What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-07 · 149 added, 88 removed, 364 unchanged (39% of the section changed)

31 unchanged sentences

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

Highlights of First Quarter Results

Highlights of Second Quarter Results

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

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

SaaS and license revenue represented 68% of our revenue during the three months ended March 31, 2026, as compared to 69% in the same period in the prior year.

SaaS and license revenue represented 68% of our revenue during the three and six months ended June 30, 2026, as compared to 67% and 68% in the same periods in the prior year.

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

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

Hardware and other revenue represented 32% of our revenue during the three months ended March 31, 2026, as compared to 31% in the same period in the prior year.

Hardware and other revenue represented 32% of our revenue during the three and six months ended June 30, 2026, as compared to 33% and 32% in the same periods in the prior year.

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

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

• SaaS and license revenue increased 11% to $181.5 million during the three months ended March 31, 2026 from $163.8 million during the three months ended March 31, 2025.

• Total revenue increased 11% to $265.2 million during the three months ended March 31, 2026 from $238.8 million during the three months ended March 31, 2025.

• Net income decreased to $23.4 million during the three months ended March 31, 2026, as compared to $27.7 million during the three months ended March 31, 2025.

Net income attributable to common stockholders decreased to $23.6 million during the three months ended March 31, 2026, as compared to $28.0 million during the three months ended March 31, 2025.

• Non-GAAP adjusted EBITDA, a non-GAAP measurement of operating performance, increased to $49.6 million during the three months ended March 31, 2026 from $45.8 million during the three months ended March 31, 2025.

Please see Non-GAAP Measures below in this section of this Quarterly Report for a discussion of the limitations of non-GAAP adjusted EBITDA (a non-GAAP measure) and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable measurement in accordance with accounting principles generally accepted in the United States, or GAAP, for the three months ended March 31, 2026 and 2025.

• SaaS and license revenue increased 11% to $188.8 million during the three months ended June 30, 2026 from $170.0 million during the three months ended June 30, 2025.

SaaS and license revenue increased 11% to $370.3 million during the six months ended June 30, 2026 from $333.8 million during the six months ended June 30, 2025.

• Total revenue increased 9% to $277.7 million during the three months ended June 30, 2026 from $254.3 million during the three months ended June 30, 2025.

Total revenue increased 10% to $542.9 million during the six months ended June 30, 2026 from $493.1 million during the six months ended June 30, 2025.

• Net income decreased to $24.2 million during the three months ended June 30, 2026, as compared to $34.2 million during the three months ended June 30, 2025.

Net income decreased to $47.6 million during the six months ended June 30, 2026, as compared to $61.9 million during the six months ended June 30, 2025.

Net income attributable to common stockholders decreased to $24.2 million during the three months ended June 30, 2026, as compared to $34.6 million during the three months ended June 30, 2025.

Net income attributable to common stockholders decreased to $47.8 million during the six months ended June 30, 2026, as compared to $62.5 million during the six months ended June 30, 2025.

• Non-GAAP adjusted EBITDA, a non-GAAP measurement of operating performance, increased to $57.7 million during the three months ended June 30, 2026 from $49.9 million during the three months ended June 30, 2025.

Non-GAAP adjusted EBITDA increased to $107.3 million during the six months ended June 30, 2026 from $95.7 million during the six months ended June 30, 2025.

See the "Non-GAAP Measures" section of Item 2.

"Management’s Discussion and Analysis of Financial Condition and Results of Operations" for details on the changes made to the definition of non-GAAP adjusted EBITDA during the six months ended June 30, 2026.

Recent Developments

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 January 14, 2026, we paid $500.0 million in aggregate principal amount to holders of the 2026 Notes, fully settling the outstanding balance in accordance with the repayment terms.

On February 24, 2026, a technology partner in which we invested was acquired by an unrelated third party.

As a result of the sale, we received proceeds of $5.4 million in exchange for all of our shares of the technology partner stock after deducting $0.1 million related to an agreed holdback.

As a result of the sale, we recorded a loss of $0.2 million within other expense, net, in our condensed consolidated statements of operations during the three months ended March 31, 2026.

On May 29, 2026, we paid $14.1 million in cash to purchase an additional investment in SafeStreets USA, LLC, to maintain our 24.7% ownership percentage.

This investment is included in the Alarm.com segment and is accounted for under the equity method of accounting.

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

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

The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2026, which is increasingly true in periods of uncertainty, such as the uncertainty caused by the Macroeconomic Conditions.

The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2026, which is increasingly true in periods of uncertainty, such as the uncertainty caused by the Macroeconomic Conditions.

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

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Three Months Ended

June 30, Six Months Ended

2026 2025 2026 2025

SaaS and license revenue $ 188,778 $ 169,993 $ 370,302 $ 333,793

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Non-GAAP Adjusted EBITDA

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

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

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

The non-cash items include amortization and depreciation expense;

(income) / loss from equity method investments, net;

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

income from equity method investments, net;

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

amortization of debt issuance costs for the May 31, 2024 issuance of $500.0 million aggregate principal amount of 2.25% convertible senior notes due June 1, 2029, or the 2029 Notes, included in interest expense;

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

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

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

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

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

Please see Non-GAAP Measures in this section for a discussion of the limitations of non-GAAP adjusted EBITDA and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measurement, for the three months ended March 31, 2026 and 2025.

SaaS and License Revenue Renewal Rate

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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.

As of March 31, 2026 and 2025, we had 66 and 76 employees who manufacture hardware for our suite of IoT solutions, respectively .

As of June 30, 2026 and 2025, we had 66 and 75 employees who manufacture hardware for our suite of IoT solutions, respectively .

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

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government may continue to impose tariffs under alternative statutory authorities, and the situation remains fluid.

On April 20, 2026, the U.S.

Customs and Border Protection began accepting refund requests through its Consolidated Administration and Processing of Entries portal, and we subsequently filed for an estimated $14.5 million in tariffs previously paid under the International Emergency Economic Powers Act, or IEEPA.

During the three and six months ended June 30, 2026, we recorded less than one third of the estimated $14.5 million as a reduction to cost of hardware and other revenue and processed a commensurate amount of refunds to customers, excluding certain processing fees, as a reduction to hardware and other revenue.

As of June 30, 2026, we have not recorded any additional receivables related to potential refunds for previous tariffs we paid because we are unable to assess the probability of their recovery.

The United States and/or countries into which we import products have adjusted and/or imposed and may, in the future, adjust and/or impose new quotas, duties, tariffs or reciprocal tariffs or other restrictions.

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

We grew from 2,020 employees as of March 31, 2025 to 2,051 employees as of March 31, 2026 , and decreased from 2,058 employees as of December 31, 2025.

We grew from 2,048 employees as of June 30, 2025 to 2,051 employees as of June 30, 2026 , and remained constant at 2,051 employees as of March 31, 2026.

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

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

The number of employees in sales and marketing functions increased from 579 as of March 31, 2025 to 615 as of March 31, 2026 and increased from 607 as of December 31, 2025.

The number of employees in sales and marketing functions increased from 599 as of June 30, 2025 to 612 as of June 30, 2026 and decreased from 615 as of March 31, 2026.

We expect to continue to invest in our sales and marketing activities to expand our business both domestically and internationally.

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

The number of employees in general and administrative functions decreased from 236 as of March 31, 2025 to 230 as of March 31, 2026 and decreased from 235 as of December 31, 2025.

The number of employees in general and administrative functions decreased from 238 as of June 30, 2025 to 225 as of June 30, 2026 and decreased from 230 as of March 31, 2026.

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

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

The number of employees in research and development functions increased from 1,129 as of March 31, 2025 to 1,140 as of March 31, 2026 and decreased from 1,150 as of December 31, 2025.

The number of employees in research and development functions increased from 1,136 as of June 30, 2025 to 1,148 as of June 30, 2026 and increased from 1,140 as of March 31, 2026.

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

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

For the three months ended March 31, 2026, our effective tax rate was below the 21.0% statutory rate primarily due to the impact of 2026 research and development tax credits claimed and the foreign derived deduction eligible income deduction, partially offset by the impact of state taxes, foreign withholding taxes, a shortfall from employee stock-based compensation and other nondeductible expenses.

For the three and six months ended June 30, 2026, our effective tax rate was above the 21.0% statutory rate primarily due to the impact of state taxes, foreign withholding taxes, a shortfall from employee stock-based compensation and other nondeductible expenses, partially offset by the impact of 2026 research and development tax credits claimed and the foreign derived deduction eligible income deduction.

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

(Income) / Loss from Equity Method Investments, Net

(Income) / loss from equity method investments, net primarily consists of our share of the net assets and net income / (losses) of our investees accounted for under the equity method, including the impacts of amortization expense related to basis differences.

Income from Equity Method Investments, Net

Income from equity method investments, net primarily consists of our share of the net assets and net income / (losses) of our investees accounted for under the equity method, including the impacts of amortization expense related to basis differences.

Results of Operations

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2026 2025 2026 2025

SaaS and license revenue $ 188,778 68 % $ 169,993 67 % $ 370,302 68 % $ 333,793 68 %

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Provision for income taxes 7,737 2 5,458 2 13,593 2 12,765 2

(Income) / loss from equity method investments, net (245) — 25 —

Income from equity method investments, net (849) — (341) — (1,094) — (316) —

Net income $ 24,208 9 % $ 34,217 13 % $ 47,590 9 % $ 61,929 13 %

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Three Months Ended

June 30, Six Months Ended

Stock-based compensation expense data:

2026 2025 2026 2025

Sales and marketing $ 592 $ 620 $ 1,334 $ 1,100

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Three Months Ended

June 30, Six Months Ended

2026 2025 2026 2025

Components of cost of revenue as a percentage of revenue:

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

Comparison of the Three Months Ended March 31, 2026 to March 31, 2025

The following tables in this section set forth our selected condensed consolidated statements of operations (in thousands), data for the percentage change and data as a percentage of revenue for the three months ended March 31, 2026 and March 31, 2025.

Comparison of the Three and Six Months Ended June 30, 2026 to June 30, 2025

Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

SaaS and license revenue $ 188,778 $ 169,993 11 % $ 370,302 $ 333,793 11 %

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Total revenue $ 277,734 $ 254,308 9 % $ 542,927 $ 493,130 10 %

The $26.4 million increase in total revenue was primarily the result of a $17.7 million, or 11%, increase in our SaaS and license revenue, and an $8.7 million, or 12%, increase in our hardware and other revenue.

The $23.4 million increase in total revenue for the three months ended June 30, 2026 as compared to the same period in the prior year was primarily the result of a $18.8 million, or 11%, increase in our SaaS and license revenue, and a $4.6 million, or 6%, increase in our hardware and other revenue.

The SaaS and license revenue for the Alarm.com segment increased $8.8 million primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2025.

The SaaS and license revenue for our Other segment increased $10.0 million primarily due to an increase in sales of our energy management and demand response solutions, including revenue from the purchase of RGS on November 21, 2025.

The increase in hardware and other revenue was primarily from the $6.7 million increase in hardware and other revenue, net of intersegment eliminations, in the Alarm.com segment arising from price increases we have implemented on certain products to cover a portion of our increases in costs as well as an increase in hardware sold related to our video surveillance software.

Hardware and other revenue, net of intersegment eliminations, in our Other segment increased $2.0 million primarily due to sales of energy credits related to the acquisition of Bridge to Renewables, Inc., or BTR, on August 15, 2025, as well as increased sales related to our property management solution.

The increase in hardware and other revenue was primarily from the $4.5 million increase in hardware and other revenue, net of intersegment eliminations, in the Other segment primarily due to sales of energy credits related to the acquisition of Bridge to Renewables, Inc., or BTR, on August 15, 2025, as well as increased sales related to our property management and Heating, Ventilation and Air Conditioning solutions.

Hardware and other revenue, net of intersegment eliminations, in our Alarm.com segment increased $0.1 million from an increase in hardware sold related to our video surveillance software as well as price increases we have implemented on certain products to cover a portion of our increases in costs.

These increases in hardware and other revenue were partially offset by a decrease in hardware and other revenue related to tariff refunds we provided to our customers, excluding certain processing fees.

The $49.8 million increase in total revenue for the six months ended June 30, 2026 as compared to the same period in the prior year was primarily the result of a $36.5 million, or 11%, increase in our SaaS and license revenue and a $13.3 million, or 8%, increase in our hardware and other revenue.

The SaaS and license revenue for the Alarm.com segment increased $18.5 million for the six months ended June 30, 2026 as compared to the same period in the prior year primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2025.

The SaaS and license revenue for our Other segment increased $18.0 million for the six months ended June 30, 2026 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions including revenue from the purchase of RGS on November 21, 2025.

The increase in hardware and other revenue for the six months ended June 30, 2026 as compared to the same period in the prior year was primarily from the $6.8 million increase in hardware and other revenue, net of intersegment eliminations, in the Alarm.com segment arising from an increase in hardware sold related to our video surveillance software as well as price increases we have implemented on certain products to cover a portion of our increases in costs.

Hardware and other revenue, net of intersegment eliminations, in our Other segment increased $6.5 million for the six months ended June 30, 2026 as compared to the same period in the prior year, primarily due to sales of energy credits related to the acquisition of BTR on August 15, 2025, as well as increased sales related to our property management and Heating, Ventilation and Air Conditioning solutions.

Cost of Revenue

Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

Cost of revenue (1)

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

The $12.3 million increase in cost of revenue was the result of a $6.3 million, or 29%, increase in cost of SaaS and license revenue, and a $6.0 million, or 11%, increase in cost of hardware and other revenue.

The $8.2 million increase in cost of revenue for the three months ended June 30, 2026 as compared to the same period in the prior year was the result of a $6.3 million, or 26%, increase in cost of SaaS and license revenue, and a $1.9 million, or 3%, increase in cost of hardware and other revenue.

The cost of SaaS and license revenue for the Other segment increased $5.5 million primarily due to an increase in sales of our energy management and demand response solutions, including from our acquisition of RGS on November 21, 2025, which drove a corresponding increase in amounts paid to distributed energy resource providers.

The cost of SaaS and license revenue for the Alarm.com segment increased $0.8 million primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers.

The cost of hardware and other revenue for the Alarm.com segment increased $4.7 million primarily due to a change in the mix of product sales to more hardware with higher costs related to tariffs and supplier price increases.

The cost of hardware and other revenue for the Other segment increased $4.1 million primarily due to costs associated with sales of energy credits related to the acquisition of BTR on August 15, 2025, and an increase in the number of hardware units shipped related to our property management solution.

Cost of hardware and other revenue as a percentage of hardware and other revenue was 75% and 76% for the three months ended March 31, 2026 and 2025, respectively.

Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 15% and 13% for the three months ended March 31, 2026 and 2025, respectively.

The cost of hardware and other revenue for the Alarm.com segment decreased $2.2 million primarily due to recording a partial amount of the IEEPA tariff refunds we previously paid during the three months ended June 30, 2026, partially offset by a change in the mix of product sales to more hardware with higher costs related to tariffs and supplier price increases.

Cost of hardware and other revenue as a percentage of hardware and other revenue was 74% and 76% for the three months ended June 30, 2026 and 2025, respectively.

Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 16% and 14% for the three months ended June 30, 2026 and 2025, respectively.

The $20.5 million increase in cost of revenue for the six months ended June 30, 2026 as compared to the same period in the prior year was the result of a $12.6 million, or 28%, increase in cost of SaaS and license revenue and a $7.9 million, or 7%, increase in cost of hardware and other revenue.

The cost of SaaS and license revenue for the Other segment increased $10.4 million during the six months ended June 30, 2026 as compared to the same period in the prior year primarily due to an increase in sales of our energy management and demand response solutions, including from our acquisition of RGS on November 21, 2025, which drove a corresponding increase in amounts paid to distributed energy resource providers.

The cost of SaaS and license revenue for the Alarm.com segment increased $2.2 million during the six months ended June 30, 2026 as compared to the same period in the prior year primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers.

The cost of hardware and other revenue for the Other segment increased $5.5 million primarily due to costs associated with sales of energy credits related to the acquisition of BTR on August 15, 2025, and an increase in the number of hardware units shipped related to our property management solution.

The cost of hardware and other revenue for the Alarm.com segment increased $2.4 million during the six months ended June 30, 2026 as compared to the same period in the prior year primarily due to a change in the mix of product sales to more hardware with higher costs related to tariffs and supplier price increases, partially offset by recording a partial amount of the IEEPA tariff refunds we previously paid during the three months ended June 30, 2026.

Cost of hardware and other revenue as a percentage of hardware and other revenue was 74% for the six months ended June 30, 2026 and 76% for the same period in the prior year.

Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 16% for the six months ended June 30, 2026 and 14% for the same period in the prior year.

Sales and Marketing Expense

Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

Sales and marketing $ 32,979 $ 31,136 6 % $ 67,413 $ 59,685 13 %

% of total revenue 12 % 12 % 13 % 12 %

The $5.9 million increase in sales and marketing expense was primarily due to a $2.7 million increase in marketing expense, due in part to an increase in marketing conference costs, and a $1.4 million increase in personnel and related costs, attributable in part to increases in the headcount for our sales team to support our growth for our Alarm.com segment.

The $1.8 million increase in sales and marketing expense for the three months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $1.7 million increase in personnel and related costs for our Other segment, attributable in part to increases in the headcount for our sales team.

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

Sales and marketing expense from our Other segment increased $1.7 million primarily due to an increase in personnel and related costs, attributable in part to increases in the headcount for our sales team.

The number of employees in sales and marketing functions increased from 579 as of March 31, 2025 to 615 as of March 31, 2026.

Sales and marketing expense for our Alarm.com segment decreased $0.1 million primarily due to a $1.4 million decrease in marketing conference costs, partially offset by a $1.1 million increase in personnel and related costs.

The $7.7 million increase in sales and marketing expense for the six months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $3.2 million increase in personnel and related costs for our Other segment, attributable in part to increases in the headcount for our sales team.

Sales and marketing expense from our Alarm.com segment increased primarily due to a $2.4 million increase in personnel and related costs and a $1.2 million increase in marketing conference costs.

The number of employees in sales and marketing functions increased from 599 as of June 30, 2025 to 612 as of June 30, 2026.

General and Administrative Expense

Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

General and administrative $ 36,646 $ 27,084 35 % $ 64,100 $ 54,085 19 %

% of total revenue 13 % 11 % 12 % 11 %

The $0.5 million increase in general and administrative expense was primarily due to a $0.7 million increase in personnel and related costs for our Alarm.com segment.

General and administrative expenses from our Other segment decreased by $0.3 million primarily due to a decrease in personnel and related costs.

The number of employees in general and administrative functions decreased from 236 as of March 31, 2025 to 230 as of March 31, 2026.

The $9.6 million increase in general and administrative expense for the three months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $9.2 million increase in legal costs related to intellectual property legal matters and a $1.5 million increase in personnel and related costs for our Alarm.com segment.

These increases within our Alarm.com segment were partially offset by a $1.7 million decrease in the provision for credit losses and a $0.4 million decrease in rent expense.

General and administrative expenses from our Other segment increased by $1.9 million primarily due to an increase in the provision for credit losses.

The $10.0 million increase in general and administrative expense for the six months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $9.2 million increase in legal costs related to intellectual property legal matters and a $2.1 million increase in personnel and related costs for our Alarm.com segment.

These increases within our Alarm.com segment were partially offset by a $1.6 million decrease in the provision for credit losses and a $0.4 million decrease in rent expense.

General and administrative expenses from our Other segment increased by $1.6 million primarily due to an increase in the provision for credit losses.

The number of employees in general and administrative functions decreased from 238 as of June 30, 2025 to 225 as of June 30, 2026.

Research and Development Expense

Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

Research and development $ 71,008 $ 69,070 3 % $ 143,067 $ 137,437 4 %

% of total revenue 26 % 27 % 26 % 28 %

The $3.7 million increase in research and development expense was primarily due to a $2.0 million increase in personnel and related costs for our Other segment attributable in part to an increase in headcount of employees in research and development functions from the acquisitions of BTR on August 15, 2025 and RGS on November 21, 2025.

Additionally, the increase in research and development expense was due to a $0.7 million increase in our expenses for external consultants for our Other segment.

Research and development expense from our Alarm.com segment increased by $0.6 million primarily due to an increase in expenses for software licenses.

The overall number of employees in research and development functions increased from 1,129 as of March 31, 2025 to 1,140 as of March 31, 2026.

The $1.9 million increase in research and development expense for the three months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $3.0 million increase in research and development expense for our Other segment, due to increases in personnel and related costs as well as expenses for external consultants, attributable in part to an increase in headcount of employees in research and development functions from the acquisitions of BTR on August 15, 2025 and RGS on November 21, 2025.

Research and development expense from our Alarm.com segment decreased by $1.1 million primarily due to a decrease in personnel and related costs.

The $5.6 million increase in research and development expense for the six months ended June 30, 2026, as compared to the same period in the prior year, was primarily due to a $6.0 million increase in research and development expense for our Other segment, due to increases in personnel and related costs as well as expenses for external consultants, attributable in part to an increase in headcount of employees in research and development functions from the acquisitions of BTR on August 15, 2025 and RGS on November 21, 2025.

Research and development expense from our Alarm.com segment decreased by $0.4 million primarily due to decreases in personnel and related costs and expenses for external consultants.

The overall number of employees in research and development functions increased from 1,136 as of June 30, 2025 to 1,148 as of June 30, 2026.

Amortization and Depreciation

Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

Amortization and depreciation $ 8,964 $ 7,534 19 % $ 18,056 $ 14,558 24 %

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

Amortization and depreciation increased $2.1 million primarily due to intangible assets that were acquired in connection with the acquisition of BTR on August 15, 2025, the acquisition of RGS on November 21, 2025, the purchase of 81% of the issued and outstanding shares of capital stock of CHeKT, Inc., or CHeKT, on February 10, 2025, as well as changes in depreciation expense related to property and equipment.

Amortization and depreciation increased $1.4 million and $3.5 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to intangible assets that were acquired in connection with the acquisition of BTR on August 15, 2025, the acquisition of RGS on November 21, 2025, as well as changes in depreciation expense related to property and equipment.

Interest Expense

Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

Interest expense $ (3,543) $ (4,321) (18) % $ (7,215) $ (8,635) (16) %

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

Interest expense decreased by $0.6 million primarily due to the maturity of the 2026 Notes on January 15, 2026.

Interest expense decreased $0.8 million and $1.4 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to the maturity of the 2026 Notes on January 15, 2026.

Interest Income

Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

Interest income $ 4,491 $ 11,808 (62) % $ 9,422 $ 24,179 (61) %

% of total revenue 1 % 4 % 1 % 5 %

Interest income decreased by $7.4 million primarily due to a decrease in interest income earned on cash and cash equivalents from lower amounts of cash and cash equivalents due to the $500.0 million paid in aggregate principal amount to holders of the 2026 Notes on January 14, 2026, and lower average interest rates.

Interest income decreased $7.3 million and $14.8 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to a decrease in interest income earned on cash and cash equivalents from lower amounts of cash and cash equivalents due to the $500.0 million paid in aggregate principal amount to holders of the 2026 Notes on January 14, 2026, and lower average interest rates.

Other Expense, Net

Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

Other expense, net $ (2,336) $ (175) 1,235 % $ (6,245) $ (2,835) 120 %

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

Other expense, net increased $1.2 million primarily due to an increase in losses on equity securities during the three months ended March 31, 2026 as compared to the same period in the prior year.

Other expense, net increased $2.2 million and $3.4 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year, primarily due to an increase in loss on equity securities and fluctuations in foreign currency exchange rates.

Provision for Income Taxes

Three Months Ended

Change Six Months Ended

2026 2025 2026 2025

Provision for income taxes $ 7,737 $ 5,458 42 % $ 13,593 $ 12,765 6 %

% of total revenue 2 % 2 % 2 % 2 %

The provision for income taxes decreased by $1.5 million.

Our effective tax rate was 20.2% for the three months ended March 31, 2026, as compared to 20.9% for the same period in the prior year.

The decrease in the provision for income taxes was primarily due to the decrease in income before income taxes and a decrease in our research and development tax credits claimed during the three months ended March 31, 2026 as compared to the same period in the prior year.

(Income) / Loss from Equity Method Investments, Net

The provision for income taxes increased by $2.3 million and $0.8 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year.

Our effective tax rate was 24.9% and 22.6% for the three and six months ended June 30, 2026, respectively, as compared to 13.8% and 17.1% for the same periods in the prior year.

The increase in the provision for income taxes was primarily due to a decrease in our research and development tax credits claimed during the three and six months ended June 30, 2026 as compared to the same periods in the prior year.

Income from Equity Method Investments, Net

Three Months Ended

(Income) / loss from equity method investments, net $ (245) $ 25 N/A

Change Six Months Ended

2026 2025 2026 2025

Income from equity method investments, net $ (849) $ (341) 149 % $ (1,094) $ (316) 246 %

% of total revenue — % — % — % — %

(Income) / loss from equity method investments, net increased by $0.3 million.

The increase in the (income) / loss from equity method investments, net was due to the increase in our share of the net assets and net income of our investees accounted for under the equity method, partially offset by amortization expense related to basis differences in our equity method investments.

Income from equity method investments, net increased $0.5 million and $0.8 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year.

The increase in the income from equity method investments, net was due to the increase in our share of the net assets and net income of our investees accounted for under the equity method, partially offset by amortization expense related to basis differences in our equity method investments.

Segment Information

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Alarm.com and Other.

Our Alarm.com segment represents our cloud-based and Software platforms for intelligently connected properties and related solutions that c ontributed 90% of our revenue, net of intersegment eliminations, for the three months ended March 31, 2026, as compared to 93% for the same period in the prior year.

Our Alarm.com segment represents our cloud-based and Software platforms for intelligently connected properties and related solutions that c ontributed 87% and 88% of our revenue, net of intersegment eliminations, for the three and six months ended June 30, 2026, respectively, as compared to 92% for the same periods in the prior year.

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

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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.

Our Alarm.com segment decreased from 1,774 employees as of March 31, 2025 to 1,757 employees as of March 31, 2026 and decreased from 1,768 employees as of December 31, 2025.

Our Other segment increased from 246 employees as of March 31, 2025 to 294 employees as of March 31, 2026 and increased from 290 employees as of December 31, 2025.

Our Alarm.com segment decreased from 1,795 employees as of June 30, 2025 to 1,749 employees as of June 30, 2026 and decreased from 1,757 employees as of March 31, 2026.

Our Other segment increased from 253 employees as of June 30, 2025 to 302 employees as of June 30, 2026 and increased from 294 employees as of March 31, 2026.

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

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

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Cash and cash equivalents $ 479,418 $ 960,584

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We define working capital as current assets minus current liabilities.

Our cash and cash equivalents as of March 31, 2026 are available for working capital purposes.

Our cash and cash equivalents as of June 30, 2026 are available for working capital purposes.

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

As of March 31, 2026, our cash and cash equivalents were primarily held in money market accounts.

As of June 30, 2026, our cash and cash equivalents were primarily held in money market accounts.

Liquidity and Capital Resources

As of March 31, 2026, we had $497.4 million in cash and cash equivalents.

As of June 30, 2026, we had $479.4 million in cash and cash equivalents.

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

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

As of March 31, 2026, there were no material changes in our cash requirements from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report.

As of June 30, 2026, there were no material changes in our cash requirements from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report.

Our 2026 Notes were paid in full on January 14, 2026.

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Capital Expenditures

Over the final nine months of fiscal year 2026, we expect our capital expenditure requirements to be between $7.0 million and $10.0 million, primarily related to purchases of computer software and equipment as well as the continued build out of our leased and owned office space, excluding any leasehold improvements related to tenant improvement allowances.

We did not declare or pay dividends during the three months ended March 31, 2026 or 2025.

Over the final six months of fiscal year 2026, we expect our capital expenditure requirements to be between $5.0 million and $8.0 million, primarily related to purchases of computer software and equipment as well as the continued build out of our leased and owned office space, excluding any leasehold improvements related to tenant improvement allowances.

We did not declare or pay dividends during the three and six months ended June 30, 2026 or 2025.

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

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Stock Repurchase Programs

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

During the three months ended March 31, 2026, we repurchased 428,065 shares of our common stock under this program for $20.0 million, which includes applicable commissions and fees.

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

On May 4, 2026, our board of directors authorized the cancellation of the balance under the stock repurchase program ending May 31, 2026 and the adoption of a new stock repurchase program, under which we are authorized to purchase up to an aggregate of $150.0 million of our outstanding common stock during the two-year period ending May 4, 2028.

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

On May 4, 2026, our board of directors authorized the cancellation of the balance under the stock repurchase program ended May 31, 2026 and adopted a new stock repurchase program, under which we are authorized to purchase up to an aggregate of $150.0 million of our outstanding common stock during the two-year period ending May 4, 2028.

During the three and six months ended June 30, 2026, we repurchased 570,000 and 998,065 shares of our common stock under these programs for $25.0 million and $45.0 million, respectively, which includes applicable commissions and fees.

During the three and six months ended June 30, 2025, we repurchased 88,000 and 174,400 shares of our common stock under these programs for $5.1 million and $10.2 million, respectively, 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.

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

Three Months Ended

Six Months Ended

Cash flows from operating activities $ 92,522 $ 46,773

Cash flows from / (used in) investing activities 2,405 (55,179)

Cash flows used in investing activities (20,712) (232,988)

Cash flows used in financing activities (555,007) (9,594)

1 unchanged sentence

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

For the three months ended March 31, 2026, cash flows from operating activities were $50.6 million, compared to $24.1 million for the same period in the prior year.

This $26.5 million increase in cash flows from operating activities was due to a $15.9 million increase in non-cash and other reconciling items and a $14.9 million increase in cash from operating assets and liabilities, partially offset by a $4.3 million decrease in net income.

For the six months ended June 30, 2026, cash flows from operating activities were $92.5 million, compared to $46.8 million for the same period in the prior year.

This $45.7 million increase in cash flows from operating activities was due to a $30.1 million increase in cash from operating assets and liabilities and a $29.9 million increase in non-cash and other reconciling items, partially offset by a $14.3 million decrease in net income.

The $30.1 million increase in cash from operating assets and liabilities was primarily due to a $19.1 million change in accounts receivable, accounts payable and other current liabilities primarily due to the timing of disbursements and the collection of receipts, a $6.6 million reduction to an income tax receivable, a $2.0 million change in prepaid expenses and a $1.5 million change in inventory during the six months ended June 30, 2026 as compared to the same period in the prior year.

The $29.9 million increase in non-cash and other reconciling items was primarily due to a $21.9 million change in deferred income taxes, which was primarily driven by the enactment of the One Big Beautiful Bill Act, or OBBBA, which allows for the immediate deduction of post-2024 domestic research and development expenditures, resulting in a reduction to the associated deferred tax asset, as well as the current year amortization of the capitalized pre-2025 domestic research and development expenditures.

The increase in non-cash and other reconciling items was also due to $6.4 million in distributions received from our equity method investees.

The $14.9 million increase in cash from operating assets and liabilities was primarily due to a $5.4 million reduction to an income tax receivable, a $3.6 million change in prepaid expenses and a $1.1 million change in inventory resulting from a decrease in the change of purchased inventory during the three months ended March 31, 2026 as compared to the same period in the prior year.

Investing Activities

1 unchanged sentence

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

For the three months ended March 31, 2026, cash flows from investing activities were $2.4 million, compared to cash flows used in investing activities of $55.2 million for the same period in the prior year.

The $57.6 million increase in cash flows from investing activities was primarily due to the $23.6 million paid to purchase 81% of the issued and outstanding shares of capital stock of CHeKT on February 10, 2025 as well as a decrease of $20.0 million in notes receivable issued, primarily due to the $21.5 million note receivable issued to SafeStreets during the three months ended March 31, 2025, that did not occur during the three months ended March 31, 2026.

Additionally, the increase in cash flows from investing activities was due to $6.0 million in proceeds from the sale of investments in unconsolidated entities during the three months ended March 31, 2026 that did not occur during the same period in the prior year.

For the six months ended June 30, 2026, cash flows used in investing activities were $20.7 million, compared to $233.0 million for the same period in the prior year.

The $212.3 million decrease in cash flows used in investing activities was primarily due to the $158.5 million decrease in purchases of investments in unconsolidated entities during the six months ended June 30, 2026 as compared to the same period in the prior year.

Additionally, the decrease in cash flows used in investing activities was due to $23.6 million paid to purchase 81% of the issued and outstanding shares of capital stock of CHeKT on February 10, 2025 as well as a decrease of $19.2 million in notes receivable issued during the six months ended June 30, 2026 as compared to the same period in the prior year.

Financing Activities

1 unchanged sentence

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

For the three months ended March 31, 2026, cash flows used in financing activities were $518.2 million, compared to $3.5 million for the same period in the prior year.

The $514.7 million increase in cash flows used in financing activities was primarily due to the $500.0 million payment of the 2026 Notes during the three months ended March 31, 2026 that did not occur during the same period in the prior year as well as a $14.9 million increase in purchases of shares of our common stock during the three months ended March 31, 2026 as compared to the same period in the prior year.

For the six months ended June 30, 2026, cash flows used in financing activities were $555.0 million, compared to $9.6 million for the same period in the prior year.

The $545.4 million increase in cash flows used in financing activities was primarily due to the $500.0 million payment of the 2026 Notes during the six months ended June 30, 2026 that did not occur during the same period in the prior year as well as a $34.9 million increase in purchases of shares of our common stock during the six months ended June 30, 2026 as compared to the same period in the prior year.

Non-GAAP Measures

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

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

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

The non-cash items include amortization and depreciation expense;

(income) / loss from equity method investments, net;

income from equity method investments, net;

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

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Three Months Ended

June 30, Six Months Ended

2026 2025 2026 2025

Non-GAAP adjusted EBITDA:

3 unchanged sentences

Provision for income taxes 7,737 5,458 13,593 12,765

(Income) / loss from equity method investments, net (245) 25

Income from equity method investments, net (849) (341) (1,094) (316)

Amortization and depreciation expense 8,964 7,534 18,056 14,558

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We believe this change provides a consistent and useful view of our core operating performance, as such gains and losses are not reflective of our underlying business operations, are driven by market price fluctuations that are outside of our control and can vary significantly from period to period in ways that may obscure trends in operating results.

For comparability and to conform the prior period to the current presentation, we have revised non-GAAP adjusted EBITDA and non-GAAP adjusted net income for the three months ended March 31, 2025.

As a result, we adjusted for losses on investments with readily determinable fair value of $3.7 million and $2.3 million during the three months ended March 31, 2026 and 2025, respectively, within “Interest expense, interest income and certain activity within other expense, net.”

For comparability and to conform the prior period to the current presentation, we have revised non-GAAP adjusted EBITDA for the three and six months ended June 30, 2025.

As a result, we adjusted for losses on investments with readily determinable fair value of $1.5 million and $3.8 million during the three and six months ended June 30, 2025, respectively, within “Interest expense, interest income and certain activity within other expense, net.”

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis