Thank you for standing by. Welcome to Alarm.com's First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Matthew Zartman, Vice President of Strategic Communications & Investor Relations. Please go ahead sir.

Good afternoon, everyone, and welcome to Alarm.com's first quarter 2024 earnings conference call. Please note that this call is being recorded. Joining us today from Alarm.com are Steve Trundle, our CEO; and Steve Valenzuela, our CFO. During today's call, we will be making forward-looking statements which are predictions, projections, estimates and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. We refer you to the risk factors discussed in our quarterly report on Form 10-Q and our Form 8-K which will be filed shortly after this call with the SEC, along with the associated press release. This call is subject to these risk factors, and we encourage you to review them. Alarm.com assumes no obligation to update forward-looking statements or information, which speak as of their respective dates. In addition, several non-GAAP financial measures will be discussed on the call. A reconciliation of the GAAP to the non-GAAP measures can be found in today's press release on our Investor Relations website. I'll now turn the call over to Steve Trundle. Steve?

Thank you, Matt. Good afternoon, and welcome to everyone. We are pleased to report first quarter results that exceeded our expectations. Our SaaS and license revenue in the first quarter was $150.3 million up 11% over last year. Our adjusted EBITDA for the quarter was $37 million. I want to thank our service provider partners and our employees for their contributions to our results. On today's call, I'll share a few of my observations from our participation at ISC West, the largest Security Trade Conference in the U.S. And I'll also update you on some of our recently released product capabilities before turning things over to Steve Valenzuela. In April, Alarm.com had a strong presence at ISC West, which was attended by nearly 30,000 security trade professionals. The conference attracts a broad set of market participants from manufacturers and technology providers to a diverse range of North American and international service providers. So I had the opportunity to hear from many of our partners and update my feel for both the market and the competition that we see. There continues to be growing interest among service providers in our full range of commercial capabilities. One example that garnered attention during the conference is our recently launched cloud based vehicle management solution called Connected Fleet. The solution offers professional grade fleet management capabilities, including vehicle alerts, location tracking and fuel monitoring. Connected Fleet is also deeply integrated into our commercial software to extend operational visibility beyond the walls of the business. Alarm.com's robust enterprise reporting engine offers business management alerts and automated trip reporting. Connected Fleet also integrates with our enterprise dashboard capability enabling businesses to seamlessly monitor and manage vehicle fleets dispersed across thousands of locations. Many of our partners indicated that Connected Fleet's product integration along with their existing…

Thanks, Steve. I'll begin with a review of our first quarter 2024 financial results and then provide our updated guidance before opening the call for questions. First quarter staff and license revenue of $150.3 million grew 11% from the same quarter last year. Our SaaS and license revenue visibility remains high with a revenue renewal rate of 94% in the first quarter at the higher end of our expected range. Hardware and other revenue in the first quarter was $72.9 million down slightly from $74.3 million in Q1 2023, mainly due to fewer sales of door controllers and thermostats. Total revenue of $223.3 million for the first quarter grew 6.5% year-over-year. SaaS and license gross margin for the first quarter was 86.4%, up about 90 basis points from 85.5% in the year ago quarter. Hardware gross margin was 23.1% for the first quarter, down from 23.9% in the year ago quarter, mainly due to product mix. Total gross margin was 65.7% for the first quarter, up from 63.7% for Q1 2023 due to increased SaaS margins and a higher mix of SaaS revenue. Turning to operating expenses. R&D expenses in the first quarter were $66 million compared to $61.9 million in the first quarter of 2023, mainly due to increased headcount and related compensation expenses. We ended the first quarter with 1,139 employees in R&D, up from 1,042 employees in Q1 2023. Total headcount increased to 2,002 employees for the first quarter compared to 1,858 employees in the year ago quarter. Sales and marketing expenses in the first quarter were $25.5 million or 11.4% of total revenue down from $26.6 million or 12.7% of revenue in the same quarter last year, mainly due to less program spending. Our G&A expenses in the first quarter were $29.3 million up from $28.5…

Certainly. [Operator Instructions]. And our first question comes from the line of Darren Aftahi from ROTH. Your question please.

Thanks. Yes, Steve, maybe a big picture question. Given you guys are in the machine learning space, as you kind of look at the ecosystem, and I appreciate you talked about fleet management, which sounds like it's a new product that expands. But when you think about the outlet branches in this business beyond just kind of commercial and home security, like where are we in terms of the industry and more specifically, Alarm relative to the industry and kind of where those off branches can go? Thank you.

Yes. Interesting question, Darren. Well, I would say big picture that we're going to continue to find purpose for new devices that collect data simply because the value of the data derived from each device is now substantially higher than it was three or four years ago before a lot of the AI activity that everyone is talking about now. So if you kind of tie it back to what we've done, the cameras as an example themselves were valuable three or four years ago, but they're infinitely more valuable when they can tell you if it's a family member or an unknown car or if there are people standing in line longer than you would like them to stand in line at your business. So the value of the device is getting higher. And as a result of the intelligence that could be derived from the data, take that to Connected Fleet for example. When we get out there and we have a service provider partner that puts on customer with 1,000 vehicles, the analysis now available from that data is just substantially higher. So what it means for us is ideally we're well positioned to continue to look at places where we can generate and harvest information and then drive intelligence from it. And with our backgrounds in software and IoT device development and increasingly in AI, I think we'll be well positioned to discover those branches as the market makes room for them.

Thank you.

Thank you. [Operator Instructions]. One moment for our next question. And our next question comes from the line of Saket Kalia from Barclays. Your question please.

Great. Hey guys, thanks for taking my questions here. How are you?

Hey Saket, how are you?

Hey, good. Good, Steve. Maybe first for you Steve, Steve Valenzuela. Did we talk about what percentage of the business came from emerging products? Remind me, I think it's about 25% of SaaS revenue was growing very quickly. Did you have an updated sort of rough range on that?

It's still about the same as what we talked about last quarter. It was about 31% of SaaS coming from the growth segments and it grew about 26% year-over-year. So it's still running about the same rate.

Great. That's great. Steve Trundle, maybe for you, any just open ended question, any updates on sort of the ADT process? And what impact, if any, that's having on business?

Sure. Yes, we probably take our primary cue there from what they're publicly communicating. I think they have made some progress in their rollouts. We have -- so we're just sort of benchmarking that and specifically their comments on their time frames. It looks like it's a process that will continue to unfold throughout the year. We have not seen meaningful change in the dynamic to date. We'll continue to keep our eye on things there.

Got it. Very helpful. I'll get back in queue. Thanks, guys.

Thanks, Saket.

Thank you. [Operator Instructions]. One moment for our next question. Our next question comes from the line of Jack Vander Aarde from Maxim Group. Your question please.

Hey, great guys. Nice results and great race to the outlook. Maybe a question for Steve Valenzuela, on just the international business. Are you able to just like touch on what I don't know, if there's a number of properties or just any sort of growth rate how that business is kind of growing? I think it's been a little bit since we've got an update there.

Yes, sure, Jack. So international is now 5% of total revenue, that's up from 4%. So we are seeing decent growth there, it increased about 20% year-over-year.

Excellent. Okay. And maybe just a follow-up there, just international versus in terms of the home security residential market, international versus domestic, just can you just kind of touch on what inning we're in for international relative to domestic and when we expect that business to really grow?

Yes. I'll take a whack at that one, Jack. I would say while we've been playing the game for quite a while now, it's still -- it's probably a longer game than the domestic game in that you're dealing with a collection of many, many different markets and everyone's playing on sort of a slightly different scoreboard. So at the moment, we're out in about 60 countries globally. Sometimes the sales cycle and really the educational cycle seems to take a bit longer again because the market's not homogeneous. So I would say we're still early days. Even with some of the partners that we may have announced or talked about three years ago, we're still probably, I'd say second, third inning there at the moment.

Got it. Okay. Well, I appreciate the update and good to see the strong results guys. Thanks.

Thank you.

Thank you. [Operator Instructions]. Our next question comes from the line of Cory Carpenter from JPMorgan. Your question, please. I think your line on mute.

Hello, Cory. We're struggling to hear the question, I'm afraid.

[Operator Instructions]. This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen for your participation. One moment. And this does conclude the conference as well as the Q&A session. Thank you, ladies and gentlemen for your participation. You may now disconnect. Good day.