Alarm.com Holdings, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ALARM.COM HOLDINGS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 84 Consolidated Financial Statements Consolidated Statements of Operations 86 Consolidated Statements of Comprehensive Income 87 Consolidated Balance Sheets 88 Consolidated Statements of Cash Flows 89 Consolidated Statements of Equity 91 Notes to the Consolidated Financial Statements 93 Schedule II - Valuation and Qualifying Accounts for the Years Ended December 31, 202 5 , 202 4 and 2 023 137 83 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Alarm.com Holdings, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Alarm.com Holdings, Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Zona NewCo, LLC, or Resideo Grid Services ("RGS"), Bridge to Renewables, Inc. (“BTR”), and CHeKT from its assessment of internal control over financial reporting as of December 31, 2025 because they were acquired by the Company in purchase business combinations during 2025. We have also excluded RGS, BTR, and CHeKT from our audit of internal control over financial reporting. RGS and BTR are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less than 1% of total assets and less than 1% of total revenues of the related consolidated financial statement amounts as of and for the year ended December 31, 2025. CHeKT is an 81 % owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less than 1% of total assets and less than 1% of total revenues of the related consolidated financial statement amounts as of and for the year ended December 31, 2025. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and 84 expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue recognition As described in Note 2 to the consolidated financial statements, the Company’s revenue is generated from the sale of cloud-based SaaS services on its integrated Alarm.com platform, the sales of licenses and services on its non-hosted software platform, and the sale of hardware products. Cloud-based SaaS services are billed monthly in advance and revenue is recognized on a monthly basis as the performance obligation is satisfied. Licenses on non-hosted services are billed monthly and revenue is recognized on a monthly basis as the services are performed. Hardware revenue is recognized when the customer obtains control. The Company’s total revenue was $1.01 billion for the year ended December 31, 2025. The principal considerations for our determination that performing procedures relating to revenue recognition is a critical audit matter are the significant audit effort in performing procedures and evaluating audit evidence related to the accuracy and occurrence of revenue transactions. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the accuracy and occurrence of revenue transactions. These procedures also included, among others, evaluating, on a test basis, the accuracy and occurrence of transactions recognized as revenue by obtaining and inspecting, where applicable, invoices, customer purchase orders, dealer and license agreements, shipping documents and cash receipts from customers. /s/ PricewaterhouseCoopers LLP Washington, District Of Columbia February 19, 2026 We have served as the Company’s auditor since 2009. 85 ALARM.COM HOLDINGS, INC. Consolidated Statements of Operations (in thousands, except share and per share data) Year Ended December 31, 2025 2024 2023 Revenue: SaaS and license revenue $ 689,397 $ 631,198 $ 569,200 Hardware and other revenue 321,790 308,629 312,482 Total revenue 1,011,187 939,827 881,682 Cost of revenue (1) : Cost of SaaS and license revenue 96,200 89,512 85,898 Cost of hardware and other revenue 246,095 236,637 239,261 Total cost of revenue 342,295 326,149 325,159 Operating expenses: Sales and marketing 123,788 111,242 100,226 General and administrative 110,418 108,879 112,930 Research and development 270,229 255,878 245,114 Amortization and depreciation 30,819 29,131 31,424 Total operating expenses 535,254 505,130 489,694 Operating income 133,638 108,548 66,829 Interest expense ( 17,294 ) ( 11,426 ) ( 3,429 ) Interest income 45,617 47,359 29,801 Other income / (expense), net 4,645 ( 2,807 ) 4,624 Income before income taxes 166,606 141,674 97,825 Provision for income taxes 37,620 19,294 17,485 Income from equity method investments, net ( 2,642 ) ( 133 ) — Net income 131,628 122,513 80,340 Net loss attributable to redeemable noncontrolling interests 946 1,603 703 Net income attributable to common stockholders $ 132,574 $ 124,116 $ 81,043 Per share information attributable to common stockholders: Net income attributable to common stockholders per share: Basic $ 2.66 $ 2.50 $ 1.63 Diluted $ 2.46 $ 2.29 $ 1.53 Weighted average common shares outstanding: Basic 49,795,191 49,641,763 49,818,448 Diluted 58,923,815 57,993,019 54,625,434 _______________ (1) Exclusive of amortization and depreciation shown in operating expenses below. See accompanying notes to the consolidated financial statements. 86 ALARM.COM HOLDINGS, INC. Consolidated Statements of Comprehensive Income (in thousands) Year Ended December 31, 2025 2024 2023 Net income $ 131,628 $ 122,513 $ 80,340 Other comprehensive income / (loss) Foreign currency translation adjustment 1,875 ( 583 ) 1,398 Total other comprehensive income / (loss) 1,875 ( 583 ) 1,398 Comprehensive income 133,503 121,930 81,738 Comprehensive loss attributable to redeemable noncontrolling interests 946 1,603 703 Comprehensive income attributable to common stockholders $ 134,449 $ 123,533 $ 82,441 See accompanying notes to the consolidated financial statements. 87 ALARM.COM HOLDINGS, INC. Consolidated Balance Sheets (in thousands, except share and per share data) December 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 960,584 $ 1,220,701 Accounts receivable, net of allowance for credit losses of $ 5,171 and $ 3,870 , and net of allowance for product returns of $ 2,140 and $ 2,448 as of December 31, 2025 and 2024, respectively 141,852 126,082 Inventory 94,429 87,435 Other current assets, net of allowance for credits losses of $ 749 and $ 0 as of December 31, 2025 and 2024, respectively 75,646 47,374 Total current assets 1,272,511 1,481,592 Property and equipment, net 64,799 63,205 Intangible assets, net 99,352 63,159 Goodwill 224,987 154,211 Deferred tax assets 152,255 181,284 Operating lease right-of-use assets 52,636 53,425 Investments in unconsolidated entities 226,931 17,170 Other assets, net of allowance for credit losses of $ 0 and $ 1 as of December 31, 2025 and 2024, respectively 43,120 24,162 Total assets $ 2,136,591 $ 2,038,208 Liabilities, redeemable noncontrolling interests and stockholders’ equity Current liabilities: Accounts payable, accrued expenses and other current liabilities $ 107,195 $ 139,427 Accrued compensation 31,126 28,739 Deferred revenue 16,428 12,940 Convertible senior notes, net 499,867 — Operating lease liabilities 8,524 7,700 Total current liabilities 663,140 188,806 Deferred revenue 13,456 13,619 Convertible senior notes, net, noncurrent 489,641 983,477 Operating lease liabilities 67,609 65,534 Other liabilities 11,735 15,479 Total liabilities 1,245,581 1,266,915 Commitments and contingencies (Note 14) Redeemable noncontrolling interests 42,847 44,747 Stockholders’ equity Preferred stock, $ 0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding as of December 31, 2025 and 2024 — — Common stock, $ 0.01 par value, 300,000,000 shares authorized; 53,540,939 and 52,756,077 shares issued; and 49,630,714 and 49,618,346 shares outstanding as of December 31, 2025 and 2024, respectively 536 528 Additional paid-in capital 549,913 521,192 Treasury stock, at cost; 3,910,225 and 3,137,731 shares as of December 31, 2025 and 2024, respectively ( 227,852 ) ( 186,291 ) Accumulated other comprehensive income 2,690 815 Retained earnings 522,876 390,302 Total stockholders’ equity 848,163 726,546 Total liabilities, redeemable noncontrolling interests and stockholders’ equity $ 2,136,591 $ 2,038,208 See accompanying notes to the consolidated financial statements. 88 ALARM.COM HOLDINGS, INC. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2025 2024 2023 Cash flows from operating activities: Net income $ 131,628 $ 122,513 $ 80,340 Adjustments to reconcile net income to net cash flows from operating activities: Provision for credit losses on accounts receivable 2,155 950 1,508 Reserve for product returns 3,071 3,187 4,399 Provision for credit losses on notes receivable 748 3,996 3 Amortization and depreciation 30,819 29,131 31,424 Amortization of debt issuance costs 6,031 4,796 3,145 Amortization of operating leases 15,381 13,084 11,484 Deferred income taxes 29,974 ( 34,496 ) ( 47,730 ) Stock-based compensation 33,190 41,242 47,283 Distributions on investments in unconsolidated entities 7,763 — — Gain on from investments in unconsolidated entities ( 7,748 ) ( 127 ) — Other adjustments 1,624 955 2,701 Changes in operating assets and liabilities (net of business acquisitions): Accounts receivable ( 15,706 ) 271 ( 10,536 ) Inventory ( 5,602 ) 8,558 20,961 Other current and non-current assets ( 20,964 ) ( 2,697 ) ( 1,338 ) Accounts payable and other current liabilities ( 46,488 ) 20,133 4,613 Deferred revenue 256 3,674 4,553 Operating lease liabilities ( 9,864 ) ( 12,467 ) ( 13,947 ) Other liabilities ( 2,938 ) 3,710 ( 2,898 ) Cash flows from operating activities 153,330 206,413 135,965 Cash flows used in investing activities: Business acquisitions, net of cash acquired ( 112,915 ) — ( 9,696 ) Additions to property and equipment ( 16,281 ) ( 10,133 ) ( 7,517 ) Issuances of notes receivable ( 25,255 ) ( 500 ) ( 450 ) Capitalized software development costs ( 1,307 ) ( 1,643 ) ( 743 ) Receipt of payments on notes receivable 98 51 55 Proceeds from sale of investments in unconsolidated entities 3,058 — — Purchase of investments in unconsolidated entities ( 205,880 ) ( 11,025 ) ( 1,700 ) Purchases of other intangible assets — ( 1,431 ) ( 5,915 ) Cash flows used in investing activities ( 358,482 ) ( 24,681 ) ( 25,966 ) Cash flows (used in) / from financing activities: Proceeds from issuance of convertible senior notes — 500,000 — Payments of debt issuance costs — ( 14,834 ) — Purchases of capped calls related to convertible senior notes — ( 63,050 ) — Payments of deferred consideration for acquisitions ( 1,741 ) ( 7,269 ) ( 1,672 ) Purchases of treasury stock, including transaction costs ( 41,561 ) ( 75,000 ) ( 27,298 ) Purchases of redeemable noncontrolling interest ( 16,179 ) — ( 832 ) Payments of acquired debt — — ( 3,040 ) Payments of tax withholdings related to vesting of restricted stock units — ( 3,401 ) ( 2,621 ) Issuances of common stock from equity-based plans 4,475 9,984 3,598 Cash flows (used in) / from financing activities ( 55,006 ) 346,430 ( 31,865 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 167 ) ( 109 ) 66 Net (decrease) / increase in cash, cash equivalents and restricted cash ( 260,325 ) 528,053 78,200 Cash, cash equivalents and restricted cash at beginning of the period 1,229,132 701,079 622,879 Cash, cash equivalents and restricted cash at end of the period $ 968,807 $ 1,229,132 $ 701,079 89 ALARM.COM HOLDINGS, INC. Consolidated Statements of Cash Flows — (Continued) (in thousands) Year Ended December 31, 2025 2024 2023 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 960,584 $ 1,220,701 $ 696,983 Restricted cash included in other current assets and other assets 8,223 8,431 4,096 Total cash, cash equivalents and restricted cash $ 968,807 $ 1,229,132 $ 701,079 Supplemental disclosures: Cash paid for interest $ 11,250 $ 5,656 $ 192 Cash paid for income taxes, net of refunds 45,387 68,211 64,577 Noncash investing and financing activities: Cash not yet paid for capital expenditures 883 255 630 Cash not yet paid for business and asset acquisitions and investments - holdback and working capital adjustments 13,513 200 2,780 Conversion of notes receivable and other assets to investments in unconsolidated entities 7,192 — — Contingent liability from business acquisition 1,223 2,169 2,061 See accompanying notes to the consolidated financial statements. 90 ALARM.COM HOLDINGS, INC. Consolidated Statements of Equity (in thousands) Redeemable Noncontrolling Interests Common Stock Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income / (Loss) Retained Earnings Total Stockholders’ Equity Shares Amount Shares Amount Balance as of December 31, 2022 $ 23,988 50,985 $ 510 $ 497,199 1,533 $ ( 83,993 ) $ — $ 185,143 $ 598,859 Common stock issued in connection with equity-based plans — 904 9 3,589 — — — — 3,598 Purchases of treasury stock — — — — 488 ( 27,298 ) — — ( 27,298 ) Tax withholdings related to vesting of restricted stock units — — — ( 2,621 ) — — — — ( 2,621 ) Stock-based compensation expense — — — 47,422 — — — — 47,422 Purchases of redeemable noncontrolling interest ( 1,238 ) — — 406 — — — — 406 Accretion adjustments of redeemable noncontrolling interest to redemption value 14,261 — — ( 14,261 ) — — — — ( 14,261 ) Net income / (loss) attributable to common stockholders ( 703 ) — — — — — — 81,043 81,043 Other comprehensive income — — — — — — 1,398 — 1,398 Balance as of December 31, 2023 $ 36,308 51,889 $ 519 $ 531,734 2,021 $ ( 111,291 ) $ 1,398 $ 266,186 $ 688,546 Common stock issued in connection with equity-based plans — 867 9 9,975 — — — — 9,984 Purchases of treasury stock, including transaction costs and excise tax — — — ( 394 ) 1,117 ( 75,000 ) — — ( 75,394 ) Tax withholdings related to vesting of restricted stock units — — — ( 3,401 ) — — — — ( 3,401 ) Stock-based compensation expense — — — 41,397 — — — — 41,397 Accretion adjustments of redeemable noncontrolling interest to redemption value 10,042 — — ( 10,042 ) — — — — ( 10,042 ) Purchases of capped calls related to convertible senior notes, net of tax — — — ( 48,077 ) — — — — ( 48,077 ) Net income / (loss) attributable to common stockholders ( 1,603 ) — — — — — — 124,116 124,116 Other comprehensive income — — — — — — ( 583 ) — ( 583 ) Balance as of December 31, 2024 $ 44,747 52,756 $ 528 $ 521,192 3,138 $ ( 186,291 ) $ 815 $ 390,302 $ 726,546 91 Redeemable Noncontrolling Interests Common Stock Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income / (Loss) Retained Earnings Total Stockholders’ Equity Shares Amount Shares Amount Balance as of December 31, 2024 $ 44,747 52,756 $ 528 $ 521,192 3,138 $ ( 186,291 ) $ 815 $ 390,302 $ 726,546 Common stock issued in connection with equity-based plans — 785 8 4,467 — — — — 4,475 Purchase of treasury stock, including transaction costs and excise tax — — — ( 110 ) 772 ( 41,561 ) — — ( 41,671 ) Stock-based compensation expense — — — 33,237 — — — — 33,237 Noncontrolling interest assumed through acquisition 6,352 — — — — — — — — Purchases of redeemable noncontrolling interest ( 14,643 ) — — ( 1,536 ) — — — — ( 1,536 ) Accretion adjustments of redeemable noncontrolling interest to redemption value 7,337 — — ( 7,337 ) — — — — ( 7,337 ) Net income / (loss) attributable to common stockholders ( 946 ) — — — — — — 132,574 132,574 Other comprehensive income — — — — — — 1,875 — 1,875 Balance as of December 31, 2025 $ 42,847 53,541 $ 536 $ 549,913 3,910 $ ( 227,852 ) $ 2,690 $ 522,876 $ 848,163 See accompanying notes to the consolidated financial statements. 92 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements December 31, 2025, 2024 and 2023 Note 1. Organization Alarm.com Holdings, Inc. (referred to herein as Alarm.com, the Company, or we) is the leading platform for intelligently connected properties. Our cloud-based platform offers an expansive suite of Internet of Things, or IoT, solutions addressing global opportunities in the residential, multi-family, small business, enterprise commercial and energy markets. 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, personal safety and data-rich emergency response. Our solutions are delivered through an established network of trusted service provider partners, who are experts at selling, installing and supporting our solutions. We derive revenue from the sale of our cloud-based Software-as-a-Service, or SaaS, services, license fees, software, hardware, activation fees and other revenue. Our fiscal year ends on December 31. Note 2. Summary of Significant Accounting Policies Principles of Consolidation Our consolidated financial statements include our accounts and those of our majority-owned and controlled subsidiaries after elimination of intercompany accounts and transactions. Equity investments over which we are able to exercise significant influence but do not control the investee are accounted for using the equity method. We determine whether we have a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity, or VIE. Voting interest entities are entities that have sufficient equity and provide equity investor voting rights that give them power to make significant decisions relating to the entity’s operations. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. In VIEs, a controlling financial interest is attained through means other than voting rights and the entities lack one or more of the characteristics of a voting entity. We have unconsolidated equity investments in third-party businesses. Equity investments with readily determinable fair values are recorded at fair value. Equity investments without readily determinable fair values are recorded using the measurement alternative. Under the measurement alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments. We make a separate election to use the measurement alternative for each eligible investment, and reassess whether an investment qualifies for the alternative at each reporting period. Adjustments resulting from impairment, fair value or observable price changes are recorded in other income / (expense), net in our consolidated statements of operations. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. As of the date of issuance of these financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, assumptions and judgments or revise the carrying value of our assets or liabilities. However, our estimates, judgments and assumptions are continually evaluated based on available information and experience and may change as new events occur and additional information is obtained. The global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of significant worldwide events, including public health crises, and geopolitical upheaval (including the ongoing conflicts in Ukraine, and in the Middle East and surrounding areas), disruptions to global supply chains, fluctuations in interest rates, tariffs, risk of recession and inflation (collectively, the Macroeconomic Conditions). Because of the use of estimates inherent in the financial reporting process and in light of the continuing uncertainty arising from the Macroeconomic Conditions, actual results could differ from those estimates and any such differences may be material. Estimates are used when accounting for revenue recognition, allowances for credit losses, allowance for hardware returns, estimates of obsolete inventory, long-term incentive compensation, the lease term and incremental borrowing rates for leases, stock-based compensation, income taxes, legal reserves, equity method investments, goodwill, intangible assets and other long-lived assets. Reclassifications Certain previously reported amounts in the consolidated statements of operations for the year ended December 31, 2024 have been reclassified to conform to our current presentation to reflect income from equity method investments, net, as a separate line item, which was previously included in other income / (expense), net. Certain previously reported amounts in the consolidated balance sheets for the year ended December 31, 2024 have been reclassified to conform to our current presentation, including the addition of the investments in unconsolidated entities as a separate line item. Certain previously reported amounts in the consolidated statement of cash flows for the years ended December 31, 2024 and 2023 have been 93 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 reclassified to conform to our current presentation, including the addition of other adjustments as a separate line item within the adjustments to reconcile net income to net cash flows from the operating activities section. 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. As of December 31, 2025 and 2024, we have invested $ 941.1 million and $ 1.2095 billion in cash equivalents in the form of money market funds with a number of financial institutions, respectively. We consider these money market funds to be Level 1 financial instruments (see Note 11). Accounts Receivable Accounts receivable are principally derived from sales to customers located in the United States and Canada. Revenue in countries outside of North America accounted for 5 %, 6 % and 4 % of our total revenue for the years ended December 31, 2025, 2024 and 2023, respectively. Accounts receivable balances related to service providers partners outside of North America were 8 % as of December 31, 2025 and 2024. Our accounts receivable are stated at estimated realizable value. Restricted Cash We consider all cash reserved for a specific use and not available for immediate or general business use to be restricted cash. As of December 31, 2025, we had a total of $ 8.2 million of restricted cash, of which $ 2.1 million was included in other current assets and $ 6.1 million was included in other assets within our consolidated balance sheets. As of December 31, 2024, we had a total of $ 8.4 million of restricted cash, of which $ 2.2 million was included in other current assets and $ 6.2 million was included in other assets within our consolidated balance sheets. Notes Receivable Notes receivable are presented net of an allowance for uncollectibility, if any. We accrue interest on notes receivable based on the contractual terms of the note. Outstanding notes receivable that are aged 30 days or more from the contractual payment date are considered past due. Notes receivable are evaluated for impairment at least quarterly. Impairment occurs when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan. Factors considered in determining impairment include payment status, collateral value and the probability of collecting payments when due. See Note 10 for further details on loans provided to distribution partners and service provider partners. Credit Losses The allowance for credit losses is a valuation account that is deducted from the accounts receivable and notes receivable amortized cost basis to present the net amount expected to be collected. We estimate the allowance balance by applying the loss-rate method using relevant available information from internal and external sources, including historical write-off activity, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for changes in economic conditions, such as changes in unemployment rates. We use projected economic conditions over a period no more than twelve months based on data from external sources. For periods beyond the twelve-month reasonable and supportable forecast period, we revert to historical loss information immediately. The allowance for credit losses is measured on a pooled basis when similar risk characteristics exist. When assessing whether to measure certain financial assets on a pooled basis, we considered various risk characteristics, including the financial asset type, size and the historical or expected credit loss pattern. These risk characteristics are relevant to accounts receivable and notes receivable. Expected credit losses are estimated over the contractual term of the financial assets and we adjust the term for expected prepayments when appropriate. For the years ended December 31, 2025, 2024 and 2023 we recorded credit loss expense for accounts receivable and notes receivable of $ 1.9 million, $ 4.7 million and $ 1.0 million in general and administrative expense in our consolidated statements of operations, respectively. The contractual term excludes expected extensions, renewals and modifications because extension and renewal options are unconditionally cancelable by us. Write-offs of the amortized cost basis are recorded to the allowance for credit losses. Any subsequent recoveries of previously written off balances are recorded as a reduction to credit loss expense. Credit Losses - Accounts Receivable We identified the following two portfolio segments for our accounts receivable: (i) outstanding accounts receivable balances within Alarm.com and certain subsidiaries and (ii) outstanding accounts receivable balances within all other subsidiaries. There were no changes to our portfolio segments for our accounts receivable during the years ended December 31, 2025, 2024 and 94 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 2023, and no changes to our policies or practices that influenced our estimate of expected credit losses for accounts receivable. Additionally, there were no significant changes in the amount of accounts receivable write-offs during the year ended December 31, 2025, as compared to historical periods. Credit Losses - Notes Receivable We identified one portfolio segment, loan receivables, for our notes receivable. There were no changes to our policies or practices involving the issuance of notes receivable, customer acquisitions or any other factors that influenced our estimate of expected credit losses for notes receivable. During the year ended December 31, 2024, we wrote off $ 4.0 million related to a note receivable that originated in 2017 with an affiliate entity of one of our distribution partners, or the Affiliate, and reversed the previously allowance for credit losses recorded earlier in 2024. There were no purchases or sales of financial assets during the years ended December 31, 2025 and 2024. We do not accrue interest on notes receivable that are considered impaired or are 90 days or greater past due based on their contractual payment terms. Notes receivable that are 90 days or greater past due are placed on nonaccrual status. Notes receivable may be placed on nonaccrual status earlier if, in management’s opinion, a timely collection of the full principal and interest becomes uncertain. After a note receivable has been placed on nonaccrual status, interest will be recognized when cash is received. A note receivable may be returned to accrual status after all of the customer’s delinquent balances of principal and interest have been settled, and collection of all remaining contractual amounts due is reasonably assured. We have elected not to measure an allowance for credit losses for accrued interest receivables . We write-off any accrued interest on notes receivable that are considered impaired or are 90 days or greater past due based on their contractual payment terms by reversing interest income. The accrued interest receivable as of December 31, 2025 and 2024 was $ 0.7 million and $ 0.2 million, respectively, and is reflected in other current assets and other assets within our consolidated balance sheets and excluded from the amortized cost basis of the notes receivable . During the year ended December 31, 2024, we recorded a reduction to our interest income of $ 0.5 million related to the reversal of payable in kind interest associated with a subordinated credit agreement with the Affiliate. We did not write off any accrued interest receivable during the years ended December 31, 2025 and 2023. Inventory Our inventory, which is comprised of raw materials, work-in-process and finished goods, includes materials used to produce our wireless communications network enabled radios, video cameras, video recorders, smart thermostats, active shooter detection sensors, home automation system parts and peripherals, is stated at the lower of cost or net realizable value, and is charged to cost of sales primarily on a first in, first out, or FIFO, basis when the inventory is shipped from our manufacturer and received by our service provider partners. We periodically evaluate our inventory quantities for obsolescence based on criteria such as customer demand and changing technology and record an obsolescence write-off when necessary. Equity Method Investments We account for equity investments where we can exercise significant influence over, but not control, an investee using the equity method of accounting. Equity method investments are initially recorded at cost in investments in unconsolidated entities in the consolidated balance sheets. Under the equity method of accounting, investments are adjusted to recognize our proportionate share of net income or losses of the investees and are recorded in income from equity method investments, net in our consolidated statements of operations. The equity method investments are also adjusted by contributions to and distributions from the investees as well as any impairments resulting from other-than-temporary declines in fair value that is less than its carrying value. Depending on the timing of the availability of the financial statements of the investees, we may apply a three-month lag period based on when financial information is received. When applying a lag period, we adjust for any known significant changes from the lag period to our reporting date. In cases where our equity method investments provide for a disproportionate allocation of the profits and losses of the investees, our share of income or losses from equity method investments is determined using a balance sheet approach referred to as the hypothetical liquidation at book value, or HLBV, method. Under the HLBV method, at the end of each reporting period, a calculation is prepared to determine the amount that we would receive if an equity investment entity were to liquidate its net assets and distribute that cash to the investors based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions as well as the amortization of basis differences, is the amount we recognize for our share of the income or losses from the equity investments for the period. We have certain investments in unconsolidated entities accounted for under the equity method of accounting in which our carrying value exceeds our proportionate share of net assets of the unconsolidated entity. We record our proportionate share of amortization expense related to basis differences in income from equity method investments, net in our consolidated statements of operations. 95 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 Leases We determine if an arrangement contains a lease at the inception of the arrangement. As part of the lease determination process, we assess several factors, including, but not limited to, whether we have the right to control and direct the use of the asset and whether the other party has a substantive substitution right. If we enter into leases that contain multiple components, we identify separate lease components based on whether or not the right to use the underlying assets is distinct and either highly dependent or highly interrelated with other rights in the contract. We also evaluate whether there are any non-lease components in the arrangement. For certain classes of underlying assets, such as data centers, we have elected not to separate non-lease components from lease components. For all other classes of underlying assets, if separate lease and non-lease components are identified, we allocate the consideration in the contract to the lease and non-lease components using the relative stand-alone selling price method at the lease inception. Some of our leases include options to renew at our sole discretion. We also have several leases that provide us an option to terminate the lease prior to the end of the lease term. These renewal and termination options are included in the lease term at the commencement date when we are reasonably certain the options will be exercised. When assessing the likelihood of electing these options, we consider the length of the renewal period, market conditions, our expansion plans, the existence of a termination penalty, as well as other factors. Our lease agreements do not contain any material residual value guarantees, restrictive covenants or variable lease payments. Right-of-use, or ROU, assets represent our right to use an underlying asset for the term of the lease and lease liabilities represent our obligation to make lease payments throughout the term of the lease. ROU assets and lease liabilities are recognized as of the commencement date of the lease based on the present value of contractual lease payments due over the term of the lease. We use our incremental borrowing rate to determine the present value of the lease payments, as our leases do not state the rate implicit in the lease. Our incremental borrowing rate is determined on a collateralized basis at the commencement date of the lease. ROU assets and lease liabilities resulting from operating leases are recorded on our consolidated balance sheets. Our finance leases and subleases were not material to the consolidated financial statements as of December 31, 2025. We did not have any finance leases or subleases as of December 31, 2024. Lease expense is recognized on a straight-line basis over the term of the lease. Office and equipment lease expense is recorded in general and administrative expense and data center lease expense recorded in cost of SaaS and license revenue as well as research and development expense. Some of our leases include tenant improvement allowances, which are recorded when we are reasonably certain to utilize the allowance and are amortized on a straight-line basis over the shorter of the lease terms or the asset lives. Leases with an initial lease term of twelve months or less are considered short-term leases. Short-term leases are not recorded on our consolidated balance sheets. Expenses associated with short-term leases are recognized on a straight-line basis over the term of the lease and are recorded in general and administrative expense. Short-term lease costs were immaterial for the years ended December 31, 2025 and 2024. Convertible Senior Notes On January 20, 2021, we issued $ 500.0 million aggregate principal amount of 0 % convertible senior notes due January 15, 2026, in a private placement to qualified institutional buyers, or the 2026 Notes. On May 31, 2024, we issued $ 500.0 million aggregate principal amount of 2.25 % convertible senior notes due June 1, 2029, in a private placement to qualified institutional buyers, or the 2029 Notes. We account for the 2026 Notes and the 2029 Notes as a liability. The debt issuance costs are presented as a deduction from the outstanding principal balance of the 2026 Notes and 2029 Notes and are amortized to interest expense using the effective interest method over the contractual term of the 2026 Notes and 2029 Notes. See Note 21 for details on our payment of the 2026 Notes upon maturity on January 15, 2026. Capped Call Transactions On May 31, 2024, we issued the 2029 Notes. In connection with the offering of the 2029 Notes, we entered into privately negotiated capped call transactions with one of the initial purchasers and certain other financial institutions, at a cost of $ 63.1 million. The capped call transactions cover, subject to customary adjustments substantially similar to those applicable to the 2029 Notes, the number of shares of our common stock initially underlying the 2029 Notes. As the capped call options are both legally detachable and separately exercisable from the 2029 Notes, we account for the capped call options separately from the 2029 Notes. The capped call options are indexed to our own common stock and classified in stockholders’ equity. As such, the premiums paid for the capped call options were included as a net reduction to additional paid-in capital in the consolidated balance sheets. The capped call transactions will not be remeasured as long as they continue to meet the conditions for equity 96 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 classification. We elected to integrate the capped call options with the 2029 Notes for federal income tax purposes pursuant to applicable U.S. Treasury Regulations. Accordingly, the $ 63.1 million cost of the purchased capped calls will be deductible for income tax purposes. The original issue discount is accreted over the term of the 2029 Notes. Comprehensive Income Comprehensive income consists of net income and other comprehensive income / (loss). Other comprehensive income / (loss) refers to gains and losses that are recorded as an element of stockholders' equity and excluded from net income. Our other comprehensive income / (loss) consists of foreign currency translation adjustments. Foreign Currency For foreign operations where substantially all monetary transactions are in the local currency, we use the local currency as the functional currency. For these foreign operations, assets and liabilities are translated at period-end exchange rates and revenue and expense items are translated at average exchange rates prevailing during the periods being reported. The effects of translating financial statements of foreign operations into our reporting currency are recognized as a cumulative translation adjustment within accumulated other comprehensive income, a separate component of stockholders’ equity. Gains or losses from foreign currency remeasurements that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in our results of operations. Redeemable Noncontrolling Interests Noncontrolling interests with redemption features that are not solely within our control are considered redeemable noncontrolling interests. Our redeemable noncontrolling interests relate to our 89 % equity ownership interest in PC Open Incorporated, a Washington corporation, doing business as OpenEye, our 99 % equity ownership interest in Noonlight, Inc., or Noonlight, a Delaware corporation (see Note 7) and our 81 % ownership interest in CHeKT, Inc., or CHeKT. The OpenEye, Noonlight and CHeKT stockholder agreements contain a put option that gives the minority stockholders the right to sell their shares to us based on the fair value of the shares and also contain a call option that gives us the right to purchase the remaining shares from the minority stockholders based on the fair value of the shares. The next put and call options related to OpenEye can be exercised beginning in the first quarter of 2028 and the fourth quarter of 2028, respectively. The put and call options related to Noonlight can each be exercised beginning in the first quarter of 2026. The put and call options related to CHeKT can each be exercised beginning in the first quarter of 2028. These redeemable noncontrolling interests are considered temporary equity and we report them between liabilities and stockholders’ equity in the consolidated balance sheets. The amount of the net income or loss attributable to the redeemable noncontrolling interests is recorded in the consolidated statements of operations and the accretion of the redemption values is recorded as an adjustment to additional paid-in capital. We account for purchases of redeemable noncontrolling interest as a component of stockholders' equity when control is maintained. We recognize the difference between the fair value of the consideration paid for the acquired redeemable noncontrolling interest and the carrying value of the acquired redeemable noncontrolling interest as an adjustment to additional paid-in capital. The aggregate redemption values of the of the noncontrolling interest was $ 42.8 million and $ 44.7 million as of December 31, 2025 and 2024, respectively. Internal-Use Software We capitalize the costs directly related to the development of internal-use software for our platforms during the application development stage of the projects. Such costs primarily include payroll and payroll-related costs for engineers and product development employees as well as third-party consultants directly associated with the development project. Our internal-use software is reported at cost less accumulated amortization. Amortization begins once the project is ready for its intended use, which is usually when the code goes into production in weekly software builds on our platforms. We amortize the asset on a straight-line basis over the estimated useful life, which is typically a three to five-year period. We update our software for our SaaS multi-tenant platforms on a weekly basis utilizing continuous agile development methods, which primarily consists of bug-fixes and user interface changes. We evaluate whether a project should be capitalized if it adds significant functionality to our platforms. Maintenance activities or minor upgrades are expensed in the period performed. External Software Costs incurred in researching and developing a computer software product that will be marketed and sold are charged to expense when incurred until technological feasibility is established. Technological feasibility is established upon completion of a detailed program design or, in its absence, completion of a working model. After technological feasibility is established, certain payroll and payroll-related costs are capitalized for engineers and product development employees directly associated with the development project. Cost capitalization ceases when the product is available for general release. Our non-hosted software is typically developed in an agile environment with frequent revisions to product release features and functions. Agile development 97 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 results in a short duration between completion of the detailed program design and beta release. As of December 31, 2025 and 2024, our capitalized software development costs for internal-use software and external software included in the consolidated balance sheets were $ 3.4 million and $ 2.4 million, respectively. Revenue Recognition We derive our revenue from three primary sources: the sale of cloud-based SaaS services on our integrated Alarm.com platform, the sale of licenses and services on our non-hosted software platform, or Software platform, and the sale of hardware products. We sell our platform and hardware solutions to service provider partners that resell our solutions and hardware to residential and commercial property owners, who are the service provider partners’ customers. Our subscribers consist of all of the properties maintained by those residential and commercial property owners to which we are delivering at least one of our solutions. We also sell our hardware to distributors who resell the hardware to service provider partners. We enter into contracts with our service provider partners that establish pricing for access to our platform solutions and for the sale of hardware. These service provider c ontracts typically have an initial term o f one year , with subsequent renewal terms of one year . Our service provider partners have indicated that they typically have three to five-year service contracts with residential and commercial property owners who use our solutions. Our hardware sales include connected devices that enable our services, such as video cameras, video recorders, gunshot detection sensors, gateway modules and smart thermostats. Our service provider partners may purchase our hardware in anticipation of installing the hardware in a residential or commercial property when they create a new subscriber account, or for use in existing subscriber properties. The purchase of hardware occurs in a transaction that is separate and typically in advance of the purchase of our platform services. The performance obligation is primarily satisfied when the hardware is received by our service provider partner or distributor. Service provider partners transact with us to purchase our platform solutions and resell our solutions to a new subscriber, or to upgrade or downgrade the solutions of an existing subscriber, at which time the subscriber’s access to our platform solutions is enabled and the delivery of the services commences. Our performance obligation related to providing our platform solutions is satisfied on a daily basis as the subscriber uses the platform services. The purchase of platform solutions and the purchase of hardware are separate transactions as revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We generate all of our revenue from contracts with customers. Contracts with our service provider partners typically have an initial term of one year . Further, SaaS and license revenue associated with our contracts is recognized at an amount that corresponds directly with the value of the performance completed to date. Additionally, the consideration received from hardware sales corresponds directly with the stand-alone selling price of the hardware. As a result, we have elected to use the practical expedient related to the amount of transaction price allocated to the unsatisfied performance obligations and therefore, we have not disclosed the total remaining revenue expected to be recognized on all contracts or the expected period over which the remaining revenue would be recognized. To determine the transaction price, we analyze all of the performance obligations included in the contract. We consider the terms of the contract and our customary business practices, which typically do not include financing components or non-cash consideration. We have variable consideration primarily in the form of rebate incentives. The significant inputs related to our estimates of variable consideration include the volume and amount of products and services sold historically and expected to be sold in the future, the availability and performance of our services and the historical and expected number of returns. Depending on the type of variable consideration and its predictability, we may apply an "expected value" approach or a "most likely amount" approach. We estimate the variable consideration at the onset of a contract and include the variable consideration within the transaction price if it is probable that a significant reversal of the variable consideration would not occur in the future. When determining whether the amount of variable consideration included in the transaction price should be constrained, we look at the history of hardware purchased and subscribers added by our service provider partners to estimate the likelihood of those service provider partners obtaining the rebates. At times, our contracts include consideration payable to a customer in the form of fixed discounts or rebates. We record the consideration payable to a customer as a reduction to the transaction price resulting in a reduction to revenue over the service period. If we enter into contracts that contain multiple promised services, we evaluate which of the promised services represent separate performance obligations based on whether or not the promised services are distinct and whether or not the services are separable from other promises in the contract. If these criteria are met, then we allocate the transaction price to the performance obligations using the relative stand-alone selling price method at contract inception. In determining the relative estimated selling prices, we consider market conditions, entity-specific factors and information about the customer or class of customer. Any discount within the contract is allocated proportionately to all of the separate performance obligations in the contract unless the terms of discount relate specifically to the entity’s efforts to satisfy some but not all of the performance obligations. 98 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 For our standard service provider agreements, we have used a portfolio approach for purposes of revenue recognition, as each agreement has similar characteristics and we do not expect the effects of applying this approach would have a material impact on our financial statements as compared to assessing each agreement individually. SaaS and License Revenue We generate the majority of our SaaS and license revenue primarily from monthly fees charged to our service provider partners on a per subscriber basis for access to our cloud-based intelligently connected property platform and related solutions. Our fees per subscriber vary based upon the service plan and features utilized. Under the terms of our contractual arrangements with our service provider partners, we bill a monthly fee to our service provider partners in advance of the month of service, with the exception of the initial partial month of service, which is paid in arrears. Due to the limited period of time between receipt of payment and delivery of service, we have not accounted for these advance payments as significant financing components. We typically transfer the promised SaaS services to our customers over time, which is evidenced by the fact that the customers receive and consume the benefits provided by our performance of the services as such services are rendered. As a result, we recognize revenue from SaaS services on a monthly basis as we satisfy our performance obligations over the period of service. We have demonstrated that we can sell our SaaS offering on a stand-alone basis, as it can be sold separately from hardware and activation services. Our service provider partners typically incur and pay the same monthly fee per subscriber account for the entire period a subscriber account is active. We offer multiple service level packages for our platform solutions including a range of solutions and a range of a la carte add-ons for additional features. The fee paid by our service provider partners each month for the delivery of our solutions is based on the combination of packages and add-ons enabled for each subscriber. We utilize tiered pricing plans where our service provider partners may receive prospective pricing discounts driven by volume. We also generate SaaS and license revenue from the fees paid to us when we license our intellectual property to third parties for use of our patents. We bill a monthly fee to third parties based on the number of customers that were active during the prior month. We apply the usage-based royalty exception to recognize license revenue because the sole or predominant item to which the royalty relates is the license of intellectual property. Under the usage-based royalty exception, we recognize revenue on a monthly basis over the license period. In addition, in certain markets, our EnergyHub subsidiary sells its demand response service for an annual service fee, with pricing based on the number of subscribers or amount of aggregate electricity demand made available for a utility’s or market’s control. Software License Revenue Our SaaS and license revenue also includes our software license revenue from monthly fees charged to service providers on a per subscriber basis for access to our 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. Our agreements for the Software platform solution typically include software and services, such as post-contract customer support, or PCS. Software sales that include multiple elements are typically allocated to the various elements using the relative stand-alone selling price method. We apply the usage-based royalty exception to recognize license revenue associated with software hosted by our customers because the predominant item to which the royalty relates is the license of intellectual property. Under the usage-based royalty exception, we recognize revenue on a monthly basis over the period of use. Under the terms of our contractual arrangements with our service provider partners, we are entitled to payment of a monthly fee that is billed per subscriber for the month of service. Our software license revenue during the years ended December 31, 2025, 2024 and 2023 was $ 17.7 million, $ 20.3 million and $ 23.2 million, respectively. Hardware and Other Revenue We generate hardware and other revenue primarily from the sale of video cameras, video recorders, smart thermostats and cellular radio modules that provide access to our cloud-based platforms and, to a lesser extent, the sale of other devices, including image sensors, gunshot detection sensors and peripherals. We primarily transfer hardware to our customers upon delivery to the customer, which corresponds with the time at which the customer obtains control of the hardware. As a result, we recognize hardware and other revenue as we satisfy our performance obligations, which primarily occurs when the hardware is received by our service provider partner or distributor, net of a reserve for estimated returns. There are a few contracts in which we provide shipping and handling services to the customer after control of the hardware transfers to the customer. In these instances, we have elected to account for shipping and handling costs as activities performed to fulfill the promise to transfer hardware to the customer and not as a separate promised service. Amounts due from the sale of hardware are payable in accordance with the terms of our agreements with our service provider partners or distributors, and are not contingent on resale to end-users, or to service provider partners in the case of sales of hardware to distributors. Payment for our hardware is typically due within 30 days from shipment. Our distributors sell directly to our service provider partners under terms between the two parties. 99 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 When determining the amount of consideration we expect to be entitled to for the sale of our hardware, we estimate the variable consideration associated with customer returns. We record a reserve against revenue for hardware returns based on historical returns. For each of the years ended December 31, 2025, 2024 and 2023, our reserve against revenue for hardware returns was 1 % of hardware and other revenue. We evaluate our hardware reserve on a quarterly basis or if there is an indication of significant changes in return experience. Hist orically, our returns of hardware have not significantly differed from our estimated reserve. Additionally, we provide warranties related to the intended functionality of the products and services provided and those warranties typically allow for the return of hardware up to one year past the date of sale. We determined that these warranties are not separate performance obligations as they cannot be purchased separately and do not provide a service in addition to an assurance the hardware will function as expected. Our hardware and other revenue also includes our revenue from the sale of perpetual licenses that provide our customers in the commercial market the right to use our video surveillance software for an indefinite period of time in exchange for a one-time license fee. Our hardware and other revenue also 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. Our perpetual licenses and licenses to our gunshot detection solution provide a right to use intellectual property that is functional in nature and has significant stand-alone functionality. Accordingly, for licenses of functional intellectual property, revenue is recognized at the point-in-time when control has been transferred to the customer, which occurs once the software has been made available to the customer. Hardware and other revenue may also include activation fees charged to some of our service provider partners for activation of a new subscriber account on our platforms, as well as fees paid by service provider partners for our marketing services. Our service provider partners use services on our platforms, such as support tools and applications, to assist in the installation of our solutions in subscriber properties. This installation marks the beginning of the service period on our platforms and, on occasion, we earn activation revenue for fees charged for this service. The activation fee is non-refundable, separately negotiated and specified in our contractual arrangements with our service provider partners and is charged to the service provider partner for each subscriber activated on our platforms. The decision whether to charge an activation fee is based in part on the expected number of subscribers to be added by our service provider partners and as a result, many of our largest service provider partners do not pay an activation fee. Activation fees are not offered on a stand-alone basis separate from our SaaS offering and are billed and received at the beginning of the arrangement. We record activation fees initially as deferred revenue and we recognize these fees ratably over the expected term of the subscribers’ account which we estimate is 10 years based on our annual attrition rate. The portion of these activation fees included in current and long-term deferred revenue as of our balance sheet date represents the amounts that will be recognized ratably as revenue over the following twelve months , or longer as appropriate, until the 10-year expected term is complete. The balance of deferred revenue for activation fees was $ 4.0 million and $ 4.3 million as of December 31, 2025 and 2024, respectively, which combines current and long-term balances. Cost of Revenue Our cost of SaaS and license revenue primarily includes the amounts paid to wireless network providers and, to a lesser extent, the costs of running our network operations centers which are expensed as incurred, as well as patent and royalty costs in connection with technology licensed from third-party providers and amounts paid to distributed energy resource providers. 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. Our cost of software license revenue during the years ended December 31, 2025, 2024 and 2023 was $ 0.4 million, $ 0.6 million and $ 0.6 million, 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. Cost of hardware and other revenue also includes material costs and labor cost related to our employees who manufacture hardware for our suite of IoT solutions. Additionally, our cost of hardware and other revenue includes royalty costs in connection with technology licensed from third-party providers. We record the cost of SaaS and license revenue as expenses are incurred, which corresponds to the delivery period of our services to our subscribers. We record the cost of hardware and other revenue primarily when the hardware and other services are delivered to the service provider partner, which occurs when control of the hardware and other services transfers to the service provider partner. Our cost of revenue excludes amortization and depreciation shown in operating expenses. Contract Asset and Contract Liability Balances At contract inception, we assess the goods and services promised in our contracts with customers and identify a performance obligation for each distinct promise to transfer a good or service, or bundle of goods or services. To identify the performance obligations, we consider all of the goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. We record a contract asset when we satisfy a performance obligation by transferring a promised good or service. Contract assets can be conditional or unconditional depending on whether another performance 100 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 obligation must be satisfied before payment can be received. We receive payments from our service provider partners based on the billing schedule established in our contracts. All of the accounts receivable presented in the consolidated balance sheets represent unconditional rights to consideration. We do not have any material assets from contracts containing conditional rights and we do not have any material assets from satisfied performance obligations that have not been invoiced. We recognize an asset related to the costs incurred to obtain or fulfill a contract only if we expect to recover those costs and we would not have incurred those costs if the contract had not been obtained. We recognize an asset from the costs incurred to fulfill a contract if the costs (i) are specifically identifiable to a contract, (ii) enhance resources that will be used in satisfying performance obligations in future and (iii) are expected to be recovered. Our assets related to costs incurred to obtain a contract consist of capitalized commission costs, upfront payments made to a customer and contracts with an outstanding performance obligation. Based on the policy above, we capitalize a portion of our commission costs as an incremental cost of obtaining a contract. When calculating the incremental cost of obtaining a contract, we exclude any commission costs related to metrics that could be satisfied without obtaining a contract, including training-related metrics. We amortize our commission costs to sales and marketing expense on our consolidated statements of operations over a period of three years , which is consistent with the period over which the products and services related to the commission are transferred to the customer. The three-year period was determined based on our review of historical enhancements and upgrades to our products and services. We applied the portfolio approach to account for the amortization of contract costs for those contracts that have similar characteristics. Upfront payments made to a customer are capitalized and amortized over the expected period of benefit and are recorded as a reduction to revenue. Contract liabilities include payments received in advance of performance under the contract and are realized with the associated revenue recognized under the contract. All of the deferred revenue presented in the consolidated balance sheets represents contract liabilities resulting from advance cash receipts from customers or amounts billed in advance to customers from the sale of services. Changes in deferred revenue are due to our performance under the contract as well as to cash received from new contracts for which services have not been provided. Research and Development Our research and development costs consist primarily of personnel and related expenses for our employees working on our product development and software and device engineering teams, including salaries, bonuses, stock-based compensation, benefits and other personnel costs. Our research and development of new products and services is a multidisciplinary effort across our product management, program management, software engineering, device engineering, quality engineering, configuration management and network operations teams. Also included are non-personnel costs, such as consulting and professional fees paid to third-party development resources. We invest substantial resources in research and development to enhance our platforms and applications, support our technology infrastructure, develop new capabilities and conduct quality assurance testing. Fair Value Measurements The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard established a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date; Level 2 - Inputs other than quoted prices included within Level 1 that are observable for similar assets and liabilities, either directly or indirectly; quoted prices in markets that are not active; and Level 3 - Unobservable inputs supported by little or no market activity. The carrying amount of financial assets, including cash and cash equivalents and accounts receivable, as well as accounts payable approximates fair value because of the short maturity and liquidity of those instruments. Assets and Liabilities Measured at Fair Value on a Recurring Basis - In 2025 and 2024, we recorded assets for our money market accounts and equity securities with readily determinable fair values on a recurring basis. In 2025 and 2024, we recorded liabilities for a contingent consideration liability related to acquisitions at fair value on a recurring basis. Assets Measured at Fair Value on a Nonrecurring Basis - We measure certain assets, including property and equipment, goodwill and intangible and long-lived assets at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. Additionally, equity investments without readily determinable fair 101 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 values are recognized at fair value on a nonrecurring basis when observable price changes from orderly transactions for identical or similar investments become available. Concentration of Credit Risk The financial instruments that potentially subject us to concentrations of credit risk consists principally of cash and cash equivalents and accounts receivables. All of our cash and cash equivalents are held at financial institutions that management believes to be of high credit quality. Our cash and cash equivalent accounts may exceed federally insured limits at times. We mitigate the risk of loss for our cash and cash equivalents by depositing funds with a number of reputable financial institutions and monitoring risk profiles and investment strategies of money market funds. We have not experienced any losses on cash and cash equivalents to date. To manage accounts receivable risk, we evaluate the credit worthiness of our service provider partners and maintain an allowance for credit losses. The majority of our accounts receivable balance is due from our service provider partners in North America. We assess the concentrations of credit risk with respect to accounts receivables based on one industry and one geographic region and believe our reserve for uncollectible accounts is appropriate based on our history and this concentration. Stock-Based Compensation We compensate our executive officers, board of directors and employees with stock-based compensation plans under our 2025 Equity Incentive Plan, or 2025 Plan. We record stock-based compensation expense related to time-based restricted stock units based upon the award’s grant date fair value and use an accelerated attribution method, net of actual forfeitures, in which compensation cost for each vesting tranche in an award is recognized ratably from the service inception date to the vesting date for that tranche. We record stock-based compensation expense related to performance-based restricted stock units based on management’s determination of the probable outcome of the performance conditions and we record a cumulative adjustment in periods in which there is a change in the estimated number of shares expected to vest. Our equity awards generally vest over five years and are settled in shares of our common stock. During 2025, 2024 and 2023, we recognized compensation expense of $ 33.2 million, $ 41.2 million and $ 47.3 million, respectively. During 2025 and 2023 we recognized a tax shortfall from stock-based awards of $ 1.0 million and $ 0.5 million, respectively. During 2024, we recognized an associated tax windfall benefit from stock-based awards of $ 1.8 million. We account for stock-based compensation arrangements with non-employees based upon the award’s grant date fair value. We estimate the fair value of each option granted on the date of the grant using the Black-Scholes option-pricing model, which contains uncertainties and requires us to estimate the risk-free interest rate, expected term, expected stock price volatility and dividend yield. Beginning upon the first grant of options in 2022, the expected term for options granted is estimated using our historical experience, including information related to options we have granted. Our Employee Stock Purchase Plan, or 2015 ESPP, allows eligible employees to purchase shares of our common stock at 90 % of the fair market value of the closing price on the purchase date. The maximum number of shares of our common stock that a participant may purchase during any calendar year is limited to the lesser of 10 % of the participant's base compensation for that year or the number of shares with a fair market value of $ 15,000 . The 2015 ESPP is considered compensatory for purposes of share-based compensation expense. Compensation expense is recognized for the amount of the discount, net of actual forfeitures, over the six-month purchase period. 401(k) Defined Contribution Plan We adopted the Alarm.com Holdings 401(k) Plan, or the Plan, on April 30, 2009. All of our employees are eligible to participate in the Plan. For the years ended December 31, 2025, 2024 and 2023, our discretionary match was 100 % of employee contributions up to 10 % of salary and up to a $ 5,000 maximum match. We recognized compensation expense of $ 7.7 million, $ 7.5 million and $ 7.2 million for the years ended December 31, 2025, 2024 and 2023, respectively, related to our matching contributions. Business Combinations We are required to allocate the purchase price of acquired companies to the identifiable tangible and intangible assets acquired and liabilities assumed at the acquisition date based upon their estimated fair values. The net assets and results of operations of an acquired entity are included in our consolidated financial statements from the acquisition date. Acquisition-related costs are expensed as incurred. Goodwill as of the acquisition date represents the excess of the purchase consideration of an acquired business over the fair value of the underlying net tangible and intangible assets acquired net of liabilities assumed. This valuation requires management to apply significant judgment in estimating the fair value of long-lived and intangible assets acquired, which involves the use of significant estimates and assumptions. Significant estimates and assumptions in valuing certain acquired customer relationship intangible assets include estimates about future expected cash flows, attrition rates and discount rates. Significant estimates and assumptions in valuing acquired developed technology intangible assets include estimates about future expected cash flows, obsolescence factors, royalty rates 102 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 and discount rates. Significant estimates and assumptions in valuing acquired trade name intangible assets include estimates about future expected cash flows, royalty rates and discount rates. During the measurement period, we may record adjustments to the assets acquired and liabilities assumed. Any adjustments to provisional amounts that are identified during the measurement period are recorded in the reporting period in which the adjustment amounts are determined. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Some acquisitions may include contingent consideration, which is an obligation to make future payments to the seller contingent upon the achievement of future operational or financial targets. The fair value of the contingent consideration is estimated on a quarterly basis and changes in the fair value of the contingent consideration resulting from information that existed subsequent to the acquisition date are recorded in the consolidated statements of operations. Goodwill, Intangible Assets and Long-lived Assets Goodwill Goodwill represents the excess of (1) the aggregate of the fair value of consideration transferred in a business combination, over (2) the fair value of assets acquired, net of liabilities assumed. Goodwill is allocated to our reporting units, which are our operating segments or one level below our operating segments. Goodwill is not amortized, but is subject to annual impairment tests. We perform our annual impairment review of goodwill on October 1 and when a triggering event occurs between annual impairment tests. We test our goodwill at the reporting unit level. We perform either a qualitative analysis or a quantitative analysis every year depending on the changes to our goodwill balance as well as changes in our business and the economy. Qualitative factors we consider include, but are not limited to, macroeconomic conditions, industry and market conditions, company specific events, changes in circumstances and market capitalization. The amount of goodwill impairment is calculated as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. For our 2025 annual impairment review, we performed a qualitative assessment for our Alarm.com and Other reporting units. Based on the results of our qualitative assessment, we determined that it was not more likely than not that the fair value of our reporting units was less than their carrying amount, including goodwill. Therefore, we concluded that there was no goodwill impairment as of October 1, 2025. Our assessment was performed as of October 1, 2025, and we have determined there has been no triggering events that resulted in goodwill impairment from our assessment date through December 31, 2025. Intangible Assets and Long-lived Assets Intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Intangible assets with definite lives are amortized over their estimated useful lives. We evaluate the recoverability of our intangible assets with definite lives and long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of intangible assets with definite lives and long-lived assets are measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. For the years ended December 31, 2025, 2024 and 2023, we determined there were no impairments of our intangible assets with definite lives or other long-lived assets. Advertising Costs We expense advertising costs as incurred. Advertising costs totaled $ 7.7 million, $ 6.6 million and $ 2.9 million for the years ended December 31, 2025, 2024 and 2023, respectively. Advertising costs are primarily included within sales and marketing expenses on our consolidated statements of operations. Accounting for Income Taxes We account for income taxes under the asset and liability method as required by Accounting Standards Codification, or ASC 740, " Income Taxes ," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that are included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. 103 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. We are subject to income taxes in the United States and foreign jurisdictions based upon our business operations in those jurisdictions. Significant judgment is required in evaluating uncertain tax positions. We record uncertain tax positions in accordance with ASC 740-10 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position, and (2) with respect to those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. We record interest and penalties as a component of our income tax provision. Treasury Stock We account for treasury stock under the cost method and present treasury stock, including any applicable commissions and fees, as a component of stockholders’ equity in the consolidated balance sheets and statements of equity. We are subject to a 1.0% excise tax on the value of net corporate stock repurchases under the Inflation Reduction Act of 2022. When applicable, the excise tax will be included as part of the cost basis of shares acquired and is presented within stockholders’ equity in the consolidated balance sheets. Treasury stock held by us may be retired or reissued in the future. Earnings per Share Our basic net income per share attributable to common stockholders is calculated by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Our diluted net income per share attributable to common stockholders is calculated by giving effect to all potentially dilutive common stock when determining the weighted-average number of common shares outstanding. For purposes of the diluted net income per share calculation, restricted stock units, options to purchase common stock and unvested shares issued upon the early exercise of options that are subject to repurchase are considered to be potential common stock. We use the treasury stock method when calculating the dilutive impact of the stock options and restricted stock units on net income per share. We use the if-converted method when calculating the dilutive impact of the 2026 Notes and 2029 Notes on net income per share. Additionally, we included interest expense and debt issuance cost amortization, net of tax, within the numerator of the diluted net income per share. Our redeemable noncontrolling interests are related to our 89 % equity ownership interest in OpenEye, our 99 % equity ownership interest in Noonlight and our 81 % equity ownership interest in CHeKT. When calculating net income attributable to the common stockholders, net loss attributable to our redeemable noncontrolling interests should be excluded from net income. As a result, net income attributable to the common stockholders is equal to the net income less the net loss attributable to redeemable noncontrolling interests as of the end of each period. Recent Accounting Pronouncements Adopted On November 27, 2023, the Financial Accounting Standards Board, or FASB, issued ASU 2023-07, "Segment Reporting (Topic 280),” which revises the disclosure requirements about a public entity’s reportable segments and a reportable segment’s expenses. This amendment requires a public entity to (i) disclose significant segment expense that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, (ii) disclose an amount for other segment items by reportable segment and a description of its composition and (iii) provide annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods. This amendment is required to be applied retrospectively to all prior periods presented. We adopted ASU 2023-07 during the fiscal year ended December 31, 2024, which increased the amount of disclosures within Note 20 related to segment expenses. On December 14, 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740)," which requires additional annual disclosures regarding specific categories in the income tax rate reconciliation as well as additional information for reconciling items that meet a quantitative threshold. This amendment also requires annual disclosures regarding the amount of income taxes paid, including income taxes paid disaggregated by (i) federal, state and foreign taxes as well as (ii) individual jurisdictions in which income taxes paid is equal to or greater than five percent of total income taxes paid. Additionally, this amendment requires annual disclosures for income from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign as well as income tax expense (or benefit) disaggregated between federal, state and foreign. The amendment is effective for annual periods beginning after December 15, 2024, and early adoption is permitted. We adopted ASU 2023-09 during the fiscal year ended December 31, 2025, which increased the disclosures of certain tax amounts within Note 19 104 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 related to income taxes. Not Yet Adopted On November 5, 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)," which requires more detailed information about the types of expenses included in certain expense captions presented on the consolidated statements of operations, including purchases of inventory, employee compensation, depreciation, amortization and depletion. Additionally, this amendment requires the disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively and the disclosure of the total amount of selling expenses and, on an annual basis, an entity's definition of selling expenses. The amendment is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. This amendment should be applied either on a prospective basis or a retrospective basis to any or all prior periods presented. We are currently assessing the impact this pronouncement will have on our consolidated financial statement disclosures. On September 18, 2025, the FASB issued ASU 2025-06, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)," to align the accounting for software costs with the evolution of software development, including the shift from using a prescriptive and sequential development method to using an incremental and iterative development method. This amendment clarifies that capitalization of internal-use software costs begins when (i) management has authorized and committed to funding the software project, and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. Additionally, this amendment supersedes the website development costs guidance and it clarifies certain disclosure requirements for internal-use software costs. The amendment is effective for annual periods beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. This amendment should be applied either on a (i) prospective basis, (ii) retrospective basis to any or all prior periods presented, or (iii) modified transition basis that is based on the status of the project and whether software costs were capitalized before the date of adoption. We are currently assessing the impact this pronouncement will have on our consolidated financial statements and related disclosures. Note 3. Revenue from Contracts with Customers Contract Assets Our assets related to costs incurred to obtain or fulfill a contract primarily consist of capitalized commission costs, upfront payments made to customers and costs incurred on contracts with an outstanding performance obligation. The current portion of capitalized commission costs, upfront payments made to customers and costs incurred on contracts with an outstanding performance obligation is included in other current assets within our consolidated balance sheets. The non-current portion of capitalized commission costs, upfront payments made to customers and costs incurred on contracts with an outstanding performance obligation is reflected in other assets within our consolidated balance sheets. We review the capitalized costs for impairment at least annually. Impairment exists if the carrying amount of the asset recognized from contract costs exceeds the remaining amount of consideration we expect to receive in exchange for providing the goods and services to which such asset relates, less the costs that relate directly to providing those good and services and that have not been recognized as an expense. We did no t record an impairment loss on our contract assets during the years ended December 31, 2025, 2024 and 2023. The changes in our contract assets are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Beginning of period balance $ 12,088 $ 9,099 $ 13,975 Additions to contract assets 15,524 10,292 7,837 Reimbursement of previously capitalized upfront payments to customers — — ( 6,774 ) Amortization or satisfaction of outstanding performance obligation of capitalized contract assets ( 9,665 ) ( 7,303 ) ( 5,939 ) End of period balance $ 17,947 $ 12,088 $ 9,099 On July 27, 2023, we received $ 6.9 million in cash related to the reimbursement of previously capitalized upfront payments to a customer. On the date of the payment, the $ 6.8 million unamortized portion of the contract asset balance was reduced to zero and the remaining amount of $ 0.1 million was recorded as an increase to SaaS and license revenue. 105 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 Contract Liabilities Contract liabilities include payments received in advance of performance under the contract and are realized with the associated revenue recognized under the contract. The changes in our contract liabilities are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Beginning of period balance $ 26,559 $ 22,885 $ 18,332 Revenue deferred or acquired in period 33,903 26,883 22,861 Revenue recognized from amounts included in contract liabilities ( 30,578 ) ( 23,209 ) ( 18,308 ) End of period balance $ 29,884 $ 26,559 $ 22,885 The revenue recognized from amounts included in contract liabilities primarily relates to prepayment contracts with customers as well as payments of activation fees. Note 4. Accounts Receivable, Net The components of accounts receivable, net are as follows (in thousands): December 31, 2025 2024 Accounts receivable $ 149,163 $ 132,400 Allowance for credit losses ( 5,171 ) ( 3,870 ) Allowance for product returns ( 2,140 ) ( 2,448 ) Accounts receivable, net $ 141,852 $ 126,082 For the years ended December 31, 2025, 2024 and 2023 we recorded a provision for credit losses on our accounts receivable of $ 2.2 million, $ 1.0 million and $ 1.5 million, respectively. For the years ended December 31, 2025, 2024 and 2023, we recorded a $ 3.1 million, $ 3.2 million and $ 4.4 million reserve for product returns in our hardware and other revenue, respectively. Historically, we have not experienced write-offs for uncollectible accounts or sales returns that have differed significantly from our estimates. Allowance for Credit Losses - Accounts Receivable The changes in our allowance for credit losses for accounts receivable are as follows (in thousands): Year Ended December 31, 2025 Year Ended December 31, 2024 Alarm.com and Certain Subsidiaries All Other Subsidiaries Alarm.com and Certain Subsidiaries All Other Subsidiaries Beginning of period balance $ ( 3,777 ) $ ( 93 ) $ ( 3,723 ) $ ( 141 ) (Provision for) / recovery of expected credit losses ( 1,952 ) ( 203 ) ( 956 ) 6 Write-offs 798 56 902 42 End of period balance $ ( 4,931 ) $ ( 240 ) $ ( 3,777 ) $ ( 93 ) 106 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 Note 5. Inventory The components of inventory are as follows (in thousands): December 31, 2025 2024 Raw materials $ 18,238 $ 23,881 Work-in-process 372 595 Finished goods 75,819 62,959 Total inventory $ 94,429 $ 87,435 Note 6. Property and Equipment, Net Furniture, fixtures and office equipment, computer software and hardware, internal-use software, construction in progress, leasehold improvements and real property and improvements are recorded at cost and presented net of depreciation on the consolidated balance sheets. We record land at historical cost. Furniture, fixtures and office equipment and computer software and hardware are depreciated on a straight-line basis over lives generally ranging from three to five years . Internal-use software included in fixed assets is amortized on a straight-line basis over a three-year period. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease terms or the asset lives. Real property is amortized on a straight-line basis over lives ranging from 15 to 39 years and the improvements related to real property are amortized on a straight-line basis over the shorter of the life of the underlying real property or the asset lives. The components of property and equipment, net are as follows (in thousands): December 31, 2025 2024 Furniture, fixtures and office equipment $ 11,320 $ 10,325 Computer software and hardware 43,644 41,197 Internal-use software 8,949 8,949 Construction in progress 13,372 14,809 Leasehold improvements 38,004 34,397 Real property and improvements 11,441 11,322 Land 22,711 22,684 Total property and equipment 149,441 143,683 Accumulated depreciation ( 84,642 ) ( 80,478 ) Property and equipment, net $ 64,799 $ 63,205 Depreciation expense related to property and equipment for the years ended December 31, 2025, 2024 and 2023 was $ 11.2 million, $ 10.3 million and $ 11.2 million, respectively. We had $ 0.6 million of disposals and write-offs of property and equipment that impacted the consolidated statements of operations during the year ended December 31, 2025. We had no disposals and write-offs of property and equipment that impacted the consolidated statements of operations during the years ended December 31, 2024 and 2023. Note 7. Acquisitions Asset Acquisitions On November 22, 2024, EnergyHub International, Inc., one of our wholly-owned subsidiaries, acquired certain assets of Finland-based Kapacity.io Solutions Oy. Substantially all of the acquired assets consisted of developed technology. The acquisition of the developed technology has helped accelerate deployment of a cloud-based demand response platform internationally for our EnergyHub subsidiary. 107 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 In consideration for the purchase of the developed technology, we paid $ 1.3 million in cash in November 2024, after deducting $ 0.2 million related to an agreed holdback provision. Additionally, we incurred $ 0.1 million in direct transaction costs related to legal fees during 2024 that were capitalized as a component of the consideration transferred. The $ 1.6 million purchase price consideration related to developed technology was recorded as an intangible asset at the time of the asset acquisition and is being amortized on a straight-line basis over an estimated useful life of seven years . The asset acquisition was recorded within our Other segment. On April 21, 2023, Alarm.com Incorporated, one of our wholly-owned subsidiaries, acquired certain assets of Vintra, Inc., or Vintra. Substantially all of the acquired assets consisted of developed technology. The acquisition of the developed technology has expanded Alarm.com's learning program and accelerated deployment of advanced video analytics solutions for the Alarm.com and OpenEye platforms. In consideration for the purchase of the acquired assets, we paid $ 5.5 million in cash on April 21, 2023, after deducting $ 0.3 million related to the settlement of an outstanding loan issued to Vintra during March 2023 and $ 1.0 million related to an agreed holdback provision. The holdback was fully paid by the third quarter of 2024. Additionally, we incurred $ 0.4 million in direct transaction costs related to legal fees during 2023 that were capitalized as a component of the consideration transferred. The $ 7.1 million purchase price consideration allocated to developed technology was recorded as an intangible asset at the time of the asset acquisition and is being amortized on a straight-line basis over an estimated useful life of five years . The remaining $ 0.1 million purchase price consideration was allocated to property and equipment. The asset acquisition was recorded within our Alarm.com segment. Acquisition of a Business - RGS On November 21, 2025, EnergyHub, Inc., or EnergyHub, one of our wholly-owned subsidiaries, acquired 100 % of the issued and outstanding shares of capital stock of Zona NewCo, LLC, which acquired substantially all of the assets and liabilities of Resideo Grid Services, or RGS, from Resideo Technologies, Inc. RGS provides demand response aggregation and program management services for utilities. The acquisition is anticipated to strengthen EnergyHub’s position in the demand response market as well as make new demand energy response classes available to RGS customers. On November 21, 2025, in consideration for the purchase of 100 % of the issued and outstanding shares of capital stock of RGS, we paid $ 77.2 million in cash. Pursuant to the terms of the stock purchase agreement, following the preliminary determination of the working capital of RGS as of the closing date, the purchase price increased by $ 1.6 million. The working capital adjustment is expected to be finalized during the first quarter of 2026. As a result of the acquisition of RGS, we recorded approximately $ 0.8 million in acquisition-related costs for the year ended December 31, 2025. These costs include expenses directly related to acquiring RGS, are expensed as incurred and are included in general and administrative expense in our consolidated statements of operations. The purchase price allocation was not finalized as of the filing date of this Annual Report on Form 10-K and is primarily pending the final determination of the working capital adjustment, tax adjustments and the valuation of the acquired customer relationships. 108 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 The table below sets forth the purchase consideration and the preliminary allocation used to estimate the fair value of the tangible and intangible net assets acquired (in thousands): November 21, 2025 Calculation of Purchase Consideration: Cash paid, net of working capital adjustment $ 78,811 Total consideration $ 78,811 Estimated Tangible and Intangible Net Assets: Accounts receivable $ 4,887 Other current assets 16 Deferred tax assets 638 Customer relationships 28,947 Developed technology 4,279 Accounts payable ( 356 ) Accrued expenses and other current liabilities ( 1,588 ) Deferred revenue ( 3,069 ) Goodwill 45,057 Total estimated tangible and intangible net assets $ 78,811 Goodwill of $ 45.1 million reflects the value of acquired workforce and synergies we expect to achieve from integrating RGS's customers and demand response aggregation and program management services into EnergyHub’s existing service offerings. The majority of the goodwill recognized is expected to be deductible for income tax purposes in future periods. We allocate goodwill to reporting units based on expected benefit from synergies and have allocated the goodwill to the Other segment. Fair Value of Net Assets Acquired and Intangibles The acquired activities and assets in the purchase of RGS constituted a business and in accordance with ASC 805, " Business Combinations ," the assets and liabilities were recorded at their respective fair values as of November 21, 2025. We developed the fair value of intangible net assets using the relief from royalty method for developed technology and the multi-period excess earnings method for customer relationships. Developed Technology Developed technology primarily consists of intellectual property of proprietary software that is marketed for sale. We valued the developed technology using the relief from royalty method, an income approach. The significant assumptions used in the income approach include estimates about future expected cash flows from the developed technology, the royalty rate and the discount rate. We are amortizing the RGS developed technology, valued at $ 4.3 million, on an attribution method based on the discounted cash flows of the model over an estimated useful life of two years . Customer Relationships We recorded the customer relationships intangible separately from goodwill based on determination of the length, strength and contractual nature of the relationship that RGS shared with its customers. We valued the single group of customer relationships using the multi-period excess earnings method, an income approach. The significant assumptions used in the income approach include estimates about future expected cash flows from customer contracts, the attrition rate and the discount rate. We are amortizing the customer relationships, valued at $ 28.9 million, on a straight-line basis over an estimated useful life of 16 years. 109 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 Business Combinations in Operations - RGS The operations of the RGS business combination discussed above were included in the consolidated financial statements as of the acquisition date. The pro forma information as well as the revenue and net income of the business combination were not material to the consolidated financial statements for the year ended December 31, 2025. Acquisition of a Business – BTR On August 15, 2025, EnergyHub, Inc., one of our wholly-owned subsidiaries, acquired all of the issued and outstanding shares of capital stock of Bridge to Renewables, Inc., or BTR. BTR provides a managed charging solution for electric vehicle manufacturers and drivers. BTR’s technology integrates directly into a vehicle’s native mobile app, delivering utility program enrollment, charging insights and incentives to electric vehicle drivers. The acquisition is anticipated to expand EnergyHub’s ecosystem of automotive partners and strengthen its end-to-end managed charging offering, supporting improved driver engagement and grid optimization for utility clients. In consideration for the purchase of BTR, we paid $ 12.4 million in cash on August 15, 2025, after deducting $ 1.6 million related to agreed holdback provisions. The acquisition was accounted for as a business combination within the Other segment. The purchase price allocation was finalized during the fourth quarter of 2025. The overall impacts to our consolidated financial statements were not considered material for the year ended December 31, 2025. Acquisition of a Business – CHeKT 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. CHeKT provides a remote video monitoring service for central station operators that is compatible with a variety of cameras. The acquisition of CHeKT has helped 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 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. As a result of the acquisition of CHeKT, we recorded approximately $ 0.5 million in acquisition-related costs for the year ended December 31, 2025. These costs include expenses directly related to acquiring CHeKT, are expensed as incurred and are included in general and administrative expense in our consolidated statements of operations. The purchase price allocation was finalized during the fourth quarter of 2025, resulting in measurement period adjustments to decrease goodwill by $ 0.1 million and decrease tax-related liabilities by $ 0.1 million. 110 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 The table below sets forth the purchase consideration and the fair value allocation of the tangible and intangible net assets acquired (in thousands): February 10, 2025 Calculation of Purchase Consideration: Cash paid, net of working capital adjustment $ 23,382 Holdback consideration 3,694 Total consideration $ 27,076 Tangible and Intangible Net Assets: Cash $ 195 Accounts receivable 308 Inventory 645 Other current assets 4 Customer relationships 486 Developed technology 9,412 Trade names 814 Accounts payable ( 150 ) Accrued expenses and other current liabilities ( 212 ) Deferred tax liability ( 1,462 ) Other liabilities ( 100 ) Redeemable noncontrolling interest ( 6,352 ) Goodwill 23,488 Total tangible and intangible net assets $ 27,076 Goodwill of $ 23.5 million reflects the value of acquired workforce and synergies we expect to achieve from integrating CHeKT's remote video monitoring services into our existing solutions in the commercial and residential markets. None of the goodwill recognized is expected to be deductible for income tax purposes in future periods. We allocate goodwill to reporting units based on expected benefit from synergies and have allocated the goodwill to the Alarm.com segment. Fair Value of Net Assets Acquired and Intangibles The acquired activities and assets in the purchase of CHeKT constituted a business and in accordance with ASC 805, " Business Combinations ," the assets and liabilities were recorded at their respective fair values as of February 10, 2025. We developed the fair value of intangible net assets using the multi-period excess earnings method for developed technology, the with-and-without method for customer relationships and the relief from royalty method for the trade name. Developed Technology Developed technology primarily consists of intellectual property of proprietary software that is marketed for sale. We valued the developed technology using the multi-period excess earnings method, an income approach. The significant assumptions used in the income approach include estimates about future expected cash flows from the developed technology, the obsolescence factor and the discount rate. We are amortizing the CHeKT developed technology, valued at $ 9.4 million, on an attribution method based on the discounted cash flows of the model over an estimated useful life of 11 years. Customer Relationships We recorded the customer relationships intangible separately from goodwill based on determination of the length, strength and contractual nature of the relationship that CHeKT shared with its customers. We valued the single group of customer relationships using the with-and-without method, an income approach. The significant assumptions used in the income approach include estimates about future expected cash flows from customer contracts and the discount rate. We are amortizing the customer relationships, valued at $ 0.5 million, on a straight-line basis over an estimated useful life of three years . 111 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 Trade Names We valued the trade names acquired using a relief from royalty method. The significant assumptions used in the income approach include future expected cash flows from the trade name, the royalty rate and the discount rate. We are amortizing the trade names, valued at $ 0.8 million, on an attribution basis derived from the discounted cash flows of the model over an estimated useful life of seven years . Redeemable Noncontrolling Interest We have a redeemable noncontrolling interest related to our 81 % equity ownership interest in CHeKT. The CHeKT stockholder agreement contains a put option that gives the minority CHeKT stockholders the right to sell their remaining 19 % equity ownership interest to us based on the fair value of the shares and also contains a call option that gives us the right to purchase the remaining CHeKT shares from the minority CHeKT stockholders based on the fair value of the shares. The put and call options can each be exercised beginning in the first quarter of 2028. This redeemable noncontrolling interest was recorded at fair value on February 10, 2025, by applying the income approach using unobservable inputs for projected cash flows, including projected financial results and a discount rate, which are considered Level 3 inputs. This redeemable noncontrolling interest is considered temporary equity and we report it between liabilities and stockholders’ equity in the consolidated balance sheets. The redemption value of the CHeKT noncontrolling interest was $ 6.4 million as of February 10, 2025 and $ 6.3 million as of December 31, 2025. Business Combinations in Operations - CHeKT The operations of the CHeKT business combination discussed above were included in the consolidated financial statements as of the acquisition date. The pro forma information as well as the revenue and net income of the business combination were not material to the consolidated financial statements for the year ended December 31, 2025. Acquisition of a Business – EBS On January 18, 2023, one of our wholly-owned subsidiaries acquired 100 % of the issued and outstanding shares of capital stock of EBS Spółka z ograniczoną odpowiedzialnością, or EBS, an international producer of universal smart communicator devices, headquartered in Warsaw, Poland. We believe this acquisition will assist in the continued expansion of our international operations as well as benefit our supply chain operations. In consideration for the purchase of EBS, we paid $ 9.8 million in cash on January 18, 2023, after deducting $ 2.2 million related to agreed holdback provisions. The holdback was fully paid by the third quarter of 2024. An earn-out up to an additional $ 2.5 million is payable if certain performance targets are met, which was initially recorded at the acquisition date fair value of $ 2.0 million. The acquisition was accounted for as a business combination within our Alarm.com segment. The purchase price allocation was finalized during the third quarter of 2023. The overall impacts to our consolidated financial statements were not considered material during the year of the acquisition. Note 8. Goodwill and Intangible Assets, Net The changes in goodwill by reportable segment are outlined below (in thousands): Alarm.com Other Total Balance as of January 1, 2024 $ 154,498 $ — $ 154,498 Foreign currency translation adjustment ( 287 ) — ( 287 ) Balance as of December 31, 2024 154,211 — 154,211 Goodwill acquired 23,579 48,156 71,735 Measurement period adjustment ( 91 ) ( 1,767 ) ( 1,858 ) Foreign currency translation adjustment 899 — 899 Balance as of December 31, 2025 $ 178,598 $ 46,389 $ 224,987 On February 10, 2025, we acquired 81 % of the issued and outstanding shares of capital stock of CHeKT and initially recorded $ 23.6 million of goodwill in the Alarm.com segment. On August 15, 2025, we acquired 100 % of the issued and outstanding shares of capital stock of BTR and initially recorded $ 3.1 million of goodwill in the Other segment. On November 21, 2025, we acquired 100 % of the issued and outstanding shares of capital stock of RGS and recorded $ 45.1 million of goodwill in the Other segment. The goodwill related to the acquisitions of CHeKT, BTR and RGS reflects the value of acquired workforce and synergies we expect to achieve from integrating these acquisitions into our existing solutions. The 2025 measurement period 112 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 adjustments related to the CHeKT and BTR working capital and tax adjustments during the year ended December 31, 2025. There were no impairments of goodwill recorded during the years ended December 31, 2025, 2024 or 2023. As of December 31, 2025, the accumulated balance of goodwill impairments was $ 4.8 million, which is related to our acquisition of EnergyHub in 2013. The following table reflects changes in the net carrying amount of the components of intangible assets (in thousands): Customer Relationships Developed Technology Trade Name Capitalized Software Development Costs Other Total Balance as of January 1, 2024 $ 39,294 $ 37,174 $ 1,217 $ 879 $ — $ 78,564 Intangible assets acquired — 1,585 — — 46 1,631 Capitalized software development costs — — — 1,798 — 1,798 Amortization ( 9,669 ) ( 8,216 ) ( 717 ) ( 232 ) — ( 18,834 ) Balance as of December 31, 2024 29,625 30,543 500 2,445 46 63,159 Intangible assets acquired 34,120 18,398 1,058 — — 53,576 Capitalized software development costs — — — 1,354 — 1,354 Amortization ( 8,721 ) ( 9,320 ) ( 256 ) ( 440 ) — ( 18,737 ) Balance as of December 31, 2025 $ 55,024 $ 39,621 $ 1,302 $ 3,359 $ 46 $ 99,352 We recorded $ 19.4 million, $ 18.6 million and $ 19.3 million of amortization related to our intangible assets for the years ended December 31, 2025, 2024 and 2023, respectively. There were no impairments of long-lived intangible assets during the years ended December 31, 2025, 2024 and 2023. During the year ended December 31, 2024, $ 0.3 million of fully amortized developed technology intangible assets previously acquired were written-off in the Alarm.com segment as the technology was no longer in use. The following tables reflect the weighted-average remaining life and carrying value of finite-lived intangible assets (in thousands, except weighted-average remaining life): December 31, 2025 Gross Carrying Amount Accumulated Amortization Net Carrying Value Weighted- Average Remaining Life (in years) Customer relationships $ 162,400 $ ( 107,376 ) $ 55,024 10.8 Developed technology 89,714 ( 50,093 ) 39,621 5.2 Trade name 5,532 ( 4,230 ) 1,302 5.0 Capitalized software development costs 4,034 ( 675 ) 3,359 3.8 Other 46 — 46 5.0 Total intangible assets $ 261,726 $ ( 162,374 ) $ 99,352 8.3 December 31, 2024 Gross Carrying Amount Accumulated Amortization Net Carrying Value Weighted- Average Remaining Life (in years) Customer relationships $ 128,280 $ ( 98,655 ) $ 29,625 5.3 Developed technology 71,316 ( 40,773 ) 30,543 4.0 Trade name 4,474 ( 3,974 ) 500 2.9 Capitalized software development costs 2,680 ( 235 ) 2,445 3.7 Other 46 — 46 5.0 Total intangible assets $ 206,796 $ ( 143,637 ) $ 63,159 4.6 113 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 The following table reflects the future estimated amortization expense for intangible assets (in thousands): Year Ended December 31, Amortization 2026 $ 23,448 2027 20,325 2028 14,550 2029 7,683 2030 6,498 2031 and thereafter 26,848 Total future amortization expense $ 99,352 Note 9. Investments in Unconsolidated Entities Investment in Protegger Luxembourg S.à r.l, or Pronet On November 20, 2025, we paid $ 30.1 million in cash to purchase 20.3 % of the outstanding shares of Pronet. We do not have a controlling financial interest in Pronet, but based on the legal form of Pronet, our level of ownership and our extent of influence, we concluded that this equity investment in Pronet, 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. As of December 31, 2025, the carrying value of our equity investment in Pronet did not exceed our share of Pronet's net assets. We are not obligated to fund losses of Pronet, when applicable. Investments in Safe Haven Security Services, LLC, or Safe Haven, and All Access Holdings, LLC, or All Access 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. 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 our 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. As of December 31, 2025, the carrying value of our equity investments in Safe Haven and All Access exceeded our share of Safe Haven's and All Access' net assets primarily due to trade name intangible assets, customer relationship intangible assets and goodwill. Trade names and customer relationships are definite-lived intangible assets and are amortized on an attribution method based on the projected discounted cash flows over useful lives ranging from nine years to 14 years. We are not obligated to fund losses of Safe Haven or All Access, when applicable. Investment in SafeStreets USA, LLC, or SafeStreets On April 28, 2025, we paid $ 29.1 million in cash to purchase 24.7 % of the outstanding shares of SafeStreets. We do not have a controlling financial interest in SafeStreets, but based on the legal form of SafeStreets, our level of ownership and our extent of influence, we concluded that this equity investment in SafeStreets, 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. As of December 31, 2025, the carrying value of our equity investment in SafeStreets exceeded our share of SafeStreets' net assets primarily due to trade name intangible assets, customer relationship intangible assets and goodwill. Trade names and customer relationships are definite-lived intangible assets and are amortized on an attribution method based on the projected discounted cash flows over their useful lives of 10 years and 11 years, respectively. We are not obligated to fund losses of SafeStreets, when applicable. Investment in a Hardware Supplier In October 2018, we entered into a subordinate convertible promissory note with one of our hardware suppliers. In July 2019, we converted the outstanding notes receivable balance of $ 5.6 million into 9,520,832 shares of Series B preferred stock in the hardware supplier. We concluded that the $ 5.6 million equity investment, which is included in the Alarm.com segment, does not meet the criteria for consolidation and will be accounted for using the measurement alternative. Under the alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted for observable price changes 114 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 from orderly transactions for identical or similar investments. As of December 31, 2025 and 2024, our investment in the hardware supplier was $ 5.6 million. Investments in Technology Partners In February 2021, we paid $ 5.0 million in cash to purchase 1,000,000 shares of Series B-2 Preferred Stock from a technology partner as part of a financing round that included other investors. The $ 5.0 million equity investment, which is included in the Alarm.com segment, does not meet the criteria for consolidation and is accounted for using the measurement alternative. Under the measurement alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments. As of December 31, 2025 and 2024, our investment in the technology partner was $ 5.7 million. In December 2022, we paid $ 5.1 million in cash to another technology partner to purchase 4,231,717 shares of its Series A Preferred Stock. The $ 5.1 million equity investment, which is included in the Alarm.com segment, does not meet the criteria for consolidation and is accounted for using the measurement alternative. As of December 31, 2025 and 2024, our investment in the technology partner was $ 5.1 million. In December 2023, we paid $ 1.5 million to another technology partner as part of a Simple Agreement for Future Equity, or SAFE. We paid an additional $ 1.5 million during both May 2024 and December 2024 to the same technology partner via a SAFE for a total investment of $ 4.5 million. On June 11, 2025, the $ 4.5 million SAFE was converted into shares of Series B preferred stock representing 25.9 % of the outstanding shares of the technology partner. Our preferred stock provides us with a liquidation preference that is considered substantive. Accordingly, our equity ownership interest is not considered in-substance common stock. We concluded that the equity investment in the technology partner, which is included in the Alarm.com segment, does not meet the criteria for consolidation and will be accounted for under the measurement alternative. Under the measurement alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments. As of December 31, 2025 and 2024, our investment in the technology partner was $ 4.5 million. Summary of Investments in Unconsolidated Entities Our investments in unconsolidated entities are as follows (in thousands): December 31, 2025 December 31, 2024 Ownership Percentage Carrying Value Excess Carrying Value of Investment Over Proportionate Share of Net Assets Carrying Value Excess Carrying Value of Investment Over Proportionate Share of Net Assets Safe Haven and All Access 32.5 % $ 141,205 $ 143,134 $ — $ — SafeStreets 24.7 % 29,436 31,144 — — Pronet 20.3 % 30,142 — — — Other unconsolidated entities 26,148 707 17,170 733 Total $ 226,931 $ 174,985 $ 17,170 $ 733 Equity method income from our investments in unconsolidated entities are as follows (in thousands): Year Ended December 31, 2025 2024 Income from equity method investments, net $ 2,642 $ 133 Other related party transactions and balances outstanding with our equity method investees for activity subsequent to our 115 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 investments are as follows (in thousands): Year Ended December 31, 2025 2024 Revenue from equity method investees $ 17,411 $ 39 Interest income from equity method investees 1,096 2 Distributions received from equity method investees 7,763 — December 31, 2025 December 31, 2024 Outstanding principal from loans to equity method investees $ 21,947 $ 145 Interest receivable from equity method investees 381 — Accounts receivable from equity method investees 1,774 82 Total amounts receivable from equity method investees $ 24,102 $ 227 Summarized Financial Information Summarized financial information for all of our equity method investees in the aggregate for the periods during which we held an equity method investment are as follows (in thousands): Statement of Operations Year Ended December 31, 2025 2024 Revenue $ 730,488 $ 1,565 Gross profit 300,352 688 Operating income 106,050 ( 176 ) Net income 64,131 ( 332 ) Net income attributable to the equity method investees 64,131 ( 332 ) Balance Sheet December 31, 2025 December 31, 2024 Current assets $ 107,854 $ 470 Noncurrent assets 548,486 1 Current liabilities 150,650 267 Noncurrent liabilities 209,872 239 Note 10. Other Assets Loan to SafeStreets On January 30, 2025, we entered into a senior secured loan agreement with SafeStreets, 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 SafeStreets. 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. As of December 31, 2025, $ 21.5 million of principal was outstanding from SafeStreets under the loan agreement. Loan to a Distribution Partner In December 2022, we amended a subordinated credit agreement with the Affiliate. The amended subordinated credit agreement with the Affiliate matures on June 18, 2027, and interest on the outstanding principal balance accrues at a rate of 12.0 % per annum and is payable in kind. In March 2024, the Affiliate was in default on a loan arrangement with one of its third party secured lenders. Based on this information from the Affiliate, during the three months ended March 31, 2024, we recorded a credit loss expense of $ 4.0 million in general and administrative expense and recorded a reduction to our interest income of 116 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 $ 0.5 million related to the reversal of payable in kind interest associated with the subordinated credit agreement. We placed this loan in nonaccrual status and recorded a full allowance for credit losses for this note receivable as of March 31, 2024. During the three months ended June 30, 2024, we wrote off the entire $ 4.0 million outstanding note receivable balance that originated in 2017 and reversed the previously recorded allowance for credit losses. For the years ended December 31, 2025, 2024 and 2023, we recognized $ 1.8 million, $ 2.6 million and $ 3.0 million of revenue from the distribution partner associated with this loan, respectively. Loan to a Service Provider Partner In July 2020, we entered into a loan agreement with a service provider partner, under which we agreed to loan the service provider partner up to $ 2.5 million, collateralized by the assets of the service provider partner. Interest on the outstanding principal accrues at a rate per annum equal to 9.0 % and monthly interest and principal payments began in April 2021. The maturity date of the loan was July 24, 2025. In July 2025, we learned that this service provider partner may have a lien placed on its property that may have a priority over our security interest. Based on the information provided by the service provider partner, during the three months ended June 30, 2025, we recorded a credit loss expense of $ 0.7 million in general and administrative expense and we placed this loan in nonaccrual status as of June 30, 2025. As of December 31, 2025 and 2024, $ 0.9 million and $ 1.0 million of principal was outstanding from the service provider partner under the loan agreement. For each of the years ended December 31, 2025, 2024 and 2023, we recognized $ 0.1 million, $ 0.2 million and $ 0.2 million of revenue from the service provider partner associated with this loan, respectively. Allowance for Credit Losses - Notes Receivable The changes in our allowance for credit losses for notes receivable are as follows (in thousands): Year Ended December 31, 2025 Year Ended December 31, 2024 Beginning of period balance $ ( 1 ) $ ( 5 ) Provision for expected credit losses ( 748 ) ( 3,996 ) Write-offs — 4,000 End of period balance $ ( 749 ) $ ( 1 ) We manage our notes receivables using delinquency as a key credit quality indicator. The following tables reflect the current and delinquent notes receivable by class of financing receivables and by year of origination (in thousands): December 31, 2025 Loan Receivables: 2025 2024 2023 2022 2021 Prior Total Current $ 22,600 $ 500 $ 447 $ 1,500 $ — $ — $ 25,047 30-59 days past due — — — — — — — 60-89 days past due — — — — — — — 90-119 days past due — — — — — — — 120+ days past due — — — — — 943 943 Total $ 22,600 $ 500 $ 447 $ 1,500 $ — $ 943 $ 25,990 December 31, 2024 Loan Receivables: 2024 2023 2022 2021 2020 Prior Total Current $ 500 $ 146 $ 1,500 $ — $ 993 $ — $ 3,139 30-59 days past due — — — — — — — 60-89 days past due — — — — — — — 90-119 days past due — — — — — — — 120+ days past due — — — — — — — Total $ 500 $ 146 $ 1,500 $ — $ 993 $ — $ 3,139 117 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 There was one note receivable placed on nonaccrual status as of December 31, 2025 and no notes receivable placed on nonaccrual status as of December 31, 2024. During the years ended December 31, 2025, 2024 and 2023, there was no interest income recognized related to notes receivables that were in nonaccrual status. As of December 31, 2025, there was $ 0.2 million of notes receivable placed in nonaccrual status for which there was not a related allowance for credit losses. As of December 31, 2024, there were no notes receivable placed in nonaccrual status for which there was not a related allowance for credit losses. As of December 31, 2025 and 2024, there were no notes receivables that were 90 days or greater past due for which we continued to accrue interest income. Prepaid Expenses As of December 31, 2025 and 2024, $ 19.4 million and $ 16.1 million of prepaid expenses were included in other current assets, respectively, primarily related to software licenses, insurance and long lead-time parts related to our inventory. Note 11. Fair Value Measurements The following tables present our assets and liabilities measured at fair value on a recurring basis (in thousands): Fair Value Measurements on a Recurring Basis Level 1 Level 2 Level 3 Total Assets: Money market accounts as of December 31, 2025 $ 941,134 $ — $ — $ 941,134 Money market accounts as of December 31, 2024 1,209,474 — — 1,209,474 Equity securities with readily determinable fair value as of December 31, 2025 14,858 — — 14,858 Equity securities with readily determinable fair value as of December 31, 2024 7,425 — — 7,425 Liabilities: Contingent consideration liability from acquisition as of December 31, 2025 $ — $ — $ 1,223 $ 1,223 Contingent consideration liability from acquisition as of December 31, 2024 — — 2,169 2,169 The following table summarizes the change in fair value of the Level 3 contingent consideration liability with significant unobservable inputs (in thousands): Year Ended December 31, 2025 2024 2023 Beginning of period balance $ 2,169 $ 2,061 $ — Acquired liabilities — — 1,993 Performance target achievement payment ( 1,266 ) — — Changes in fair value included in earnings 320 108 68 End of period balance $ 1,223 $ 2,169 $ 2,061 As of December 31, 2025, $ 933.0 million of our money market accounts was included in cash and cash equivalents, $ 6.1 million was included in other assets and $ 2.0 million was included in other current assets in our consolidated balance sheets. As of December 31, 2024, $ 1.2014 billion of our money market accounts was included in cash and cash equivalents, $ 6.2 million was included in other assets and $ 1.9 million was included in other current assets in our consolidated balance sheets. Our assets from money market accounts are valued using quoted prices in active markets. Our equity securities with readily determinable fair value represent our investments in publicly traded companies, which are valued using quoted prices in active markets. During the year ended December 31, 2025, we recorded a gain on publicly traded equity securities within our treasury portfolio of $ 4.7 million. During the year ended December 31, 2024, we recorded a loss on publicly traded equity securities within our treasury portfolio of less than $ 0.1 million. Our investments in public entities are recorded at fair value within other current assets in our consolidated balance sheets and changes in fair value of the investments are recorded within other income / (expense), net within our consolidated statements of operations. See Note 14 for the carrying amount and estimated fair value of our convertible senior notes as of December 31, 2025 and 2024. The contingent consideration liability consists of the potential earn-out payment related to our acquisition of 100 % of the issued and outstanding capital stock of EBS on January 18, 2023. The earn-out payment is contingent on the satisfaction of two performance targets related to the integration of EBS's hardware into the Alarm.com platform by December 31, 2026, and has a 118 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 maximum potential payment of up to $ 2.5 million. We account for the contingent consideration using fair value and established a liability for the future earn-out payment based on an estimation of the probability of the future achievement of the performance targets. The contingent consideration liability was valued with Level 3 unobservable inputs, including the probability of expected achievement of the performance targets. At January 18, 2023, the fair value of the liability was $ 2.0 million. At each reporting date until December 31, 2026, or the achievement of the performance targets, we will remeasure the liability, using the same valuation approach. The fair value of the contingent consideration liability is included within accounts payable, accrued expenses and other current liabilities within our consolidated balance sheets. Changes in fair value resulting from information that existed subsequent to the acquisition date are recorded in general and administrative expense in the consolidated statements of operations. One of the performance targets was achieved during the year ended December 31, 2025, and the related payment of $ 1.3 million was made during the second quarter of 2025. The unobservable inputs used in the valuation for the remaining performance target as of December 31, 2025 included an expected achievement percentage of 100 %. The valuation also included a weighted average discount rate of 4.9 %, weighted by the probability of achievement of the performance targets at various dates, including a range of 4.9 % to 5.0 %. Selecting another probability of expected achievement or discount rate within an acceptable range would not result in a significant change to the fair value of the contingent consideration liability. We monitor the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. There were no transfers into or out of Level 3 during the years ended December 31, 2025, 2024 and 2023. There were no reclassifications between levels of the fair value hierarchy during the years ended December 31, 2025, 2024 and 2023. Note 12. Leases As of December 31, 2025, we leased office space, data centers and office equipment under non-cancelable operating leases with various expiration dates through 2034. In August 2014, we signed a lease for office space in Tysons, Virginia where we relocated our corporate headquarters to in February 2016. We have subsequently entered into amendments to this lease to provide us with additional office space as well as tenant improvement allowances. In August 2024, we entered into an amendment to the lease for our corporate headquarters, which extends the term of our existing leased office space to 2034 and includes two successive five-year renewal options. Additionally, the amendment provides for additional office space, parking spaces and tenant improvement allowances. Supplemental information related to leases is presented in the table below (in thousands, except weighted-average term and discount rate): Year Ended December 31, 2025 2024 2023 Operating lease cost $ 15,381 $ 13,084 $ 11,484 Cash paid for amounts included in the measurement of operating lease liabilities 9,864 12,467 13,947 Operating lease right-of-use assets obtained in exchange for new operating lease liabilities 7,650 38,872 5,262 During the years ended December 31, 2025, 2024 and 2023, we received cash incentives from our landlord of $ 4.5 million, zero , and $ 0.4 million, respectively, as reimbursement for tenant improvements. December 31, 2025 December 31, 2024 Weighted-average remaining lease term — operating leases 7.1 years 7.8 years Weighted-average discount rate — operating leases 8.1 % 8.2 % 119 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 Maturities of lease liabilities are as follows (in thousands): Year Ended December 31, Operating Leases (1) 2026 $ 14,297 2027 14,594 2028 13,605 2029 11,974 2030 11,343 2031 and thereafter 37,147 Total lease payments 102,960 Less: imputed interest (2) 26,827 Present value of lease liabilities $ 76,133 ____________________ (1) Operating lease payments exclude $ 4.4 million of legally binding minimum lease payments for leases executed but not yet commenced. There are no options to extend lease terms that were reasonably certain of being exercised included in these balances. (2) Imputed interest was calculated using the incremental borrowing rate applicable for each lease. Note 13. Liabilities The components of accounts payable, accrued expenses and other current liabilities are as follows (in thousands): December 31, 2025 December 31, 2024 Accounts payable $ 22,200 $ 65,615 Accrued expenses 51,360 29,443 Income taxes payable 1,785 28,045 Holdback and working capital liabilities from business combinations, asset acquisitions and investments in unconsolidated entities 13,713 — Contingent consideration liability from acquisition 1,223 1,216 Other current liabilities 16,914 15,108 Accounts payable, accrued expenses and other current liabilities $ 107,195 $ 139,427 The components of other liabilities are as follows (in thousands): December 31, 2025 December 31, 2024 Contingent consideration liability from acquisition $ — $ 953 Other liabilities 11,735 14,526 Other liabilities $ 11,735 $ 15,479 Note 14. Debt, Commitments and Contingencies The debt, commitments and contingencies described below would require us, or our subsidiaries, to make payments to third parties under certain circumstances. Convertible Senior Notes - 2026 Notes On January 20, 2021, we issued $ 500.0 million aggregate principal amount of 0 % convertible senior notes due January 15, 2026, in a private placement to qualified institutional buyers, or the 2026 Notes. The terms of the 2026 Notes are governed by an Indenture, or the 2026 Indenture, by and between Alarm.com Holdings, Inc. and U.S. Bank National Association, as trustee. The 2026 Notes are senior unsecured obligations that do not bear regular interest and the principal amount of the 2026 Notes will not accrete. The 2026 Notes may bear special interest under specified circumstances related to our failure to comply with our reporting obligations under the 2026 Indenture. Special interest, if any, will be payable semiannually in arrears on January 15 and July 15 of each year, beginning on July 15, 2021. We received proceeds from the issuance of the 2026 Notes of $ 484.3 million, net of $ 15.7 million of transaction fees and other debt issuance costs. 120 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 We may redeem for cash, all or any portion of the 2026 Notes, at our option, on or after January 20, 2024, at a redemption price equal to 100 % of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date, if the last reported sale price of our common stock has been at least 130 % of the conversion price for the 2026 Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. No sinking fund is provided for the 2026 Notes. The 2026 Notes were convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding August 15, 2025, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the 2026 Notes on each applicable trading day; (2) during the five business day period immediately after any 10 consecutive trading day period in which, for each trading day of that period, the trading price per $1,000 principal amount of 2026 Notes for such trading day was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate for the 2026 Notes on each such trading day; (3) if we call any or all of the 2026 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the 2026 Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events as set forth in the 2026 Indenture. On or after August 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2026 Notes, holders of the 2026 Notes could have converted all or any portion of their 2026 Notes at any time, regardless of the foregoing conditions. Upon conversion, prior to August 15, 2025, we had the ability to satisfy our conversion obligation by paying or delivering, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. It was our intent to settle the principal amount of the 2026 Notes with cash. On or after August 15, 2025, we must pay cash to satisfy the principal portion of our conversion obligation and must deliver shares to satisfy any excess conversion value. The initial conversion rate for the 2026 Notes is 6.7939 shares of our common stock per $1,000 principal amount of 2026 Notes, which is equivalent to an initial conversion price of $ 147.19 per share of our common stock, subject to adjustment under certain circumstances in accordance with the terms of the 2026 Indenture. In addition, following certain corporate events that occur prior to the maturity date of the 2026 Notes or if we deliver a notice of redemption in respect of the 2026 Notes, we will, under certain circumstances, increase the conversion rate of the 2026 Notes for a holder who elects to convert its 2026 Notes (or any portion thereof) in connection with such a corporate event or convert its 2026 Notes called (or deemed called) for redemption during the related redemption period (as defined in the 2026 Indenture), as the case may be. If we undergo a fundamental change (as defined in the 2026 Indenture), subject to certain exceptions and except as described in the 2026 Indenture, holders may require us to repurchase for cash all or any portion of their 2026 Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date. The 2026 Indenture includes customary covenants and sets forth certain events of default after which the 2026 Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving us after which the 2026 Notes become automatically due and payable. We used some of the proceeds to repay the $ 110.0 million outstanding principal balance under our credit facility and also used some of the proceeds to pay accrued interest, fees and expenses related to our credit facility, which was terminated effective January 20, 2021. We are using the remaining net proceeds from the issuance of the 2026 Notes for working capital and other general corporate purposes, which may include acquisitions or strategic investments in complementary businesses or technologies. We account for the 2026 Notes as a liability. The debt issuance costs are presented as a deduction from the outstanding principal balance of the 2026 Notes and are amortized to interest expense using the effective interest method over the contractual term of the 2026 Notes at a rate of 0.6 %. As of December 31, 2025 and 2024, the fair value of our 2026 Notes was $ 499.1 million and $ 473.8 million, respectively. The fair value was determined based on the quoted price of the 2026 Notes in an inactive market on the last traded day of the quarter and has been classified as Level 2 in the fair value hierarchy. Based on the closing price of our common stock of $ 51.02 on the last trading day of the quarter, the if-converted value of the 2026 Notes did not exceed the principal amount of $ 500.0 million as of December 31, 2025. 121 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 The net carrying amount of the liability component of the 2026 Notes is as follows (in thousands): December 31, 2025 December 31, 2024 Principal $ 500,000 $ 500,000 Unamortized debt issuance costs ( 133 ) ( 3,319 ) Net carrying amount $ 499,867 $ 496,681 Interest expense related to the 2026 Notes is as follows (in thousands): Year Ended December 31, 2025 2024 2023 Amortization of debt issuance costs $ 3,186 $ 3,166 $ 3,145 Total interest expense $ 3,186 $ 3,166 $ 3,145 See Note 21 for details on our payment of the 2026 Notes upon maturity on January 15, 2026. Convertible Senior Notes - 2029 Notes On May 31, 2024, we issued $ 500.0 million aggregate principal amount of 2.25 % convertible senior notes due June 1, 2029, in a private placement to qualified institutional buyers, or the 2029 Notes. The terms of the 2029 Notes are governed by an Indenture, or the 2029 Indenture, by and between Alarm.com Holdings, Inc. and U.S. Bank Trust Company, National Association, as trustee. The 2029 Notes are senior unsecured obligations that bear interest at a rate of 2.25 % per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024, and the principal amount of the 2029 Notes will not accrete. We received proceeds from the issuance of the 2029 Notes of $ 485.2 million, net of $ 14.8 million of transaction fees and other debt issuance costs. We may redeem for cash, all or any portion of the 2029 Notes (subject to the partial redemption limitation described below), at our option, on or after June 7, 2027, at a redemption price equal to 100 % of the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, if the last reported sale price of our common stock has been at least 130 % of the conversion price for the 2029 Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. If we redeem less than all the 2029 Notes, at least $ 75.0 million aggregate principal amount of the 2029 Notes must be outstanding and not subject to redemption as of the relevant redemption notice date. No sinking fund is provided for the 2029 Notes. The 2029 Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding January 1, 2029, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2024 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the 2029 Notes on each applicable trading day; (2) during the five business day period immediately after any 10 consecutive trading day period in which, for each trading day of that period, the trading price per $1,000 principal amount of 2029 Notes for such trading day was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate for the 2029 Notes on each such trading day; (3) if we call any or all of the 2029 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the 2029 Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events as set forth in the 2029 Indenture. On or after January 1, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2029 Notes, holders of the 2029 Notes may convert all or any portion of their 2029 Notes at any time, regardless of the foregoing conditions. Upon conversion, we may satisfy our conversion obligation by paying or delivering, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. It is our current intent to settle the principal amount of the 2029 Notes with cash. The initial conversion rate for the 2029 Notes is 11.4571 shares of our common stock per $1,000 principal amount of 2029 Notes, which is equivalent to an initial conversion price of $ 87.28 per share of our common stock, subject to adjustment under certain circumstances in accordance with the terms of the 2029 Indenture. In addition, following certain corporate events that occur prior to the maturity date of the 2029 Notes or if we deliver a notice of redemption in respect of some or all of the 2029 Notes, we will, under certain circumstances, increase the conversion rate of the 2029 Notes for a holder who elects to convert its 2029 Notes (or any portion thereof) in connection with 122 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 such a corporate event or convert its 2029 Notes called (or deemed called) for redemption during the related redemption period (as defined in the 2029 Indenture), as the case may be. If we undergo a fundamental change (as defined in the 2029 Indenture), subject to certain exceptions and except as described in the 2029 Indenture, holders may require us to repurchase for cash all or any portion of their 2029 Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the 2029 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The 2029 Indenture includes customary covenants and sets forth certain events of default after which the 2029 Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving us after which the 2029 Notes become automatically due and payable. We used $ 63.1 million of the net proceeds from the 2029 Notes to pay the cost of the capped call transactions described below and used $ 75.0 million to repurchase 1,117,068 shares of our common stock concurrently with the pricing of the 2029 Notes, which was separately authorized by our board of directors. We are using the remaining net proceeds from the issuance of the 2029 Notes for general corporate purposes, which may include acquisitions or strategic investments in complementary businesses or technologies, other repurchases of our common stock, and for working capital, operating expenses and capital expenditures. We account for the 2029 Notes as a liability. The debt issuance costs are presented as a deduction from the outstanding principal balance of the 2029 Notes and are amortized to interest expense using the effective interest method over the contractual term of the 2029 Notes at a rate of 2.9 %. As of December 31, 2025 and 2024, the fair value of our 2029 Notes was $ 477.3 million and $ 496.7 million, respectively. The fair value was determined based on the quoted price of the 2029 Notes in an inactive market on the last traded day of the quarter and has been classified as Level 2 in the fair value hierarchy. Based on the closing price of our common stock of $ 51.02 on the last trading day of the quarter, the if-converted value of the 2029 Notes did not exceed the principal amount of $ 500.0 million as of December 31, 2025. The net carrying amount of the liability component of the 2029 Notes is as follows (in thousands): December 31, 2025 December 31, 2024 Principal $ 500,000 $ 500,000 Unamortized debt issuance costs ( 10,359 ) ( 13,204 ) Net carrying amount $ 489,641 $ 486,796 Interest expense related to the 2029 Notes is as follows (in thousands): Year Ended December 31, 2025 2024 Interest expense $ 11,250 $ 6,593 Amortization of debt issuance costs 2,845 1,630 Total interest expense $ 14,095 $ 8,223 Capped Call – 2029 Notes In connection with the offering of the 2029 Notes, we entered into privately negotiated capped call transactions with one of the initial purchasers and certain other financial institutions, at a cost of $ 63.1 million. The capped call transactions cover, subject to customary adjustments substantially similar to those applicable to the 2029 Notes, the number of shares of our common stock initially underlying the 2029 Notes. The cap price of the capped call transactions is initially $ 134.28 per share of our common stock, which represents a premium of 100% over the closing price of our common stock on the Nasdaq Global Select Market on May 28, 2024, and is subject to certain adjustments under the terms of the capped call transactions. The exercise price is $ 87.28 per share of common stock, subject to customary anti-dilution adjustments that mirror corresponding adjustments for the 2029 Notes. We elected to integrate the capped call options with the 2029 Notes for federal income tax purposes pursuant to applicable U.S. Treasury Regulations. Accordingly, the $ 63.1 million cost of the purchased capped calls will be deductible for income tax purposes. The original issue discount is accreted over the term of the 2029 Notes. 123 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 The capped call transactions are generally expected to reduce the potential dilution to holders of our common stock upon any conversion of the 2029 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2029 Notes, as the case may be, with such reduction and/or offset subject to a cap. As the capped call options are both legally detachable and separately exercisable from the 2029 Notes, we account for the capped call options separately from the 2029 Notes. The capped call options are indexed to our own common stock and classified in stockholders’ equity. As such, the premiums paid for the capped call options were included as a net reduction to additional paid-in capital in the consolidated balance sheets. The capped call transactions will not be remeasured as long as they continue to meet the conditions for equity classification. Acquired Debt - EBS On January 18, 2023, one of our wholly-owned subsidiaries acquired 100 % of the issued and outstanding shares of capital stock of EBS. As part of this acquisition we acquired $ 2.9 million of outstanding debt, which had decreased to zero as of December 31, 2023. Commitments and Contingencies Indemnification Agreements We have various agreements that may obligate us to indemnify the other party to the agreement with respect to certain matters. Generally, these indemnification provisions are included in contracts arising in the normal course of business. Although we cannot predict the maximum potential amount of future payments that may become due under these indemnification agreements, we do not believe any potential liability that might arise from such indemnity provisions is probable or material. Legal Proceedings On January 10, 2022, EcoFactor, Inc., or EcoFactor, filed a lawsuit against us in U.S. District Court, District of Oregon, alleging Alarm.com’s products and services directly and indirectly infringe five U.S. patents owned by EcoFactor. EcoFactor is seeking a permanent injunction, enhanced damages and attorneys' fees. EcoFactor had previously asserted two of the same patents against us in an October 2019 complaint with the U.S. International Trade Commission, or ITC. In July 2021, the ITC found in favor of Alarm.com. EcoFactor appealed the decision but withdrew its appeal in December 2021. We moved to dismiss the Oregon case for failure to state a claim on March 28, 2022. On April 18, 2022, the district court stayed the case at the request of the parties pending the disposition of other proceedings involving the asserted patents. These proceedings include four ex parte reexamination proceedings at the U.S. Patent and Trademark Office and one inter partes review. Three of the patents were found unpatentable in reexamination. The decision with respect to one of the patents was affirmed by the United States Court of Appeals for the Federal Circuit, or Federal Circuit, on January 21, 2026, EcoFactor filed an appeal of the decision with respect to the second patent with the Federal Circuit on November 20, 2025, and EcoFactor is appealing the rejection of the third patent to the Patent Trial and Appeal Board, or PTAB, having filed its appeal brief on June 10, 2024. Ex parte reexamination of a fourth patent concluded on August 23, 2023 after the claims were amended. On April 18, 2022, all claims of a fifth patent were found unpatentable by the PTAB in inter partes review, and all claims were canceled on February 1, 2024. Should EcoFactor prevail in its lawsuit we could be required to pay damages and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us. While we believe we have valid defenses to EcoFactor’s claims, the outcome of these legal claims cannot be predicted with certainty and any of these outcomes could result in an adverse effect on our business. Based on currently available information, we have determined a loss is not probable or reasonably estimable at this time. On July 22, 2021, Causam Enterprises, Inc., or Causam, filed a lawsuit against us in U.S. District Court, Western District of Texas, alleging that Alarm.com’s smart thermostats infringe four U.S. patents owned by Causam. Causam is seeking preliminary and permanent injunctions, enhanced damages and attorneys’ fees. Causam had previously asserted the same four patents against us in a July 2021 complaint with the ITC. In February 2023, the ITC found in favor of Alarm.com and Causam’s appeal of the decision with respect to one patent was dismissed as moot on October 15, 2025 based on the Federal Circuit’s affirmance, on the same day, of a PTAB decision that found the patent at issue in the appeal is invalid. Separately, the Federal Circuit affirmed a PTAB decision finding a second of the asserted patents invalid on September 5, 2025. Before we responded to Causam’s district court complaint, the court issued a stay of the case until the ITC investigation was finally resolved. Now that the appeal proceedings have been completed in the ITC investigation, Causam may seek to pursue the district court lawsuit. Should Causam choose to pursue the district court lawsuit, and prevail, then we could be required to pay damages and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us. While we believe we have valid defenses to Causam’s claims, the outcome of these legal claims cannot be predicted with certainty, and any of these outcomes could result in an 124 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 adverse effect on our business. Based on currently available information, we have determined a loss is not probable or reasonably estimable at this time. On July 3, 2025, SkyBell Technologies, Inc., or SkyBell, filed a lawsuit against us in U.S. District Court, Eastern District of Virginia, alleging that Alarm.com misappropriated SkyBell’s trade secrets relating to video doorbells. SkyBell is seeking injunctive relief, enhanced damages, attorneys’ fees, a constructive trust, and an order that Alarm.com assign to SkyBell the alleged trade secrets. On August 25, 2025, we moved to dismiss the complaint as barred by the statute of limitations. Should SkyBell prevail in its lawsuit, we could be required to pay damages and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us, we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us, and we could be required to assign, transfer, and return any SkyBell trade secret that we are found to improperly possess. While we believe we have valid defenses to SkyBell’s claims, the outcome of these legal claims cannot be predicted with certainty, and any of these outcomes could result in an adverse effect on our business. Based on currently available information, we have determined a loss is not probable or reasonably estimable at this time. In addition to the matters described above, we may be required to provide indemnification to certain of our service provider partners for certain claims regarding our solutions. We may also be a party to litigation and subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Other than the preceding matters, we are not a party to any lawsuit or proceeding that, in the opinion of management, is reasonably possible or probable of having a material adverse effect on our financial position, results of operations or cash flows. We reserve for contingent liabilities based on ASC 450, " Contingencies ," when it is determined that a liability, inclusive of defense costs, is probable and reasonably estimable. Litigation is subject to many factors that are difficult to predict, so there can be no assurance that, in the event of a material unfavorable result in one or more claims, we will not incur material costs. Note 15. Stockholders' Equity Authorized shares We are authorized to issue two classes of stock, common stock and preferred stock. On June 9, 2015, the board of directors amended and restated our Amended and Restated Certificate of Incorporation, effective upon the closing of our initial public offering, or IPO, on July 1, 2015, and authorized us to issue up to 300,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock. Common and Preferred Stock As of December 31, 2025 and 2024, there were 53,540,939 and 52,756,077 shares of common stock issued, and 49,630,714 and 49,618,346 shares of common stock outstanding, respectively. As of December 31, 2025 and 2024, there were no preferred shares issued and outstanding. Each outstanding share of common stock is entitled to one vote per share. Stock Repurchase Programs On December 3, 2020, our board of directors authorized a stock repurchase program, under which we were authorized to purchase up to an aggregate of $ 100.0 million of our outstanding common stock during the three-year period ending December 3, 2023. On February 15, 2023, our board of directors authorized the cancellation of the balance under the stock repurchase program ending December 3, 2023, and also authorized a stock repurchase program, effective February 23, 2023, under which we were authorized to purchase up to an aggregate of $ 100.0 million of our outstanding common stock during the two-year period ending February 23, 2025. On May 24, 2024, our board of directors authorized the repurchase of our common stock in connection with the issuance of the 2029 Notes, the cancellation of the balance under the stock repurchase program ending February 23, 2025, 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. 125 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 During the year ended December 31, 2025, we repurchased 772,494 shares of our common stock for $ 41.6 million under the stock repurchase program, effective May 24, 2024. During the year ended December 31, 2024, we repurchased 1,117,068 shares of our common stock for $ 75.0 million concurrently with the pricing of the 2029 Notes, which was separately authorized by our board of directors. During the year ended December 31, 2023, we repurchased 487,918 shares of our common stock under our stock repurchase program that was subsequently canceled effective May 31, 2024 for $ 27.3 million, which includes applicable commissions and fees. We are subject to a 1.0% excise tax on the value of net corporate stock repurchases under the Inflation Reduction Act of 2022. When applicable, the excise tax will be included as part of the cost basis of shares acquired and is presented within stockholders’ equity in the consolidated balance sheets. Shares Withheld As permitted under the terms of the 2025 Plan, we may withhold shares of common stock in connection with the vesting of restricted stock unit awards issued to employees to satisfy applicable tax withholding requirements. These withheld shares are not issued or considered common stock repurchases under our stock repurchase program. We paid $ 3.4 million and $ 2.6 million of tax withholdings related to vesting of restricted stock units during the years ended December 31, 2024 and 2023, respectively. No tax withholdings related to the vesting of restricted stock units were paid during the year ended December 31, 2025. We also utilized the sell-to-cover method in which shares of our restricted stock unit awards were sold into the market on behalf of the employee upon vesting to cover tax withholding liabilities. We may utilize either the withholding method or sell-to-cover method in the future. Note 16. Stock-Based Compensation Stock-based compensation expense is included in the following line items in the consolidated statements of operations (in thousands): Year Ended December 31, 2025 2024 2023 Cost of hardware and other revenue $ — $ 2 $ 5 Sales and marketing 2,441 2,833 3,522 General and administrative 10,474 13,080 13,028 Research and development 20,275 25,327 30,728 Total stock-based compensation expense $ 33,190 $ 41,242 $ 47,283 The following table summarizes the components of non-cash stock-based compensation expense (in thousands): Year Ended December 31, 2025 2024 2023 Stock options $ 3,902 $ 4,237 $ 4,166 Restricted stock units 29,082 36,792 42,924 Employee stock purchase plan 206 213 193 Total stock-based compensation expense $ 33,190 $ 41,242 $ 47,283 Tax (shortfall) / windfall benefit from stock-based awards $ ( 1,025 ) $ 1,829 $ ( 508 ) 2025 Equity Incentive Plan We issue stock options pursuant to our 2025 Plan. The 2025 Plan allows for the grant of stock options to employees and for the grant of nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, or RSUs, performance-based stock awards, and other forms of equity compensation to our employees, directors and non-employee directors. On April 17, 2025, our board of directors adopted, and on June 4, 2025, our stockholders approved, our 2025 Plan. The 2025 Plan provides that (i) no new awards may be granted under the 2015 Equity Incentive Plan, or 2015 Plan, as of June 4, 2025, although awards granted under the 2015 Plan prior to June 4, 2025, will remain outstanding in accordance with their terms and those of the 2015 Plan, and (ii) the shares of common stock that were available for grant under the 2015 Plan but were unissued as of June 4, 2025, became available for issuance pursuant to awards granted under the 2025 Plan. Additionally, no 126 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 further grants may be made under the Amended and Restated 2009 Stock Incentive Plan, or the 2009 Plan. As of December 31, 2025, 10,774,498 shares remained available for future grant under the 2025 Plan. Stock Options Stock options under the 2025 Plan and the 2015 Plan have been granted at exercise prices based on the closing price of our common stock on the date of grant. Stock options under the 2009 Plan were granted at exercise prices as determined by the board of directors to be the fair market value of our common stock. Our stock options generally vest over a five-year period and each option, if not exercised or forfeited, expires on the ten th anniversary of the grant date. Certain stock options granted under the 2025 Plan and previously granted under the 2015 Plan and 2009 Plan may be exercised before the options have vested. Unvested shares issued as a result of early exercise are subject to repurchase by us upon termination of employment or services at the original exercise price. The proceeds from the early exercise of stock options are initially recorded as a current liability and are reclassified to common stock and additional paid-in capital as the awards vest and our repurchase right lapses. There were no unvested shares of common stock outstanding subject to our right of repurchase as of December 31, 2025 and 2024. We did not repurchase any unvested shares of common stock related to early exercised stock options in connection with employee terminations during the years ended December 31, 2025, 2024 and 2023. There were no proceeds from the early exercise of the unvested stock options reflected in accounts payable, accrued expenses and other current liabilities on our consolidated balance sheets as of December 31, 2025 and 2024. We account for stock-based compensation options based on the fair value of the award as of the grant date. We recognize stock-based compensation expense using the accelerated attribution method, net of actual forfeitures, in which compensation cost for each vesting tranche in an award is recognized ratably from the service inception date to the vesting date for that tranche. We value our stock options using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including the risk-free interest rate, expected term, expected stock price volatility and dividend yield. The risk-free interest rate assumption is based upon observed interest rates for constant maturity U.S. Treasury securities consistent with the expected term of our stock options. Beginning upon the first grant of options in 2022, the expected term for options granted is estimated using our historical experience, including information related to options we have granted. The expected volatility for options granted is based on historical volatilities of our stock over the estimated expected term of the stock options. There were 145,500 , 138,750 and 237,400 stock options granted during the years ended December 31, 2025, 2024 and 2023, respectively. We declared and paid dividends in June 2015 in anticipation of our IPO, which we closed on July 1, 2015. Subsequent to the IPO, we do not expect to declare or pay dividends on a recurring basis. As such, we assume that the dividend rate is 0 %. The following table summarizes the assumptions used for estimating the fair value of stock options granted: Year Ended December 31, 2025 2024 2023 Volatility 39.0 - 39.3 % 39.7 - 41.1 % 40.9 - 41.9 % Expected term 5.6 - 5.7 years 5.5 - 5.6 years 5.4 - 5.6 years Risk-free interest rate 3.7 - 4.2 % 3.7 - 4.4 % 3.3 - 4.4 % Dividend rate — % — % — % 127 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 The following table summarizes stock option activity: Number of Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value (in thousands) Outstanding as of December 31, 2024 1,123,860 $ 50.74 5.8 $ 14,974 Granted 145,500 57.29 Exercised ( 120,525 ) 22.21 3,936 Forfeited ( 51,552 ) 66.07 Expired ( 171 ) 11.55 Outstanding as of December 31, 2025 1,097,112 $ 54.02 5.8 $ 5,187 Vested and expected to vest as of December 31, 2025 1,097,112 $ 54.02 5.8 $ 5,187 Exercisable as of December 31, 2025 649,482 $ 50.06 4.2 $ 5,182 The weighted average grant date fair value for our stock options granted during the years ended December 31, 2025, 2024 and 2023 was $ 24.94 , $ 29.16 and $ 23.01 , respectively. The total fair value of stock options vested during the years ended December 31, 2025, 2024 and 2023 was $ 3.8 million, $ 4.2 million and $ 3.3 million, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2025, 2024 and 2023 was $ 3.9 million, $ 9.3 million and $ 5.6 million, respectively. As of December 31, 2025, the total compensation cost related to nonvested awards not yet recognized was $ 5.1 million, which will be recognized over a weighted average period of 2.2 years. Cash received from exercises of stock options was $ 2.7 million, $ 8.3 million and $ 2.0 million during the years ended December 31, 2025, 2024 and 2023, respectively. Restricted Stock Units There was an aggregate of 709,762 , 628,394 and 558,747 RSUs without performance conditions granted to certain of our employees and directors during the years ended December 31, 2025, 2024 and 2023, respectively. There were 25,205 RSUs with performance conditions granted during the year ended December 31, 2025. There were no RSUs with performance conditions granted during the years ended December 31, 2024 and 2023. The time-based RSUs vest over a five-year period from the vesting commencement date, which is generally the grant date. The performance-based RSUs vest when the related performance conditions are met. Vested RSUs include the amount of shares withheld to satisfy tax withholding requirements to be paid by us on behalf of our employees, when applicable. We account for RSUs based on the fair value of the award as of the grant date. We recognize stock-based compensation expense for time-based RSUs using the accelerated attribution method, net of actual forfeitures, in which compensation cost for each vesting tranche in an award is recognized ratably from the grant date to the vesting date for that tranche. The condition for vesting of the RSUs is based on continued employment. We recognize stock-based compensation expense for performance-based RSUs based on management’s determination of the probable outcome of the performance conditions and we record a cumulative adjustment in periods in which there is a change in the estimated number of shares expected to vest. As of December 31, 2025, the total unrecognized compensation expense related to RSUs without performance conditions was $ 53.2 million, which is expected to be recognized over a weighted average period of 2.5 years. As of December 31, 2025, the total unrecognized compensation expense related to RSUs with performance conditions was $ 1.3 million, which is expected to be recognized over a weighted average period of 2.2 years. The following table summarizes RSU activity: RSUs without Performance Conditions RSUs with Performance Conditions Number of RSUs Weighted Average Grant Date Fair Value Aggregate Intrinsic Value (in thousands) Number of RSUs Weighted Average Grant Date Fair Value Aggregate Intrinsic Value (in thousands) Outstanding as of December 31, 2024 1,819,320 $ 64.97 $ 110,615 154,361 $ 80.83 $ 9,385 Granted 709,762 53.15 25,205 49.97 Vested ( 565,058 ) 65.83 31,561 ( 61,895 ) 74.15 3,329 Forfeited ( 184,340 ) 62.31 ( 9,799 ) 85.35 Outstanding as of December 31, 2025 1,779,684 $ 60.25 $ 90,799 107,872 $ 77.05 $ 5,504 Vested and expected to vest as of December 31, 2025 1,779,684 $ 60.25 $ 90,799 55,872 $ 69.82 $ 2,851 128 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 The weighted average grant date fair value for our RSUs without performance conditions granted during the years ended December 31, 2025, 2024 and 2023 was $ 53.15 , $ 65.29 and $ 55.40 , respectively. The weighted average grant date fair value for our RSUs with performance conditions granted during the year ended December 31, 2025 was $ 49.97 . The total fair value of RSUs without performance conditions vested during the years ended December 31, 2025, 2024 and 2023 was $ 37.2 million, $ 37.0 million and $ 45.3 million, respectively. The total fair value of RSUs with performance conditions vested during the years ended December 31, 2025, 2024 and 2023 was $ 4.6 million, $ 2.0 million and $ 3.2 million, respectively. Employee Stock Purchase Plan Our board of directors adopted our 2015 ESPP in June 2015. As of December 31, 2025, 1,831,595 shares have been reserved for future grant under the 2015 ESPP. The 2015 ESPP allows eligible employees to purchase shares of our common stock at 90 % of the fair market value, rounded up to the nearest cent, based on the closing price of our common stock on the purchase date. The maximum number of shares of our common stock that a participant may purchase during any calendar year shall not exceed such number of shares having a fair market value equal to the lesser of $ 15,000 or 10 % of the participant's base compensation for that year. The 2015 ESPP is considered compensatory for purposes of share-based compensation expense due to the 10 % discount on the fair market value of the common stock. An aggregate of 34,449 , 29,946 and 33,639 shares were purchased by employees for the years ended December 31, 2025, 2024 and 2023, respectively, for which we recognized $ 0.2 million of compensation expense during each of those years. Compensation expense is recognized for the amount of the discount, net of actual forfeitures and voluntary withdrawals, over the six-month purchase period. Note 17. Earnings Per Share Basic and Diluted Earnings Per Share The components of basic and diluted earnings per share are as follows (in thousands, except share and per share amounts): Year Ended December 31, Numerator: 2025 2024 2023 Net income $ 131,628 $ 122,513 $ 80,340 Net loss attributable to redeemable noncontrolling interests 946 1,603 703 Net income attributable to common stockholders - basic (A) 132,574 124,116 81,043 Add back total interest expense, net of tax, attributable to convertible senior notes 12,098 8,573 2,367 Net income attributable to common stockholders - diluted (B) $ 144,672 $ 132,689 $ 83,410 Denominator: Weighted average common shares outstanding — basic (C) 49,795,191 49,641,763 49,818,448 Dilutive effect of convertible senior notes, stock options and restricted stock units 9,128,624 8,351,256 4,806,986 Weighted average common shares outstanding — diluted (D) 58,923,815 57,993,019 54,625,434 Net income attributable to common stockholders per share: Basic (A/C) $ 2.66 $ 2.50 $ 1.63 Diluted (B/D) $ 2.46 $ 2.29 $ 1.53 The following securities have been excluded from the calculation of diluted weighted average common shares outstanding as the inclusion of these securities would have an anti-dilutive effect: Year Ended December 31, 2025 2024 2023 Stock options 774,004 579,678 626,976 Restricted stock units 11,300 1,700 255,325 Our redeemable noncontrolling interests relate to our 89 % equity ownership interest in OpenEye, our 99 % equity ownership interest in Noonlight and our 81 % equity ownership interest in CHeKT. See Note 2 for details on the put options and call options contained in the OpenEye, Noonlight and CHeKT stockholder agreements. 129 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 We use the treasury stock method when calculating the dilutive impact of the stock options and restricted stock units on net income per share. We use the if-converted method when calculating the dilutive impact of the 2026 Notes and 2029 Notes on net income per share. On or after August 15, 2025, we must pay cash to satisfy the principal portion of our conversion obligation and must deliver shares to satisfy any excess conversion value on the 2026 Notes. As a result, we included 2,103,317 shares related to the 2026 Notes and 5,728,550 shares related to the 2029 Notes within the weighted average shares outstanding when calculating the diluted net income per share for the year ended December 31, 2025. We included 3,396,950 and 3,365,132 shares related to the 2026 and 2029 Notes, respectively, within the weighted averages shares outstanding when calculating the diluted net income per share for the year ended December 31, 2024. We included 3,396,950 shares related to the 2026 Notes within the weighted averages shares outstanding when calculating the diluted net income per share for the year ended December 31, 2023. Additionally, we included $ 12.1 million, $ 8.6 million and $ 2.4 million of interest expense and debt issuance cost amortization, net of tax, within the numerator of the diluted net income per share for the years ended December 31, 2025, 2024 and 2023, respectively. Note 18. Significant Service Providers and Distributors During the years ended December 31, 2025, 2024 and 2023, our 10 largest revenue service provider partners or distributors accounted for 45 %, 46 % and 50 % of our consolidated revenue, respectively. One of our service provider partners within the Alarm.com segment individually represented greater than 15 % but not more than 20 % of our revenue for the years ended December 31, 2025, 2024 and 2023. No service provider partners represented more than 10% of accounts receivable as of December 31, 2025 or 2024. Note 19. Income Taxes The components of our income before income taxes are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Domestic $ 157,866 $ 138,111 $ 97,453 Foreign 8,740 3,563 372 Total $ 166,606 $ 141,674 $ 97,825 The components of our income tax expense are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Current Federal $ ( 5,201 ) $ 40,131 $ 51,923 State 8,268 10,561 11,577 Foreign 4,579 3,098 1,715 Total Current 7,646 53,790 65,215 Deferred Federal 30,383 ( 29,307 ) ( 40,519 ) State ( 440 ) ( 5,277 ) ( 6,986 ) Foreign 31 88 ( 225 ) Total Deferred 29,974 ( 34,496 ) ( 47,730 ) Total $ 37,620 $ 19,294 $ 17,485 130 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 The difference between the income tax expense at the federal statutory rate and income tax expense in the consolidated statements of operations is as follows: Year Ended December 31, 2025 2024 2023 Amount Percentage Amount Percentage Amount Percentage U.S. Federal Statutory Tax Rate $ 34,987 21.0 % $ 29,779 21.0 % $ 20,543 21.0 % State and Local Income Taxes, Net of Federal Income Tax Effect (1) 6,249 3.8 4,587 3.2 3,654 3.7 Foreign Tax Effects 2,924 1.8 2,553 1.8 1,442 1.6 Effect on Changes in Tax Laws or Rates Enacted in Current Period — — — — — — Effect of Cross-Border Tax Laws 1,017 0.6 ( 4,720 ) ( 3.3 ) ( 4,288 ) ( 4.4 ) Foreign Derived Intangible Income 4 — ( 4,844 ) ( 3.4 ) ( 4,288 ) ( 4.4 ) Global Intangible Low-Taxed Income 1,013 0.6 124 0.1 — — Tax Credits ( 11,279 ) ( 6.7 ) ( 14,236 ) ( 10.0 ) ( 7,005 ) ( 7.2 ) Federal Research and Development Tax Credits ( 11,279 ) ( 6.7 ) ( 14,236 ) ( 10.0 ) ( 7,005 ) ( 7.2 ) Changes in Valuation Allowances — — — — 44 — Nontaxable or Nondeductible Items 3,072 1.8 1,637 1.2 2,819 2.9 Changes in Unrecognized Tax Benefits 83 — ( 320 ) ( 0.3 ) 261 0.3 Other Adjustments 567 0.3 14 — 15 — Effective Tax Rate $ 37,620 22.6 % $ 19,294 13.6 % $ 17,485 17.9 % _______________ (1) In 2025, state taxes in Virginia, Illinois, Pennsylvania, Florida and Utah made up the majority (greater than 50%) of the tax effect in this category. In 2024, state taxes in Virginia, Florida, Illinois and New York made up the majority (greater than 50%) of the tax effect in this category. In 2023, state taxes in Virginia, Pennsylvania and Massachusetts made up the majority (greater than 50%) of the tax effect in this category. The components of our cash paid for income taxes, net of refunds are as follows (in thousands): Year Ended December 31, 2025 2024 2023 Federal $ 30,080 $ 52,686 $ 50,973 State 13,445 12,990 12,345 Foreign 1,862 2,535 1,259 Total $ 45,387 $ 68,211 $ 64,577 Income taxes paid (net of refunds) exceeded 5% of total income taxes paid (net of refunds) in the following jurisdictions (in thousands): Year Ended December 31, 2025 2024 2023 Virginia (2) $ 6,570 $ 4,787 $ — _______________ (2) In 2023, no state jurisdictions had income taxes paid (net of refunds) that exceeded 5%. 131 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 The components of our net deferred tax assets (liabilities) are as follows (in thousands): December 31, 2025 2024 Deferred tax assets, non-current Provision for credit losses on accounts receivable $ 1,873 $ 1,459 Depreciation 316 292 Accrued expenses 8,473 6,615 Deferred revenue 3,451 2,997 Operating lease liabilities 18,849 18,149 Stock-based compensation 16,799 20,060 Acquisition costs 1,803 1,852 Inventory reserve 679 566 Net operating losses 4,850 1,610 Tax credits 4,470 4,334 Capitalized research and development expenditures 113,933 135,619 Capped call premium 10,661 13,416 Other 2,123 3,430 Total deferred tax assets, non-current prior to valuation allowance 188,280 210,399 Valuation allowance ( 5,632 ) ( 5,012 ) Total deferred tax assets, non-current, net of valuation allowance 182,648 205,387 Deferred tax liabilities, non-current Intangible assets and prepaid patent licenses ( 7,273 ) ( 2,574 ) Operating lease right-of-use assets ( 13,002 ) ( 13,199 ) Depreciation ( 7,787 ) ( 5,953 ) Sales commissions ( 1,858 ) ( 1,706 ) Equity investments ( 27 ) ( 161 ) Other deferred tax liabilities ( 446 ) ( 510 ) Total deferred tax liabilities, non-current ( 30,393 ) ( 24,103 ) Net deferred tax assets, non-current $ 152,255 $ 181,284 A reconciliation of the beginning and ending amounts of unrecognized tax benefits (without related interest expense) is as follows (in thousands): Year Ended December 31, 2025 2024 2023 Beginning balance $ 9,124 $ 9,063 $ 7,596 Additions based on tax positions of the current year 1,693 1,978 1,589 Additions based on tax positions of prior year 289 617 204 Decreases based on tax positions of prior year ( 57 ) ( 2 ) ( 205 ) Decreases for tax positions taken in the prior year due to settlement — ( 2,220 ) — Decreases due to lapse of applicable statute of limitations ( 1,257 ) ( 312 ) ( 121 ) Ending balance $ 9,792 $ 9,124 $ 9,063 On July 4, 2025, Public Law 119-21, commonly referred to as One Big Beautiful Bill Act, or OBBBA, was enacted in the United States. The OBBBA includes a broad range of tax provisions that impact the timing and the magnitude of certain key tax deductions. The most significant provisions to us are the permanent reinstatement of the full and immediate deduction for domestic research and development expenditures in the year such costs are incurred and the 100% first-year bonus depreciation 132 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 deduction, with both provisions reducing our associated deferred tax assets. 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 beginning in 2026. We recorded a current federal tax benefit of $ 47.9 million based on our intent to deduct all 2025 domestic research and development expenditures, which resulted in a reduction of the current income tax payable of approximately $ 47.9 million and a corresponding decrease in the deferred tax asset. In addition, we generated $ 5.8 million in excess federal research and development tax credits in 2025. We will carryback this excess credit to 2024 and offset 2024 federal taxes, resulting in a 2025 current tax benefit. Our effective income tax rates were 22.6 %, 13.6 % and 17.9 % for the years ended December 31, 2025, 2024 and 2023, respectively. For the year ended December 31, 2025, the effective tax rate was above the 21.0% statutory rate primarily due to the impact of state taxes, foreign withholding taxes and other nondeductible expenses, partially offset by the impact of 2025 research and development tax credits claimed and a favorable true-up adjustment of our 2024 income tax provision estimate associated with research and development tax credits. For the year ended December 31, 2024, the effective tax rate was below the 21.0% statutory rate primarily due to research and development tax credits claimed, the foreign derived intangible income deduction, tax windfall benefits from employee stock-based compensation and a favorable true-up adjustment of our 2023 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. For the year ended December 31, 2023, the effective tax rate was below the 21.0% statutory rate primarily due to research and development tax credits claimed and the foreign derived intangible income deduction, partially offset by the impact of state taxes, foreign withholding taxes, federal estimated tax payment interest expense, other nondeductible expenses and a stock-based compensation tax shortfall. We recognize a valuation allowance if, based on the weight of available evidence, both positive and negative, it is more likely than not that some portion, or all, of net deferred tax assets will not be realized. Our valuation allowance for state research and development tax credit carryforwards, net deferred tax assets of our EBS subsidiary, state net operating losses and an unrealized U.S. federal capital loss was $ 5.6 million, $ 5.0 million and $ 3.8 million as of December 31, 2025, 2024 and 2023, respectively. We apply guidance for uncertainty in income taxes that requires the application of a more likely than not threshold to the recognition and de-recognition of uncertain tax positions. If the recognition threshold is met, this guidance permits us to recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is more likely than not to be realized upon settlement. We recorded a net increase to the unrecognized tax benefits liability, excluding penalties and interest, of $ 0.7 million primarily due to a liability for research and development tax credits claimed, partially offset by the release of a federal unrecognized tax benefit liability due to the statute of limitations expiration during the year ended December 31, 2025. We recorded a net increase to the unrecognized tax benefits liability of $ 0.1 million, primarily due to a liability for research and development tax credits claimed, partially offset by the closure of the 2018 and 2019 Internal Revenue Service federal income tax return examination and the release of a state unrecognized tax benefit liability due to the statute of limitations expiration during the year ended December 31, 2024. We recorded a net increase to the unrecognized tax benefits liability of $ 1.5 million primarily for research and development tax credits claimed during the years ended December 31, 2023. Our unrecognized tax benefits as of December 31, 2025 and 2024 includes unrecognized tax benefits of $ 9.8 million and $ 9.1 million, respectively, that if recognized, would reduce our income tax expense and effective tax rate. As of December 31, 2025 and 2024, our consolidated balance sheets included a $ 1.2 million and $ 0.9 million accrual for total interest expense related to unrecognized tax benefits and penalties, respectively. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2025, we had gross U.S. federal net operating loss carryforwards of $ 16.1 million, which will begin to expire in 2031. As of December 31, 2025, we had state net operating loss carryforwards of $ 22.3 million, which will begin to expire in 2031. As of December 31, 2025, we had $ 0.1 million of federal research and development tax credit carryforwards that will begin to expire in 2041. As of December 31, 2025, we had state research and development tax credit carryforwards of $ 5.2 million, which will begin to expire in 2032. The federal net operating loss carryforward arose in connection with the 2013 acquisition of EnergyHub and the 2025 acquisitions of CHeKT and BTR. Utilization of the acquired EnergyHub, CHeKT and BTR net operating loss carryforwards are subject to annual limitations due to ownership change limitations as provided by the Internal Revenue Code of 1986, as amended. Our tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in our tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. On October 13, 2021, the Internal Revenue Service commenced an examination of our federal income tax return for 2018 and on August 12, 2022, the Internal Revenue Service expanded the examination to include our federal income tax return for 2019. On January 25, 2024, the Internal Revenue Service notified us that the income tax examination of our 2018 and 2019 federal income tax returns has been closed. As a result, we paid $ 0.6 million in additional federal taxes, including interest, 133 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 during the three months ended June 30, 2024, and recognized a net income tax benefit of $ 1.7 million during the three months ended March 31, 2024. As of December 31, 2025, we did not have material undistributed foreign earnings. We have not historically recorded a deferred tax liability on the undistributed earnings from our foreign subsidiaries, as such earnings are considered to be indefinitely reinvested. During the three months ended September 30, 2025, we changed this assertion with respect to a portion of the 2024 and 2025 current earnings of our Canadian business to begin providing deferred taxes on such earnings, the tax impact of which was not material. Note 20. Segment Information We have two reportable segments: • Alarm.com segment • Other segment Our chief operating decision maker is our chief executive officer. Management determined the operational data used by the chief operating decision maker is that of the two reportable segments. Management bases strategic goals and decisions on these segments and the data presented below is used to measure financial results. Our Alarm.com segment represents our cloud-based platform and licenses and services on our non-hosted software platform for intelligently connected properties and related solutions that contributed 91 %, 92 % and 93 % of our revenue, net of intersegment eliminations, for the years ended December 31, 2025, 2024 and 2023, respectively. Our Other segment is focused on researching, developing and offering residential and commercial automation solutions and energy management products and services in adjacent markets. Inter-segment revenue includes sales of hardware between our segments. Management evaluates the performance of its segments and allocates resources to them based on operating income / (loss) as compared to prior periods and current performance levels. The reportable segment operational data is presented in the tables below (in thousands): Year Ended December 31, 2025 Alarm.com Other Intersegment Alarm.com Intersegment Other Total SaaS and license revenue $ 605,261 $ 84,136 $ — $ — $ 689,397 Hardware and other revenue 314,389 11,599 ( 2,928 ) ( 1,270 ) 321,790 Total revenue 919,650 95,735 ( 2,928 ) ( 1,270 ) 1,011,187 Cost of SaaS and license revenue 69,986 26,214 354 ( 354 ) 96,200 Cost of hardware and other revenue 239,561 10,871 ( 2,871 ) ( 1,466 ) 246,095 Total cost of revenue 309,547 37,085 ( 2,517 ) ( 1,820 ) 342,295 Selling and marketing expense 98,039 25,749 — — 123,788 General and administrative expense 102,647 7,771 — — 110,418 Research and development expense 238,925 31,304 — — 270,229 Amortization and depreciation expense 28,813 2,006 — — 30,819 Total operating expenses 468,424 66,830 — — 535,254 Operating income / (loss) $ 141,679 $ ( 8,180 ) $ ( 411 ) $ 550 $ 133,638 Total assets $ 2,181,210 $ 190,095 $ ( 234,681 ) $ ( 33 ) $ 2,136,591 Reconciliation of operating income to income before income taxes Operating income $ 133,638 Interest expense ( 17,294 ) Interest income 45,617 Other income / (expense), net 4,645 Income before income taxes $ 166,606 134 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 Year Ended December 31, 2024 Alarm.com Other Intersegment Alarm.com Intersegment Other Total SaaS and license revenue $ 564,513 $ 66,685 $ — $ — $ 631,198 Hardware and other revenue 306,074 5,979 ( 2,769 ) ( 655 ) 308,629 Total revenue 870,587 72,664 ( 2,769 ) ( 655 ) 939,827 Cost of SaaS and license revenue 68,666 20,809 329 ( 292 ) 89,512 Cost of hardware and other revenue 234,414 5,414 ( 2,630 ) ( 561 ) 236,637 Total cost of revenue 303,080 26,223 ( 2,301 ) ( 853 ) 326,149 Selling and marketing expense 88,899 22,343 — — 111,242 General and administrative expense 101,401 7,478 — — 108,879 Research and development expense 227,559 28,319 — — 255,878 Amortization and depreciation expense 28,107 1,024 — — 29,131 Total operating expenses 445,966 59,164 — — 505,130 Operating income / (loss) $ 121,541 $ ( 12,723 ) $ ( 468 ) $ 198 $ 108,548 Total assets $ 2,081,214 $ 85,468 $ ( 128,465 ) $ ( 9 ) $ 2,038,208 Reconciliation of operating income to income before income taxes Operating income $ 108,548 Interest expense ( 11,426 ) Interest income 47,359 Other income / (expense), net ( 2,807 ) Income before income taxes $ 141,674 135 ALARM.COM HOLDINGS, INC. Notes to the Consolidated Financial Statements — (Continued) December 31, 2025, 2024 and 2023 Year Ended December 31, 2023 Alarm.com Other Intersegment Alarm.com Intersegment Other Total SaaS and license revenue $ 514,673 $ 54,527 $ — $ — $ 569,200 Hardware and other revenue 309,778 6,501 ( 3,201 ) ( 596 ) 312,482 Total revenue 824,451 61,028 ( 3,201 ) ( 596 ) 881,682 Cost of SaaS and license revenue 71,639 17,852 ( 2,967 ) ( 626 ) 85,898 Cost of hardware and other revenue 237,660 5,760 ( 3,771 ) ( 388 ) 239,261 Total cost of revenue 309,299 23,612 ( 6,738 ) ( 1,014 ) 325,159 Selling and marketing expense 82,672 17,554 — — 100,226 General and administrative expense 107,475 5,935 ( 480 ) — 112,930 Research and development expense 220,106 25,008 — — 245,114 Amortization and depreciation expense 30,337 1,087 — — 31,424 Total operating expenses 440,590 49,584 ( 480 ) — 489,694 Operating income / (loss) $ 74,562 $ ( 12,168 ) $ 4,017 $ 418 $ 66,829 Reconciliation of operating income to income before income taxes Operating income $ 66,829 Interest expense ( 3,429 ) Interest income 29,801 Other income / (expense), net 4,624 Income before income taxes $ 97,825 Our SaaS and license revenue for the Alarm.com segment included software license revenue of $ 17.7 million, $ 20.3 million and $ 23.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. There was no software license revenue recorded for the Other segment during the years ended December 31, 2025, 2024 and 2023. Cash additions to property and equipment were $ 16.2 million, $ 10.0 million and $ 7.4 million for the Alarm.com segment for the years ended December 31, 2025, 2024 and 2023, respectively. Cash additions to property and equipment were less than $ 0.1 million for the Other segment for the year ended December 31, 2025, and were $ 0.1 million for the years ended December 31, 2024 and 2023. We derived substantially all revenue from North America for the years ended December 31, 2025, 2024 and 2023. Substantially all of our long-lived assets were in North America as of December 31, 2025 and 2024. Note 21 . Subsequent Event On January 20, 2021, we issued the 2026 Notes. On January 15, 2026, the 2026 Notes matured and on January 14, 2026, we paid $ 500.0 million in aggregate principal amount to holders of the 2026 Notes, fully settling the outstanding balance. The settlement was funded with cash on hand, consistent with our stated intent, with no shares of common stock issued. 136 Schedule II – Valuation and Qualifying Accounts and Reserves Alarm.com Holdings, Inc. Schedule II Valuation and Qualifying Accounts and Reserves (in thousands) Description Balance at Beginning of Year Additions Charged Against Revenue Additions Charged to Other Accounts Deductions Balance at End of Year Year Ended December 31, 2025 Allowance for credit losses on accounts receivable $ 3,870 $ — $ 2,155 $ ( 854 ) $ 5,171 Allowance for product returns 2,448 3,071 — ( 3,379 ) 2,140 Allowance for credit losses on notes receivable 1 — 748 — 749 Deferred tax valuation allowance 5,012 — 1,529 ( 909 ) 5,632 Year Ended December 31, 2024 Allowance for credit losses on accounts receivable $ 3,864 $ — $ 950 $ ( 944 ) $ 3,870 Allowance for product returns 2,279 3,187 — ( 3,018 ) 2,448 Allowance for credit losses on notes receivable 5 — 3,996 ( 4,000 ) 1 Deferred tax valuation allowance 3,754 — 2,642 ( 1,384 ) 5,012 Year Ended December 31, 2023 Allowance for credit losses on accounts receivable $ 2,835 $ — $ 1,508 $ ( 479 ) $ 3,864 Allowance for product returns 1,551 4,399 — ( 3,671 ) 2,279 Allowance for credit losses on notes receivable 2 — 3 — 5 Deferred tax valuation allowance 2,591 — 2,204 ( 1,041 ) 3,754 137 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.