 % $ 55,924 12 %

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Three Months Ended

June 30, Six Months Ended

Stock-based compensation expense data:

2025 2024 2025 2024

Cost of hardware and other revenue

$ — $ 1 $ — $ 2

Sales and marketing 620 724 1,100 1,479

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Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Components of cost of revenue as a percentage of revenue:

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Total cost of revenue as a percentage of total revenue 34 % 35 % 33 % 35 %

Comparison of the Three Months Ended March 31, 2025 to March 31, 2024

The following tables in this section set forth our selected condensed consolidated statements of operations (in thousands), data for the percentage change and data as a percentage of revenue for the three months ended March 31, 2025 and March 31, 2024.

Comparison of the Three and Six Months Ended June 30, 2025 to June 30, 2024

Three Months Ended

Change Six Months Ended

2025 2024 2025 2024

SaaS and license revenue $ 169,993 $ 155,927 9 % $ 333,793 $ 306,271 9 %

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Total revenue $ 254,308 $ 233,807 9 % $ 493,130 $ 457,090 8 %

The $15.5 million increase in total revenue for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily the result of a $13.5 million, or 9%, increase in our SaaS and license revenue, and a $2.1 million, or 3%, increase in our hardware and other revenue.

Our software license revenue included within SaaS and license revenue decreased $0.5 million to $4.7 million during the three months ended March 31, 2025 as compared to $5.2 million during the same period in the prior year primarily due to the result of the continuing transition of customers from non-hosted software to our cloud based hosted platform.

The SaaS and license revenue for the Alarm.com segment increased $9.8 million for the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2024.

The SaaS and license revenue for our Other segment increased $3.7 million for the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions as well as our property management solution.

The increase in hardware and other revenue for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily from the $1.7 million increase in hardware and other revenue, net of intersegment eliminations, in the Alarm.com segment arising from an increase in the average selling price of cameras sold.

Hardware and other revenue, net of intersegment eliminations, in our Other segment increased $0.4 million for the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to increased sales related to our property management solution.

The $20.5 million increase in total revenue for the three months ended June 30, 2025 as compared to the same period in the prior year was primarily the result of a $14.1 million, or 9%, increase in our SaaS and license revenue, and a $6.4 million, or 8%, increase in our hardware and other revenue.

Our software license revenue included within SaaS and license revenue decreased $0.7 million to $4.5 million during the three months ended June 30, 2025 as compared to $5.2 million during the same period in the prior year primarily due to the result of the continuing transition of customers from non-hosted software to our cloud-based hosted platform.

The SaaS and license revenue for the Alarm.com segment increased $10.2 million for the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2024.

The SaaS and license revenue for our Other segment increased $3.9 million for the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions as well as our property management solution.

The increase in hardware and other revenue for the three months ended June 30, 2025 as compared to the same period in the prior year was primarily from the $5.6 million increase in hardware and other revenue, net of intersegment eliminations, in the Alarm.com segment arising from an increase in the volume of video cameras sold.

Hardware and other revenue, net of intersegment eliminations, in our Other segment increased $0.8 million for the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to increased sales related to our property management solution.

The $36.0 million increase in total revenue for the six months ended June 30, 2025 as compared to the same period in the prior year was primarily the result of a $27.5 million, or 9%, increase in our SaaS and license revenue and a $8.5 million, or 6%, increase in our hardware and other revenue.

Our software license revenue included within SaaS and license revenue decreased $1.2 million to $9.2 million during the six months ended June 30, 2025, as compared to $10.4 million during the same period in the prior year primarily due to the result of the continuing transition of customers from non-hosted software to our cloud-based hosted platform.

The SaaS and license revenue for the Alarm.com segment increased $19.9 million for the six months ended June 30, 2025 as compared to the same period in the prior year primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2024.

The SaaS and license revenue for our Other segment increased $7.6 million for the six months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions as well as our property management solution.

The increase in hardware and other revenue for the six months ended June 30, 2025 as compared to the same period in the prior year was primarily from the $7.3 million increase in hardware and other revenue, net of intersegment eliminations, in the Alarm.com segment due to an increase in the volume of video cameras sold.

Hardware and other revenue, net of intersegment eliminations, in our Other segment increased $1.2 million for the six months ended June 30, 2025 as compared to the same period in the prior year, primarily due to an increase in sales related to our property management solution.

Cost of Revenue

Three Months Ended

Change Six Months Ended

2025 2024 2025 2024

Cost of revenue (1)

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(1) Excludes amortization and depreciation shown in operating expenses.

The $1.7 million increase in cost of revenue for the three months ended March 31, 2025 as compared to the same period in the prior year was the result of a $1.1 million, or 6%, increase in cost of SaaS and license revenue, and a $0.6 million, or 1%, increase in cost of hardware and other revenue.

Our cost of software license revenue included within cost of SaaS and

license revenue was $0.1 million and $0.2 million for the three months ended March 31, 2025 and 2024, respectively.

The cost of SaaS and license revenue for the Other segment increased $0.8 million during the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions, which drove a corresponding increase in amounts paid to distributed energy resource providers.

The cost of SaaS and license revenue for the Alarm.com segment increased $0.3 million during the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers.

The cost of hardware and other revenue for the Alarm.com segment increased $0.3 million during the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to a change in the mix of product sales to more hardware with higher costs.

The cost of hardware and other revenue for the Other segment increased $0.3 million during the three months ended March 31, 2025 as compared to the same period in the prior year primarily due to an increase in the number of hardware units shipped related to our property management solution.

Cost of hardware and other revenue as a percentage of hardware and other revenue was 76% for the three months ended March 31, 2025 and 77% for the same period in the prior year.

The decrease in cost of hardware and other revenue as a percentage of hardware and other revenue for the three months ended March 31, 2025 as compared to the same period in the prior year is primarily a reflection of the mix of product sales during the periods.

Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 13% for three months ended March 31, 2025 as compared to 14% for the same period in the prior year.

Cost of software license revenue as a percentage of software license revenue was 3% for each of the three months ended March 31, 2025 and 2024.

The $6.2 million increase in cost of revenue for the three months ended June 30, 2025 as compared to the same period in the prior year was the result of a $4.6 million, or 8%, increase in cost of hardware and other revenue, and a $1.6 million, or 7%, increase in cost of SaaS and license revenue.

Our cost of software license revenue included within cost of SaaS and license revenue was $0.1 million for each of the three months ended June 30, 2025 and 2024.

The cost of hardware and other revenue for the Alarm.com segment increased $4.0 million during the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in the number of hardware units shipped.

The cost of hardware and other revenue for the Other segment increased $0.6 million during the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in the number of hardware units shipped related to our property management solution.

The cost of SaaS and license revenue for the Other segment increased $1.1 million during the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions, which drove a corresponding increase in amounts paid to distributed energy resource providers.

The cost of SaaS and license revenue for the Alarm.com segment increased $0.5 million during the three months ended June 30, 2025 as compared to the same period in the prior year primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers.

Cost of hardware and other revenue as a percentage of hardware and other revenue was 76% for each of the three months ended June 30, 2025 and 2024.

Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 14% for each of the three months ended June 30, 2025 and 2024.

Cost of software license revenue as a percentage of software license revenue was 2% for the three months ended June 30, 2025 as compared to 3% for the same period in the prior year.

The $7.9 million increase in cost of revenue for the six months ended June 30, 2025 as compared to the same period in the prior year was the result of a $5.2 million, or 5%, increase in cost of hardware and other revenue, and a $2.7 million, or 6%, increase in cost of SaaS and license revenue.

Our cost of software license revenue included within cost of SaaS and license revenue was $0.2 million for the six months ended June 30, 2025 as compared to $0.3 million during the same period in the prior year.

The cost of hardware and other revenue for the Alarm.com segment increased $4.3 million during the six months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in the number of hardware units shipped.

The cost of hardware and other revenue for the Other segment increased $0.9 million during the six months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in the number of hardware units shipped related to our property management solution.

The cost of SaaS and license revenue for the Other segment increased $1.9 million during the six months ended June 30, 2025 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions, which drove a corresponding increase in amounts paid to distributed energy resource providers.

The cost of SaaS and license revenue for the Alarm.com segment increased $0.8 million during the six months ended June 30, 2025 as compared to the same period in the prior year primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers.

Cost of hardware and other revenue as a percentage of hardware and other revenue was 76% for each of the six months ended June 30, 2025 and 2024.

Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 14% for each of the six months ended June 30, 2025 and 2024.

Cost of software license revenue as a percentage of software license revenue was 2% for the six months ended June 30, 2025 as compared to 3% for the same period in the prior year.

Sales and Marketing Expense

Three Months Ended

Change Six Months Ended

2025 2024 2025 2024

Sales and marketing $ 31,136 $ 27,837 12 % $ 59,685 $ 53,291 12 %

% of total revenue 12 % 12 % 12 % 11 %

The $3.1 million increase in sales and marketing expense for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily due to a $1.5 million increase in personnel and related costs for our Alarm.com segment, attributable in part to increases in the headcount for our sales team to support our growth, and a $0.6 million increase in marketing expense for our Alarm.com segment.

The $3.3 million increase in sales and marketing expense for the three months ended June 30, 2025 as compared to the same period in the prior year was primarily due to a $1.5 million increase in personnel and related costs for our Alarm.com segment, attributable in part to increases in the headcount for our sales team to support our growth, and a $1.0 million increase in marketing expense for our Alarm.com segment.

Personnel and related costs includes salary, benefits, stock-based compensation and travel expenses.

Sales and marketing expense from our Other segment increased $1.0 million for the three months ended March 31, 2025 as compared to the same period in the prior year, primarily due to an increase in personnel and related costs, attributable in part to increases in the headcount for our sales team.

The number of employees in sales and marketing functions increased from 564 as of March 31, 2024 to 579 as of March 31, 2025.

Sales and marketing expense from our Other segment increased $0.7 million for the three months ended June 30, 2025 as compared to the same period in the prior year, primarily due to an increase in personnel and related costs, attributable in part to increases in the headcount for our sales team.

The $6.4 million increase in sales and marketing expense for the six months ended June 30, 2025 as compared to the same period in the prior year was primarily due to a $3.0 million increase in personnel and related costs for our Alarm.com segment, attributable in part to increases in the headcount for our sales team to support our growth, and a $1.6 million increase in marketing expense for our Alarm.com segment.

Sales and marketing expense from our Other segment increased $1.8 million for the six months ended June 30, 2025, as compared to the same period in the prior year, primarily due to increases in personnel and related costs, attributable in part to increases in the headcount for our sales team.

The number of employees in sales and marketing functions increased from 576 as of June 30, 2024 to 599 as of June 30, 2025.

General and Administrative Expense

Three Months Ended

Change Six Months Ended

2025 2024 2025 2024

General and administrative $ 27,084 $ 26,104 4 % $ 54,085 $ 55,400 (2) %

% of total revenue 11 % 11 % 11 % 12 %

The $2.3 million decrease in general and administrative expense for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily due to a $4.3 million decrease in the provision for credit losses for our Alarm.com segment, driven by a $4.0 million loan we provided to an affiliated entity of one of our distribution partners.

This decrease in general and administrative expense was partially offset by a $1.0 million increase in consulting costs.

General and administrative expenses from our Other segment increased by $1.2 million for the three months ended March 31, 2025 as compared to the same period in the prior year, primarily due to an increase in the provision for credit losses.

The number of employees in general and administrative functions increased from 224 as of March 31, 2024 to 236 as of March 31, 2025.

The $1.0 million increase in general and administrative expense for the three months ended June 30, 2025 as compared to the same period in the prior year was primarily due to a $1.7 million increase in the provision for credit losses for our Alarm.com segment due in part to the $0.7 million credit loss expense recorded on a loan agreement with a service provider partner during the three months ended June 30, 2025 that did not occur during the same period in the prior year.

General and administrative expenses from our Other segment decreased by $0.4 million for the three months ended June 30, 2025 as compared to the same period in the prior year, primarily due to a decrease in the provision for credit losses.

The $1.3 million decrease in general and administrative expense for the six months ended June 30, 2025 as compared to the same period in the prior year was primarily due to a $2.5 million decrease in the provision for credit losses for our Alarm.com segment primarily related to credit loss expense recorded during the six months ended June 30, 2024 related to a loan we previously provided to an affiliated entity of one of our distribution partners that did not occur during the six months ended June 30, 2025.

This decrease in general and administrative expense was partially offset by a $0.7 million increase in personnel and related costs for our Alarm.com segment due in part to increases in the headcount to support our operational growth.

General and administrative expenses from our Other segment increased by $0.7 million for the six months ended June 30, 2025 as compared to the same period in the prior year, primarily due to an increase in legal costs.

The number of employees in general and administrative functions increased from 223 as of June 30, 2024 to 238 as of June 30, 2025.

Research and Development Expense

Three Months Ended

Change Six Months Ended

2025 2024 2025 2024

Research and development $ 69,070 $ 65,730 5 % $ 137,437 $ 131,686 4 %

% of total revenue 27 % 28 % 28 % 29 %

The $2.4 million increase in research and development expense for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily due to a $0.7 million increase in our expenses for external consultants, a $0.7 million increase in expenses for software licenses and a $0.2 million increase in personnel and related costs for our Alarm.com segment.

Research and development expense from our Other segment increased by $0.6 million for the three months ended March 31, 2025 as compared to the same period in the prior year, primarily due to an increase in personnel and related costs attributable in part to an increase in headcount of employees in research and development functions.

The overall number of employees in research and development functions decreased from 1,139 as of March 31, 2024 to 1,129 as of March 31, 2025.

The $3.3 million increase in research and development expense for the three months ended June 30, 2025 as compared to the same period in the prior year was primarily due to a $1.1 million increase in our expenses for external consultants and a $0.5 million increase in expenses for software licenses for our Alarm.com segment.

Research and development expense from our Other segment increased by $0.7 million for the three months ended June 30, 2025 as compared to the same period in the prior

year, primarily due to an increase in personnel and related costs attributable in part to an increase in headcount of employees in research and development functions.

The $5.8 million increase in research and development expense for the six months ended June 30, 2025 as compared to the same period in the prior year was primarily due to a $1.8 million increase in our expenses for external consultants, a $1.1 million increase in expenses for software licenses, a $0.4 million increase in rent expense and a $0.3 million increase in personnel and related costs for our Alarm.com segment.

Research and development expense from our Other segment increased by $1.2 million for the six months ended June 30, 2025 as compared to the same period in the prior year due to an increase in personnel and related costs.

The overall number of employees in research and development functions decreased from 1,155 as of June 30, 2024 to 1,136 as of June 30, 2025.

Amortization and Depreciation

Three Months Ended

Change Six Months Ended

2025 2024 2025 2024

Amortization and depreciation $ 7,534 $ 7,080 6 % $ 14,558 $ 14,417 1 %

% of total revenue 3 % 3 % 3 % 3 %

Amortization and depreciation decreased $0.3 million for the three months ended March 31, 2025, as compared to the same period in the prior year, primarily due to changes in amortization expense related to the intangible assets we previously acquired, partially offset by the intangible assets that were acquired in connection with the purchase of 81% of the issued and outstanding shares of capital stock of CHeKT on February 10, 2025.

Amortization and depreciation increased $0.5 million and $0.1 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year, primarily due to an increase in depreciation expense related to property and equipment as well as intangible assets that were acquired in connection with the purchase of 81% of the issued and outstanding shares of capital stock of CHeKT, Inc., or CHeKT, on February 10, 2025.

Interest Expense

Three Months Ended

Change Six Months Ended

2025 2024 2025 2024

Interest expense $ (4,321) $ (1,968) 120 % $ (8,635) $ (2,764) 212 %

% of total revenue (2) % (1) % (2) % (1) %

Interest expense increased $3.5 million for the three months ended March 31, 2025, as compared to the same period in the prior year, primarily due to the interest expense and amortization of the debt issuance costs related to the 2029 Notes.

I nterest expense increased $2.4 million and $5.9 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year, primarily due to the interest expense and amortization of the debt issuance costs related to the 2029 Notes.

Interest Income

Three Months Ended

Change Six Months Ended

2025 2024 2025 2024

Interest income $ 11,808 $ 10,856 9 % $ 24,179 $ 19,396 25 %

% of total revenue 4 % 5 % 5 % 4 %

Interest income increased $3.8 million for the three months ended March 31, 2025, as compared to the same period in the prior year, primarily due to an increase in interest income earned on cash and cash equivalents from higher amounts of cash and cash equivalents during the three months ended March 31, 2025 as compared to the same period in the prior year.

Interest income increased $1.0 million and $4.8 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year, primarily due to an increase in interest income earned on cash and cash equivalents from higher amounts of cash and cash equivalents during the six months ended June 30, 2025 as compared to the same period in the prior year.

Other Expense, Net

Three Months Ended

Change Six Months Ended

2025 2024 2025 2024

Other expense, net $ (150) $ (1,258) (88) % $ (2,835) $ (1,576) 80 %

% of total revenue — % (1) % (1) % — %

Other expense, net increased $2.4 million for the three months ended March 31, 2025, as compared to the same period in the prior year, primarily due to a $2.3 million unrealized loss on equity securities during the three months ended March 31, 2025, which did not occur during the three months ended March 31, 2024.

Other expense, net decreased $1.1 million for the three months ended June 30, 2025 as compared to the same period in the prior year, primarily due to a $1.9 million gain on fluctuations in foreign currency exchange rates and a $0.5 million reduction in expenses related to a program to help our service providers resell our solutions and hardware to our subscribers.

These decreases in other expense, net were partially offset by a $1.5 million unrealized loss on equity securities during the three months ended June 30, 2025, which did not occur during the three months ended June 30, 2024.

Other expense, net increased $1.3 million for the six months ended June 30, 2025 as compared to the same period in the prior year, primarily due to a $3.8 million unrealized loss on equity securities during the six months ended June 30, 2025, which did not occur during the six months ended June 30, 2024.

This increase in other expense, net was partially offset by a $1.6 million gain on fluctuations in foreign currency exchange rates and a $0.8 million reduction in expenses related to a program to help our service providers resell our solutions and hardware to our subscribers.

Provision for Income Taxes

Three Months Ended

Change Six Months Ended

2025 2024 2025 2024

Provision for income taxes $ 5,458 $ 884 517 % $ 12,765 $ 3,631 252 %

% of total revenue 2 % — % 2 % 1 %

The provision for income taxes increased by $4.6 million for the three months ended March 31, 2025, as compared to the same period in the prior year.

Our effective tax rate was 20.9% for the three months ended March 31, 2025, as compared to 10.5% for the same period in the prior year.

The increase in the provision for income taxes for the three months ended March 31, 2025 as compared to the same period in the prior year was primarily due to the increase in income before income taxes, an increase in foreign withholding taxes, a tax shortfall in employee stock-based compensation during the three months ended March 31, 2025 as opposed to a windfall tax benefit recognized during the three months ended March 31, 2024 and an increase in other nondeductible expenses, partially offset by an increase in our research and development income tax credits.

Further, the net $1.7 million tax benefit recognized during the three months ended March 31, 2024 from the closure of the 2018 and 2019 Internal Revenue Service examination did not recur during the three months ended March 31, 2025.

The provision for income taxes increased by $4.6 million and $9.1 million for the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year.

Our effective tax rate was 13.8% and 17.1% for the three and six months ended June 30, 2025, respectively, as compared to 2.6% and 6.1% for the same periods in the prior year.

The increase in the provision for income taxes for the three and six months ended June 30, 2025 as compared to the same periods in the prior year was primarily due to the increase in income before income taxes, a tax shortfall in employee stock-based compensation during the three and six months ended June 30, 2025 as opposed to a windfall tax benefit recognized during the three and six months ended June 30, 2024 and a less favorable true-up adjustment of our 2024 income tax provision estimate associated with research and development tax credits recorded during the three months ended June 30, 2025 as compared a similar true-up adjustment of our 2023 income tax provision estimate associated with research and development tax credits recorded during the same period in the prior year.

These increases in the provision for income taxes for the three and six months ended June 30, 2025 as compared to the same periods in the prior year were partially offset by an increase in our 2025 research and development income tax credits.

Income from Equity Method Investments, Net

Three Months Ended

Change Six Months Ended

2025 2024 2025 2024

Income from equity method investments, net $ (316) $ — N/A $ (316) $ — N/A

% of total revenue — % — % — % — %

Income from equity method investments, net increased by $0.3 million for each of the three and six months ended June 30, 2025, respectively, as compared to the same periods in the prior year.

The increase in the income from equity method investments, net for the three and six months ended June 30, 2025 as compared to the same periods in the prior year was due to the increase in our share of the net assets and net income of our investees accounted for under the equity method, partially offset by amortization expense related to basis differences in our equity method investments.

Segment Information

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Alarm.com and Other.

Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that c ontributed 93% of our revenue, net of intersegment eliminations, for the three months ended March 31, 2025, as compared to 94% for the same period in the prior year.

Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that c ontributed 92% of our revenue, net of intersegment eliminations, for the three and six months ended June 30, 2025, respectively, as compared to 93% for the same periods in the prior year.

Our Other segment is focused on researching, developing and offering residential and commercial automation solutions and energy management products and services in adjacent markets.

The consolidated subsidiaries that make up our Other segment are in the investment stage and have incurred significant operating expenses relative to their revenue.

Our Alarm.com segment decreased from 1,780 employees as of March 31, 2024 to 1,774 employees as of March 31, 2025 and increased from 1,773 employees as of December 31, 2024.

Our Other segment increased from 222 employees as of March 31, 2024 to 246 employees as of March 31, 2025 and increased from 237 employees as of December 31, 2024.

Our Alarm.com segment decreased from 1,801 employees as of June 30, 2024 to 1,795 employees as of June 30, 2025 and increased from 1,774 employees as of March 31, 2025.

Our Other segment increased from 232 employees as of June 30, 2024 to 253 employees as of June 30, 2025 and increased from 246 employees as of March 31, 2025.

Inter-segment revenue includes sales of hardware between our segments.

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The reportable segment operational data is presented in the tables below (in thousands):

Three Months Ended March 31, 2025

Three Months Ended June 30, 2025

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

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$ 35,022 $ (2,892) $ (199) $ 91 $ 32,022

Assets $ 2,133,644 $ 73,148 $ (129,250) $ (111) $ 2,077,431

Reconciliation of operating income to income before income taxes

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Income before income taxes $ 39,359

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

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$ 30,690 $ (4,851) $ (89) $ 24 $ 25,774

Assets $ 1,538,429 $ 64,350 $ (115,786) $ (11) $ 1,486,982

Reconciliation of operating income to income before income taxes

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Income before income taxes $ 33,404

Our SaaS and license revenue for the Alarm.com segment included software license revenue of $4.7 million for the three months ended March 31, 2025, as compared to $5.2 million for the same period in the prior year.

There was no software license revenue recorded for the Other segment during the three months ended March 31, 2025 and 2024.

Additions to property and equipment were $8.0 million for the Alarm.com segment for the three months ended March 31, 2025, as compared to $3.9 million for the same period in the prior year.

Additions to property and equipment were less than $0.1 million for the Other segment for each of the three months ended March 31, 2025 and 2024.

Six Months Ended June 30, 2025

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

SaaS and license revenue $ 298,645 $ 35,148 $ — $ — $ 333,793

Hardware and other revenue

156,922 4,531 (1,336) (780) 159,337

Total revenue

455,567 39,679 (1,336) (780) 493,130

Cost of SaaS and license revenue 34,272 10,949 171 (171) 45,221

Cost of hardware and other revenue 118,369 4,183 (1,210) (867) 120,475

Total cost of revenue 152,641 15,132 (1,039) (1,038) 165,696

Selling and marketing expense 47,502 12,183 — — 59,685

General and administrative expense 50,181 3,904 — — 54,085

Research and development expense 121,941 15,496 — — 137,437

Amortization and depreciation expense 13,967 591 — — 14,558

Total operating expenses 233,591 32,174 — — 265,765

Operating income / (loss)

$ 69,335 $ (7,627) $ (297) $ 258 $ 61,669

Assets $ 2,154,748 $ 64,107 $ (120,596) $ (205) $ 2,098,054

Reconciliation of operating income to income before income taxes

Operating income $ 61,669

Interest expense (8,635)

Interest income 24,179

Other income / (expense), net (2,835)

Income before income taxes $ 74,378

Six Months Ended June 30, 2024

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

SaaS and license revenue $ 278,713 $ 27,558 $ — $ — $ 306,271

Hardware and other revenue

149,827 2,862 (1,545) (325) 150,819

Total revenue

428,540 30,420 (1,545) (325) 457,090

Cost of SaaS and license revenue 33,470 9,015 175 (138) 42,522

Cost of hardware and other revenue 114,386 2,627 (1,498) (240) 115,275

Total cost of revenue 147,856 11,642 (1,323) (378) 157,797

Selling and marketing expense 42,863 10,428 — — 53,291

General and administrative expense 52,234 3,166 — — 55,400

Research and development expense 117,415 14,271 — — 131,686

Amortization and depreciation expense 13,911 506 — — 14,417

Total operating expenses 226,423 28,371 — — 254,794

Operating income / (loss)

$ 54,261 $ (9,593) $ (222) $ 53 $ 44,499

Assets $ 1,907,486 $ 55,017 $ (107,239) $ (17) $ 1,855,247

Reconciliation of operating income to income before income taxes

Operating income $ 44,499

Interest expense (2,764)

Interest income 19,396

Other income / (expense), net (1,576)

Income before income taxes $ 59,555

Our SaaS and license revenue for the Alarm.com segment included software license revenue of $4.5 million and $9.2 million for the three and six months ended June 30, 2025, respectively, as compared to $5.2 million and $10.4 million for the same periods in the prior year.

There was no software license revenue recorded for the Other segment during the three and six months ended June 30, 2025 and 2024.

Additions to property and equipment were $5.0 million and $13.0 million for the Alarm.com segment for the three and six months ended June 30, 2025, respectively, as compared to $1.9 million and $5.8 million for the same periods in the prior year.

Additions to property and equipment were less than $0.1 million for the Other segment for each of the three and six months ended June 30, 2025 as compared to less than $0.1 million and $0.1 million for the Other segment for the three and six months ended June 30, 2024, respectively.

Critical Accounting Estimates

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The following table summarizes our cash and cash equivalents, accounts receivable, net and working capital, for the periods indicated (in thousands):

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Cash and cash equivalents $ 1,024,862 $ 1,220,701

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We define working capital as current assets minus current liabilities.

Our cash and cash equivalents as of March 31, 2025 are available for working capital purposes.

Our cash and cash equivalents as of June 30, 2025 are available for working capital purposes.

Our investment policy defines allowable investments and establishes guidelines relating to credit quality, diversification and maturities of our investments to preserve capital, maintain liquidity and limit the amount of credit risk exposure.

As of March 31, 2025, our cash and cash equivalents were primarily held in money market accounts.

As of June 30, 2025, our cash and cash equivalents were primarily held in money market accounts.

Liquidity and Capital Resources

As of March 31, 2025, we had $1.19 billion in cash and cash equivalents.

As of June 30, 2025, we had $1.02 billion in cash and cash equivalents.

We consider all highly liquid instruments purchased with an original maturity from the date of purchase of three months or less to be cash equivalents.

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We calculated the 2023 federal and state cash tax increase from Section 174 to be $43.5 million, which we paid in April 2024, and we calculated the 2024 federal and state cash tax increase from Section 174 to be $33.5 million, which we paid in April 2025.

The Section 174 impact on 2025 cash flows from operating activities will depend on, among other factors, our 2025 operating results and the level of 2025 research and development activity.

Based on information currently available to us, we estimate the 2025 Section 174 federal and state cash tax payable for our 2025 taxable income to be in the range of $25.0 million to $30.0 million if the requirement to capitalize and amortize research and development expenditures is not modified or repealed.

This estimate is based on the limited information that is currently available and is subject to change.

While the largest impact has been to cash flow from operating activities, the impact for domestic research and development expenditures would continue over the five-year amortization period beginning in 2022, but has decreased over that period and is expected to continue to decrease in the upcoming years.

There is discussion of prospectively repealing the requirement to capitalize domestic research and development costs, but there is no assurance such legislation will be enacted.

On July 4, 2025, OBBBA was enacted in the United States.

The OBBBA includes a broad range of tax provisions that may impact the timing and the magnitude of certain key tax deductions.

We currently anticipate these provisions will significantly reduce our current federal income tax cash outlays over the next several years.

Certain other international tax provisions may also be favorable to us.

We continue to analyze the OBBBA tax provisions to assess their potential impact on our financial position, results of operations and cash flows.

We believe our existing cash and cash equivalents and our future cash flows from operating activities will be sufficient to meet our anticipated operating cash needs for at least the next 12 months.

Over the final nine months of fiscal year 2025, we expect our capital expenditure requirements to be between $10.0 million and $13.0 million, primarily related to purchases of computer software and equipment as well as the continued build out of our leased and owned office space, excluding any leasehold improvements related to tenant improvement allowances.

Maturities of lease liabilities for our various office, data center and equipment leases as of March 31, 2025 are as follows:

Over the final six months of fiscal year 2025, we expect our capital expenditure requirements to be between $4.0 million and $7.0 million, primarily related to the continued build out of our leased and owned office space, excluding any leasehold improvements related to tenant improvement allowances, as well as purchases of computer software and equipment.

Maturities of lease liabilities for our various office, data center and equipment leases as of June 30, 2025 are as follows:

$6.9 million for the remainder of 2025, $13.0 million in 2026, $13.2 million in 2027, $12.6 million in 2028, $12.2 million in 2029 and $48.6 million in 2030 and thereafter.

On January 30, 2025, we entered into a senior secured loan agreement with Safe Streets, under which a term loan was provided to them in the original principal amount of $21.5 million, which loan is collateralized by the assets of Safe Streets.

Quarterly principal payments begin in the second quarter of 2027.

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Pursuant to the terms of the stock purchase agreement, following the preliminary determination of the working capital of CHeKT as of the closing date, the purchase price decreased by $0.2 million.

The working capital adjustment is expected to be finalized by the second quarter of 2025 and $0.5 million of the holdback is expected to be paid to stockholders of CHeKT at that time.

The remaining $3.0 million of the holdback is expected to be paid to the stockholders of CHeKT by the end of the second quarter of 2026, subject to offset for any indemnification obligations.

On April 28, 2025, we paid $29.1 million in cash to purchase 24.7% of the outstanding shares of Safe Streets USA, LLC.

We are still evaluating the accounting treatment for this investment, which will be finalized during the second quarter of 2025.

The working capital adjustment was finalized during the second quarter of 2025 and $0.5 million of the holdback was paid to stockholders of CHeKT at that time.

The remaining $3.0 million of the holdback is expected to be paid to the stockholders of CHeKT by the end of the second quarter of 2026, subject to offset for any

indemnification obligations.

On April 28, 2025, we paid $29.1 million in cash to purchase 24.7% of the outstanding shares of Safe Streets.

On May 30, 2025, we paid $119.3 million in cash to purchase 32.5% of the outstanding shares of Safe Haven after deducting $6.3 million related to an agreed holdback provision that is expected to be paid during the second quarter of 2026.

On June 6, 2025, we paid $19.2 million in cash to purchase 32.5% of the outstanding shares of All Access, after deducting $1.0 million related to an agreed holdback provision that is expected to be paid during the second quarter of 2026.

After consummation of these transactions, All Access and Safe Haven were under common control.

Our future working capital, capital expenditure and cash requirements will depend on many factors, including the impact of the Macroeconomic Conditions on the economy and our operations, the rate of our revenue growth, the amount and timing of our investments in human resources and capital equipment, future acquisitions and investments, and the timing and extent of our introduction of new solutions and platform and solution enhancements.

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Material Cash Requirements

As of March 31, 2025, there were no material changes in our cash requirements from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report.

Our 2026 Notes are due January 15, 2026 and are presented as a current liability in the condensed consolidated balance sheets as of March 31, 2025.

As of June 30, 2025, there were no material changes in our cash requirements from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report.

Our 2026 Notes are due January 15, 2026 and are presented as a current liability in the condensed consolidated balance sheets as of June 30, 2025.

Sources of Liquidity

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The 2026 Notes and 2029 Notes are discussed in more detail in Note 13 of our notes to the condensed consolidated financial statements.

We did not declare or pay dividends during the three months ended March 31, 2025 or 2024.

We did not declare or pay dividends during the three and six months ended June 30, 2025 or 2024.

We cannot provide any assurance that we will declare or pay cash dividends on our common stock in the future.

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On May 24, 2024, our board of directors authorized the repurchase of our common stock in connection with the issuance of the 2029 Notes and also authorized a stock repurchase program, effective May 31, 2024, under which we are authorized to purchase up to an aggregate of $100.0 million of our outstanding common stock during the two-year period ending May 31, 2026.

During the three months ended March 31, 2025, we repurchased 86,400 shares of our common stock under this program for $5.1 million, which includes applicable commissions and fees.

No shares were repurchased under our stock repurchase programs during the three months ended March 31, 2024.

During the three and six months ended June 30, 2025, we repurchased 88,000 and 174,400 shares of our common stock under this program for $5.1 million and $10.2 million, which includes applicable commissions and fees.

During the three and six months ended June 30, 2024, we repurchased 1,117,068 shares of our common stock under our stock repurchase program authorized in connection with the issuance of the 2029 Notes for $75.0 million.

We are subject to a 1.0% excise tax on the value of net corporate stock repurchases under the Inflation Reduction Act of 2022.

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The following table sets forth our cash flows for the periods indicated (in thousands):

Three Months Ended

Six Months Ended

Cash flows from operating activities $ 46,773 $ 72,816

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Cash flows from operating activities have typically been generated from our net income and by changes in our operating assets and liabilities, particularly from accounts receivable, accounts payable and inventory, adjusted for non-cash expense items such as amortization and depreciation, deferred income taxes and stock-based compensation.

For the three months ended March 31, 2025, cash flows from operating activities were $24.1 million, compared to $49.9 million for the same period in the prior year.

This $25.8 million decrease in cash flows from operating activities was due to a $32.2 million decrease in cash from operating assets and liabilities, partially offset by a $4.3 million increase in net income and a $2.1 million increase in non-cash and other reconciling items.

The $32.2 million decrease in cash from operating assets and liabilities was primarily due to a $12.2 million change in inventory resulting from an increase in purchased inventory during the three months ended March 31, 2025 as compared to the same period in the prior year, as well as differences in the timing of disbursements and the collection of receipts.

The $2.1 million increase in non-cash and other reconciling items was primarily due to a $4.7 million change in deferred income taxes, which was primarily driven by the capitalization and amortization of research and development expenditures under Section 174, as well as a $2.3 million unrealized loss on equity securities that did not occur during the three months ended March 31, 2025.

These increases in non-cash and other reconciling items were partially offset by a $4.0 million decrease in the provision for credit losses on notes receivable related to a loan we provided to an affiliated entity of one of our distribution partners during the three months ended March 31, 2024 that did not occur during the three months ended March 31, 2025 as well as a $1.8 million decrease in stock-based compensation during the three months ended March 31, 2025 as compared to the same period in the prior year.

For the six months ended June 30, 2025, cash flows from operating activities were $46.8 million, compared to $72.8 million for the same period in the prior year.

This $26.0 million decrease in cash flows from operating activities was due to a $40.5 million decrease in cash from operating assets and liabilities, partially offset by a $8.5 million increase in non-cash and other reconciling items and a $6.0 million increase in net income.

The $40.5 million decrease in cash from operating assets and liabilities was primarily due to a $18.0 million change in inventory resulting from an increase in the change of purchased inventory during the six months ended June 30, 2025 as compared to the same period in the prior year, as well as a $12.4 million change in accounts receivable, accounts payable and other current liabilities primarily due to the timing of disbursements and the collection of receipts.

The $8.5 million increase in non-cash and other reconciling items was primarily due to a $9.3 million change in deferred income taxes, which was primarily driven by the capitalization and amortization of research and development expenditures under Section 174, as well as a $3.4 million increase in losses from investments in unconsolidated entities during the six months ended June 30, 2025 as compared to the same period in the prior year.

These increases in non-cash and other reconciling items were partially offset by a $4.1 million decrease in stock-based compensation during the six months ended June 30, 2025 as compared to the same period in the prior year.

Investing Activities

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Our capital expenditures have primarily been for general business use, including leasehold improvements as we have expanded our office space to accommodate our growth in headcount, computer equipment used internally and expansion of our network operations centers.

For the three months ended March 31, 2025, cash flows used in investing activities were $55.2 million, compared to $4.0 million for the same period in the prior year.

The $51.2 million increase in cash flows used in investing activities was primarily due to the $23.6 million paid to purchase 81% of the issued and outstanding shares of capital stock of CHeKT on February 10, 2025 and the $21.5 million note receivable issued to a service provider partner during the three months ended March 31, 2025.

Additionally, the increase in cash flows used in investing activities was due to $3.8 million purchases of investments in unconsolidated entities during the three months ended March 31, 2025 that did not occur during the same period in the prior year as well as a $3.0 million increase in purchases of equipment during the three months ended March 31, 2025 as compared to the same period in the prior year.

For the six months ended June 30, 2025, cash flows used in investing activities were $233.0 million, compared to $9.2 million for the same period in the prior year.

The $223.8 million increase in cash flows used in investing activities was primarily due to an increase of $171.8 million in purchases of investments in unconsolidated entities during the six months ended June 30, 2025 as compared to the same period in the prior year as well as $23.6 million paid to purchase 81% of the issued and outstanding shares of capital stock of CHeKT on February 10, 2025.

Additionally, the increase in cash flows used in investing activities was due to an increase of $23.0 million in notes receivable issued, primarily due to the $21.5 million note receivable issued to Safe Streets during the six months ended June 30, 2025 that did not occur during the same period in the prior year.

Financing Activities

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Cash used in financing activities has historically included repurchases of common stock, repayments of debt, payments of debt issuance costs and purchases of capped calls related to the 2029 Notes.

For the three months ended March 31, 2025, cash flows used in financing activities were $3.5 million, compared to cash flows from financing activities of $6.4 million for the same period in the prior year.

The $9.9 million decrease in cash flows from financing activities was primarily due to $5.1 million in purchases of shares of our common stock during the three months ended March 31, 2025 that did not occur during the same period in the prior year as well as a $4.8 million decrease in issuances of common stock under our 2015 Equity Incentive Plan during the three months ended March 31, 2025 as compared to the same period in the prior year.

For the six months ended June 30, 2025, cash flows used in financing activities were $9.6 million, compared to cash flows from financing activities of $346.8 million for the same period in the prior year.

The $356.4 million decrease in cash flows from financing activities was primarily due to $486.1 million in proceeds from the issuance of the 2029 Notes, net of issuances costs paid during the six months ended June 30, 2024 that did not occur during the six months ended June 30, 2025.

The decrease in cash flows from financing activities was partially offset by a $64.8 million decrease in purchases of shares of our common stock and $63.1 million purchases of capped calls related to the 2029 Notes during the six months ended June 30, 2024, which did not occur during the six months ended June 30, 2025.

Non-GAAP Measures

We define non-GAAP adjusted EBITDA as our net income before interest expense, interest income, certain activity within other expense, net, provision for income taxes, amortization and depreciation expense, stock-based compensation expense, acquisition-related expense, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation.

We define non-GAAP adjusted EBITDA as our net income before interest expense, interest income, certain activity within other expense, net, provision for income taxes, income from equity method investments, net, amortization and depreciation expense, stock-based compensation expense, acquisition-related expense, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation.

We do not consider these items to be indicative of our core operating performance.

The non-cash items include amortization and depreciation expense, amortization of debt issuance costs for the 2026 Notes and 2029 Notes included in interest expense, stock-based compensation expense related to restricted stock units and other forms of equity compensation, including, but not limited to, the sale of common stock.

The non-cash items include amortization and depreciation expense;

income from equity method investments, net;

amortization of debt issuance costs for the 2026 Notes and 2029 Notes included in interest expense;

stock-based compensation expense related to restricted stock units and other forms of equity compensation, including, but not limited to, the sale of common stock.

We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

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Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Non-GAAP adjusted EBITDA:

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Provision for income taxes 5,458 884 12,765 3,631

Income from equity method investments, net (316) — (316) —

Amortization and depreciation expense 7,534 7,080 14,558 14,417

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis