Alarm.com Holdings, Inc. (ALRM)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with (1) our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q, or Quarterly Report, and (2) the audited consolidated financial statements and the related notes and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2025 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed on February 19, 2026, or Annual Report, with the Securities and Exchange Commission, or SEC. This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” “would,” or the negative or plural of these words or similar expressions or variations and such forward-looking statements include, but are not limited to, statements with respect to the anticipated impact of the global economic uncertainty and financial market conditions caused by 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) on our business, results of operations and financial condition, including on our hardware sales and our Software-as-a-Service, or SaaS, and license revenue growth rate; our business strategy, plans and objectives for future operations; continued enhancements of our platform and offerings; the potential impact of trade policies and new or increased tariffs on our cost of hardware revenue and hardware revenue margins; and our future financial and business performance. The events described in these forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified in the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report and elsewhere in this and in our other SEC filings. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

Alarm.com is the leading platform for intelligently connected properties. Our cloud-based platform offers an expansive suite of Internet of Things, or IoT, solutions 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. During 2025, our platforms processed more than 365 billion data points generated by over 170 million connected devices. We believe this scale of subscribers, connected devices and data operations makes us the leader in the connected property market.

Alarm.com has established a global network of trusted service provider partners who distribute our solutions to their customers. Our service provider partners represent a wide range of independent businesses, and are experts at selling, installing and supporting our technology. They depend on the Alarm.com platform for connected property technology and to operate and manage their businesses efficiently.

Alarm.com primarily generates SaaS and license revenue through our service provider partners, who resell our services and pay us monthly fees. Contracts with our service provider partners typically have an initial term of 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. We also generate hardware and other revenue, primarily from our service provider partners and distributors. Our hardware sales include connected devices that enable our services, such as video cameras, video recorders, gunshot detection sensors, gateway modules and smart thermostats. We believe our network of service providers and the length of our service relationships with residential and commercial property owners, combined with our robust SaaS platforms and over 20 years of operating experience, contribute to a compelling business model.

Our Solutions and Integrated Platforms

Our solutions are designed to make both residential and commercial properties safer, smarter and more efficient. Our technology platforms support property owners who subscribe to our services, the hardware partners who manufacture devices that integrate with our platforms and the service provider partners who install and maintain our solutions.

The Alarm.com platform enables our service provider partners to address the needs of a broad range of residential and commercial customers. 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.

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Highlights of First 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. Our service provider partners sell, install and support Alarm.com solutions that enable residential and commercial property owners to intelligently secure, connect, control and automate their properties. 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 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.

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. 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. 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. 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.

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.

The global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of the Macroeconomic Conditions. These Macroeconomic Conditions have and may continue to create supply chain disruptions, inventory disruptions, and fluctuations in economic growth, including fluctuations in employment rates, inflation, tariffs, energy prices and consumer sentiment. 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. 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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Other Business Metrics

We regularly monitor a number of financial and operating metrics in order to measure our current performance and estimate our future performance. Our other business metrics may be calculated in a manner different from the way similar business metrics used by other companies are calculated and include the following (dollars in thousands):

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review Item 1A. "Risk Factors" and "Special Note Regarding Forward-Looking Statements" in this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Alarm.com is the leading platform for intelligently connected properties. Our cloud-based platform offers an expansive suite of 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. During 2025, our platforms processed more than 365 billion data points generated by over 170 million connected devices. We believe this scale of subscribers, connected devices and data operations makes us the leader in the connected property market.

Alarm.com has established a global network of trusted service provider partners who distribute our solutions to their customers. Our service provider partners represent a wide range of independent businesses, and are experts at selling, installing and supporting our technology. They depend on the Alarm.com platform for connected property technology and to operate and manage their businesses efficiently.

Alarm.com primarily generates SaaS and license revenue through our service provider partners, who resell our services and pay us monthly fees. Contracts with our service provider partners typically have an initial term of 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. We also generate hardware and other revenue, primarily from our service provider partners and distributors. Our hardware sales include connected devices that enable our services, such as video cameras, video recorders, gunshot detection sensors, gateway modules and smart thermostats. We believe our network of service providers and the length of our service relationships with residential and commercial property owners, combined with our robust SaaS platforms and over 20 years of operating experience, contribute to a compelling business model.

Our solutions are designed to make both residential and commercial properties safer, smarter and more efficient. Our technology platforms support property owners who subscribe to our services, the hardware partners who manufacture devices that integrate with our platforms and the service provider partners who install and maintain our solutions.

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The Alarm.com platform enables our service provider partners to address the needs of a broad range of residential and commercial customers. 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.

Executive Overview and Highlights of 2025 and 2024 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. Our service provider partners sell, install and support Alarm.com solutions that enable residential and commercial property owners to intelligently secure, connect, control and automate their properties. 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 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%, 67% and 65% of our revenue in 2025, 2024 and 2023, respectively.

We also generate SaaS and license revenue from monthly fees charged to service providers on a per subscriber basis for access to our non-hosted software platform, or Software platform. The non-hosted software for interactive security, automation and related solutions is typically deployed and operated by the service provider in its own network operations center. Software license revenue represented 2%, 2% and 3% of our revenue in 2025, 2024 and 2023, respectively.

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. 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. 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%, 33% and 35% of our revenue in 2025, 2024 and 2023, respectively. 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 Annual Report include:

•SaaS and license revenue increased 9% to $689.4 million in 2025 from $631.2 million in 2024. SaaS and license revenue increased 11% to $631.2 million in 2024 from $569.2 million in 2023. Software license revenue decreased to $17.7 million in 2025 from $20.3 million in 2024. Software license revenue decreased to $20.3 million in 2024 from $23.2 million in 2023.

•Total revenue increased 8% to $1.0112 billion in 2025 from $939.8 million in 2024. Total revenue increased 7% to $939.8 million in 2024 from $881.7 million in 2023.

•Net income increased 7% to $131.6 million in 2025 from $122.5 million in 2024. Net income increased 52% to $122.5 million in 2024 from $80.3 million in 2023. Net income attributable to common stockholders increased 7% to $132.6 million in 2025 from $124.1 million in 2024. Net income attributable to common stockholders increased 53% to $124.1 million in 2024 from $81.0 million in 2023.

•Non-GAAP adjusted EBITDA, a non-GAAP measurement of operating performance, increased to $206.0 million in 2025 from $176.2 million in 2024. Non-GAAP adjusted EBITDA increased to $176.2 million in 2024 from $154.0 million in 2023.

Please see Non-GAAP Measures below in this section of this Annual 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 GAAP, for the years ended December 31, 2025, 2024 and 2023.

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Historical Trends within the Financial Results

Information about current period and prior period acquisitions that may affect the comparability of our historical financial information is included in Item 1. Business – Governance – Corporate Information. Information about the 2029 Notes and the related interest expense as well as changes in legal costs, which may affect the comparability of historical financial information, is disclosed in the Comparison of Years Ended December 31, 2025 to December 31, 2024 section below within Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Information about investments in unconsolidated entities accounted for under the equity method of accounting and the related equity method income from our investments in unconsolidated entities as well as acquisitions, which may affect the comparability of historical financial information, is disclosed in the Comparison of Years Ended December 31, 2025 to December 31, 2024 section below within Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations."

Geographic Areas

We believe there is significant opportunity to expand our international business, as 5% of our total revenue during the year ended December 31, 2025 originated from customers located outside of North America. Our products are currently localized and available in over 50 countries outside of North America.

Recent Developments

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.

On November 21, 2025, EnergyHub acquired 100% of the issued and outstanding shares of capital stock of RGS. 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. 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.

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.

The global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of the Macroeconomic Conditions. These Macroeconomic Conditions have and may continue to create supply chain disruptions, inventory disruptions, and fluctuations in economic growth, including fluctuations in employment rates, inflation, tariffs, energy prices and consumer sentiment. It remains difficult to assess or predict the ultimate duration and economic impact of 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.

Other Business Metrics

We regularly monitor a number of financial and operating metrics in order to measure our current performance and estimate our future performance. Our other business metrics may be calculated in a manner different from the way similar business metrics used by other companies are calculated and include the following (dollars in thousands):

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SaaS and License Revenue

SaaS and license revenue is a GAAP measure that we use to measure our current performance and estimate our future performance. We believe SaaS and license revenue is an indicator of the productivity of our existing service provider partners and their ability to activate and maintain subscribers using our intelligently connected property solutions, our ability to add new service provider partners reselling our solutions, the demand for our intelligently connected property solutions and the pace at which the market for these solutions is growing.

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 income / (expense), net, provision for income taxes, income from equity method investments, net, amortization and depreciation expense, stock-based compensation expense, acquisition-related expense, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation. We do not consider these items to be indicative of our core operating performance. The non-cash items include amortization and depreciation expense; income from equity method investments, net; amortization of debt issuance costs for the January 20, 2021 issuance of $500.0 million aggregate principal amount of 0% convertible senior notes due January 15, 2026, or the 2026 Notes, included in interest expense; 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; and stock-based compensation expense related to restricted stock units and other forms of equity compensation, including, but not limited to, the sale of common stock. We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

We record interest expense primarily related to our 2026 Notes and 2029 Notes. We exclude interest expense in calculating non-GAAP adjusted EBITDA because we believe the exclusion of interest expense will provide for more meaningful information about our financial performance. We exclude interest income and certain activity within other income / (expense), net including gains, losses or impairments on investments without readily determinable fair values and other assets, gains on settlement fees and losses on the early extinguishment of debt, when applicable, from non-GAAP adjusted EBITDA because we do not consider it part of our ongoing results of operations. We exclude the impact related to our provision for income taxes and income from equity method investments, net from non-GAAP adjusted EBITDA because we do not consider these adjustments to be part of our ongoing results of operations.

GAAP requires that operating expenses include the amortization of acquired intangible assets, which principally include acquired customer relationships, developed technology and trade names. We exclude amortization of intangibles from non-GAAP adjusted EBITDA because we do not consider amortization expense when we evaluate our ongoing business operations, nor do we factor amortization expense into our evaluation of potential acquisitions, or our measurement of the performance of those acquisitions. We believe the exclusion of amortization expense enables the comparison of our performance to other companies in our industry as other companies may be more or less acquisitive than we are, and therefore, amortization expense may vary significantly by company based on their acquisition history. Although we exclude amortization of acquired intangible assets from non-GAAP adjusted EBITDA, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.

We record depreciation primarily for investments in property and equipment. We exclude depreciation in calculating non-GAAP adjusted EBITDA because we do not consider depreciation when we evaluate our ongoing business operations.

We exclude stock-based compensation expense, which relates to restricted stock units and other forms of equity incentives primarily awarded to employees of Alarm.com, because they are non-cash charges that we do not consider when assessing the operating performance of our business. Additionally, the determination of stock-based compensation expense can be calculated using various methodologies and is dependent upon subjective assumptions and other factors that vary on a company-by-company basis. Therefore, we believe excluding stock-based compensation expense from non-GAAP adjusted EBITDA improves the comparability of our results to the results of other companies in our industry.

Included in operating expenses are incremental costs directly related to business and asset acquisitions as well as changes in the fair value of contingent consideration liabilities, when applicable. We exclude acquisition-related expense from non-GAAP adjusted EBITDA because we believe the exclusion of this expense allows us to better provide meaningful information about our operating performance, facilitates comparisons to our historical operating results, improves the comparability of our results to the results of other companies in our industry, and ultimately, we believe helps investors better understand the acquisition-related expense and the effects of the transaction on our results of operations.

We exclude non-ordinary course litigation expense because we do not consider legal costs and settlement fees incurred and received in litigation and litigation-related matters of non-ordinary course lawsuits and other disputes, particularly costs incurred in ongoing intellectual property litigation, to be indicative of our core operating performance. We do not adjust for ordinary course

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legal expenses, including those expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

Non-GAAP adjusted EBITDA is a key measure our management uses to understand and evaluate our core operating performance and trends to generate future operating plans, to make strategic decisions regarding the allocation of capital, and to make investments in initiatives that are focused on cultivating new markets for our solutions. In particular, the exclusion of certain expenses in calculating non-GAAP adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related adjustments and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance. 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 years ended December 31, 2025, 2024 and 2023.

SaaS and License Revenue Renewal Rate

Our SaaS and license revenue renewal rate is an operating metric. We measure our SaaS and license revenue renewal rate on a trailing 12-month basis by dividing (a) the total SaaS and license revenue recognized during the trailing 12-month period from our subscribers on our Alarm.com platform who were subscribers on the first day of the period, by (b) total SaaS and license revenue we would have recognized during the period from those same subscribers assuming no terminations, or service level upgrades or downgrades. The SaaS and license revenue renewal rate represents both residential and commercial properties. Our SaaS and license revenue renewal rate is expressed as an annualized percentage and it is calculated across our entire subscriber base on the Alarm.com platform excluding subscribers of service providers that may use one of our other platforms as a substitute for the Alarm.com platform. 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 SaaS and license revenue renewal rate includes subscribers whose contract with their service provider reached the end of its contractual term during the measurement period, as well as subscribers whose contract with their service provider has not reached the end of its contractual term during the measurement period, and is not intended to estimate the rate at which our subscribers renew their contracts with our service provider partners. We believe our SaaS and license revenue renewal rate allows us to measure our ability to retain and grow our SaaS and license revenue and serves as an indicator of the lifetime value of our subscriber base.

Components of Operating Results

Our fiscal year ends on December 31. The key elements of our operating results include:

Revenue

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 the 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.

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.

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. 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 license revenue included in SaaS and license revenue is expected to continue to decline over time as we transition subscribers to our cloud-based hosted platform.

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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. We record a reserve against revenue for hardware returns based on historical returns.

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. 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 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. 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.

Our revenue, and in particular our hardware revenue, has in the past and may in the future be negatively affected by the Macroeconomic Conditions and their related impacts. It remains difficult to assess or predict the ultimate duration and economic impact of the Macroeconomic Conditions.

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. As of December 31, 2025 and 2024, we had 66 and 74 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. 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.

In April 2025, the U.S. government announced a baseline tariff of 10% on all products imported into the United States (with certain limited exceptions) and additional individualized tariffs based on country of origin at different rates per country. Certain of these tariffs have been subsequently paused or modified, and the situation remains fluid. 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. A significant portion of our hardware is produced outside the United States, including in Vietnam, Thailand and Taiwan. The U.S. government has since announced several tariff framework agreements, including with countries where a significant portion of our hardware is produced. While we began passing through the costs of baseline tariffs to our customers in the second quarter of 2025, as of December 31, 2025, we had not yet adjusted those pass-throughs to account for certain newer tariffs at higher rates. As a result, we began to absorb those additional costs, which we expect will negatively impact our hardware revenue margins in 2026. The ultimate impact of any tariffs will depend on various factors, including how long such tariffs remain in place, the ultimate levels of such tariffs, the outcome of pending legal challenges to their validity, how other countries respond to the U.S. tariffs, and the specific timing of when we implement higher pass-through costs.

Operating Expenses

Our operating expenses consist of sales and marketing, general and administrative, research and development and amortization and depreciation expenses. Salaries, bonuses, stock-based compensation, benefits and other personnel related costs are the most significant components of each of these expense categories, excluding amortization and depreciation. 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 2,010 employees as of January 1, 2025 to 2,058 employees as of December 31, 2025. We may continue to hire new employees to support the projected future growth of our business.

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Sales and Marketing Expense. Sales and marketing expense consists primarily of personnel and related expenses for our sales and marketing teams, including salaries, bonuses, stock-based compensation, benefits, travel, and commissions. 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 572 as of January 1, 2025 to 607 as of December 31, 2025. We expect to continue to invest in our sales and marketing activities to expand our business both domestically and internationally. We may increase the size of our sales force and our service provider partner support team to provide additional support to our existing service provider partner base to drive their productivity in selling our solutions as well as to enroll new service provider partners in North America and in international markets.

General and Administrative Expense. General and administrative expense consists primarily of personnel and related expenses for our administrative, legal, human resources, finance and accounting personnel, including salaries, bonuses, stock-based compensation, benefits and other personnel costs. Additional expenses included in this category are legal costs, including those that are incurred to defend and license our intellectual property, as well as non-personnel costs, such as travel-related expenses, rent, subcontracting and professional fees, audit fees, tax services, and insurance expenses. 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 237 as of January 1, 2025 to 235 as of December 31, 2025. Excluding intellectual property litigation and acquisition-related expense, we expect general and administrative costs to increase prospectively as our business grows. This includes cost increases related to human resources, accounting, finance, and legal personnel, additional external legal, audit fees and other expenses associated with regulations governing public companies. While somewhat unpredictable, we also expect to continue to incur costs related to litigation involving intellectual property. See the section of this Annual Report titled "Legal Proceedings" for additional information regarding litigation matters.

Research and Development Expense. Research and development expense consists primarily of personnel and related expenses for our employees working on our product development and software and device engineering teams as well as employees supporting research and development efforts, including salaries, bonuses, stock-based compensation, benefits and other personnel costs. 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 1,127 as of January 1, 2025 to 1,150 as of December 31, 2025. Our research and development efforts are focused on innovating new features and enhancing the functionality of our platforms and the solutions we offer to our service provider partners and subscribers. We will also continue to invest in efforts to extend our platforms to adjacent markets and internationally to maintain our leadership position in the development of intelligently connected property technology, and continued enhancement of our Partner Services Platform, a comprehensive suite of enterprise-grade business management solutions for our service provider partners.

Amortization and Depreciation. Amortization and depreciation consists of amortization of intangible assets originating from our acquisitions as well as our internally-developed capitalized software. Our depreciation expense is related to investments in property and equipment. Acquired intangible assets include developed technology, customer related intangibles, trademarks and trade names. We expect in the near term that amortization and depreciation may fluctuate based on our acquisition activity, development of our platforms and capitalized expenditures.

Interest Expense

We record interest expense associated with our 2026 Notes and 2029 Notes. Interest expense in 2026 is expected to decrease as compared to 2025 due to the maturity of the 2026 Notes on January 15, 2026.

Interest Income

Interest income consists of interest income earned on our cash and cash equivalents, our notes receivable and our restricted cash. Interest income in 2025 will depend, in part, on our use of cash and fluctuations in interest rates.

Other Income / (Expense), Net

Other income / (expense), net primarily consists of non-operating and miscellaneous expense and income, including the impacts of fluctuations in foreign currency exchange rates as well as gains and losses on equity securities.

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Provision for Income Taxes

We are subject to U.S. federal, state and local income taxes as well as foreign income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. As a result, we recognize tax liabilities based on estimates of whether additional taxes will be due. For the year ended December 31, 2025, our 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. 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 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

The following table sets forth our selected consolidated statements of operations (in thousands) and data as a percentage of revenue for the periods presented. 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.

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

(2)Operating expenses include stock-based compensation expense as follows (in thousands):

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The following table sets forth the components of cost of revenue as a percentage of revenue:

Comparison of Years Ended December 31, 2025 to December 31, 2024

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

Revenue

The $71.4 million increase in total revenue in 2025, as compared to 2024, was the result of a $58.2 million, or 9%, increase in our SaaS and license revenue and a $13.2 million, or 4%, increase in our hardware and other revenue. Our software license revenue included within SaaS and license revenue decreased $2.6 million to $17.7 million in 2025, as compared to $20.3 million during 2024, primarily due to the result of the continuing transition of customers from non-hosted software to our cloud based hosted platform. The SaaS and license revenue for the Alarm.com segment increased $40.7 million in 2025, as compared to 2024, primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2024. The SaaS and license revenue for our Other segment increased $17.5 million in 2025, as compared to 2024, primarily due to an increase in sales of our energy management and demand response solutions as well as our property management solution. Hardware and other revenue, net of intersegment eliminations, in our Alarm.com segment increased $8.2 million in 2025, as compared to 2024, primarily due to the increases in the sale of perpetual licenses 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 $5.0 million in 2025, as compared to 2024, primarily due to sales of energy credits related to the acquisition of BTR as well as an increase in sales related to our property management solution.

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Cost of Revenue

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

The $16.1 million increase in cost of revenue in 2025, as compared to 2024, was the result of a $9.5 million, or 4%, increase in cost of hardware and other revenue, and a $6.6 million, or 7%, increase in cost of SaaS and license revenue. Our cost of software license revenue included within cost of SaaS and license revenue was $0.4 million and $0.6 million during 2025 and 2024, respectively. The cost of hardware and other revenue for the Alarm.com segment increased $4.9 million in 2025, as compared to 2024, primarily due to an increase in the number of hardware units sold related to our video surveillance software. The cost of hardware and other revenue for the Other segment increased $4.6 million in 2025, as compared to 2024, primarily due to costs associated with sales of energy credits related to the acquisition of BTR and an increase in the number of hardware units shipped related to our property management solution. The cost of SaaS and license revenue for the Other segment increased $5.3 million in 2025, as compared to 2024, primarily due to an increase in sales of our energy management and demand response solutions, which drove a corresponding increase in amounts paid to distributed energy resource providers. The cost of SaaS and license revenue for the Alarm.com segment increased $1.3 million in 2025, as compared to 2024, primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers.

Cost of hardware and other revenue as a percentage of hardware and other revenue was 76% and 77% in 2025 and 2024, respectively. Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 14% and 14% in 2025 and 2024, respectively. The decrease in cost of SaaS and license revenue as a percentage of SaaS and license revenue in 2025, as compared to 2024, is a reflection of the mix of sales and services during the periods. Cost of software license revenue as a percentage of software license revenue was 2% and 3% in 2025 and 2024, respectively.

Sales and Marketing Expense

The $12.5 million increase in sales and marketing expense in 2025, as compared to 2024, was primarily due to a $6.2 million increase in personnel and related costs for our Alarm.com segment, attributable in part to increases in the headcount for our sales team to support our growth, and a $2.4 million increase in marketing expense for our Alarm.com segment. Sales and marketing expense from our Other segment increased $3.4 million in 2025, as compared to 2024, primarily due to increases in personnel and related costs, attributable in part to increases in the headcount for our sales team. The overall number of employees in our sales and marketing teams increased from 572 as of December 31, 2024, to 607 as of December 31, 2025.

General and Administrative Expense

The $1.5 million increase in general and administrative expense in 2025, as compared to 2024, was primarily due to a $3.1 million increase in our expenses for external consultants and a $2.5 million increase in personnel and related costs for our Alarm.com segment. These increases in general and administrative expense are partially offset by a $2.8 million decrease in the provision for credit losses for our Alarm.com segment primarily related to credit loss expense recorded in 2024 related to a loan we previously provided to an affiliated entity of one of our distribution partners that did not occur in 2025, as well as a decrease of $1.1 million in recruiting costs for our Alarm.com segment. General and administrative expenses from our Other segment increased by $0.3 million in 2025, as compared to 2024, primarily due to an increase in legal costs. The overall number of

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employees in general and administrative functions decreased from 237 as of December 31, 2024, to 235 as of December 31, 2025.

Research and Development Expense

The $14.4 million increase in research and development expense in 2025, as compared to 2024, was primarily due to a $4.3 million increase in personnel and related costs for our Alarm.com segment, attributable in part to an increase in headcount of employees in research and development functions, a $3.5 million increase in our expenses for external consultants and a $2.0 million increase in expenses for software licenses for our Alarm.com segment. Research and development expense from our Other segment increased by $3.0 million in 2025, as compared to 2024, primarily due to an increase in personnel and related costs. The overall number of employees in research and development functions increased from 1,127 as of December 31, 2024, to 1,150 as of December 31, 2025.

Amortization and Depreciation

Amortization and depreciation increased $1.7 million in 2025, as compared to 2024, primarily due to intangible assets that were acquired in connection with the purchase of 81% of the issued and outstanding shares of capital stock of CHeKT on February 10, 2025, the purchase of 100% of the issued and outstanding shares of capital stock of BTR on August 15, 2025, and the purchase of 100% of the issued and outstanding shares of capital stock of RGS on November 21, 2025, as well as changes in depreciation expense related to property and equipment.

Interest Expense

Interest expense increased $5.9 million in 2025 as compared to 2024, primarily due to the interest expense and amortization of the debt issuance costs related to the 2029 Notes.

Interest Income

Interest income decreased $1.7 million in 2025 as compared to 2024, primarily due to a decrease in interest income earned on cash and cash equivalents from lower average interest rates and lower amounts of cash and cash equivalents during some of 2025, as compared to 2024.

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Other Income / (Expense), Net

Other income / (expense), net increased $7.5 million in 2025 primarily due to a $4.7 million gain on publicly traded equity securities within our treasury portfolio and a $2.0 million gain on fluctuations in foreign currency exchange rates.

Provision for Income Taxes

The provision for income taxes increased $18.3 million in 2025 as compared to 2024. Our effective tax rate was 22.6% in 2025 as compared to 13.6% in 2024. The increase in the provision for income taxes was primarily due to the increase in income before income taxes, a reduction in our foreign derived intangible income deduction and our research and development tax credits, a tax shortfall in employee stock-based compensation in 2025 as opposed to a windfall tax benefit recognized in 2024 and a less favorable true-up adjustment of our 2024 income tax provision estimate associated with research and development tax credits recorded in 2025 as compared to a similar true-up adjustment of our 2023 income tax provision estimate associated with research and development tax credits recorded in 2024.

Income from Equity Method Investments, Net

Income from equity method investments, net increased $2.5 million in 2025, as compared to 2024, primarily 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.

Comparison of Years Ended December 31, 2024 to December 31, 2023

A comparison of the years ended December 31, 2024 and 2023 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 20, 2025.

Segment Information

We have two reportable segments: Alarm.com and Other. Our Alarm.com segment represents our cloud-based and Software platforms 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. The consolidated subsidiaries that make up our Other segment are in the investment stage and have incurred significant operating expenses relative to their revenue.

Our Alarm.com segment decreased from 1,773 employees as of January 1, 2025 to 1,768 employees as of December 31, 2025. Our Other segment increased from 237 employees as of January 1, 2025 to 290 employees as of December 31, 2025. Inter-segment revenue includes sales of hardware between our segments.

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

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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.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue, costs and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Because of the use of estimates inherent in the financial reporting process 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. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. Our most critical accounting estimates are summarized below. See Note 2 to our consolidated financial statements for a description of the following critical accounting estimates and our other significant accounting estimates.

Revenue

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 the 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.

We have variable consideration primarily in the form of rebate incentives, which contain uncertainties and require us to make estimates of the amount of consideration to which we will be entitled. 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, and the availability and performance of our services.

While variable consideration assumptions are specific to each contract, we did not make any material changes to these assumptions for the year ended December 31, 2025. We do not expect any material changes in the near term to the underlying assumptions used to recognize revenue during the year ended December 31, 2025. However, if changes in these assumptions occur, and, should those changes be significant, they could have a material impact on our SaaS and license revenue as well as our hardware and other revenue.

We generally offer customers a limited right of return for hardware that has been purchased from us. 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. Historically, our returns of hardware have not significantly differed from our estimated reserve and while we do not expect any material changes in the near term to the underlying assumptions used to recognize our reserve against revenue for hardware returns, if changes in these assumptions occur, and, should those changes be significant, they could have a material impact on our hardware and other revenue.

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. This valuation contains uncertainties and 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 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.

We did not make any material changes to the underlying assumptions used as of the acquisition date to calculate the purchase price of the business combinations that occurred during 2025 and 2023. We do not expect any changes to the

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underlying assumptions used to calculate the purchase price of those business combinations, in part, because the purchase price allocation was finalized for some of these business combinations.

Goodwill, Intangible Assets and Long-lived Assets

Goodwill

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. Significant estimates and assumptions when we perform a quantitative assessment include estimates about future expected cash flows and discount rates. Qualitative factors we consider when we perform a qualitative analysis include, but are not limited to, macroeconomic conditions, industry and market conditions, company specific events, changes in circumstances and market capitalization.

For our 2025 annual impairment review, we performed a qualitative assessment for our Alarm.com and Other reporting units. There were no indicators of impairment that occurred between our qualitative annual impairment test performed as of October 1, 2025 and December 31, 2025. If triggering events arise in the future that require changes in the underlying assumptions used in our assessment of our goodwill, and, should those changes be significant, they could have a material impact on our goodwill and potentially our other income / (expense), net, if those significant changes result in an impairment.

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 and are reviewed for impairment if indicators of impairment arise.

We evaluate the recoverability of our long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of 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.

There were no indicators of impairment of our intangible assets with definite lives or long-lived assets during the years ended December 31, 2025, 2024 and 2023. If triggering events arise in the future, depending on the significance of the underlying assumptions in the impairment analysis, they could have a material impact on our intangible assets and long-lived assets and potentially our other income / (expense), net, if those significant changes result in an impairment.

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.

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 did not make any material changes to the underlying assumptions used to calculate deferred tax assets and liabilities as well as uncertain tax positions for the year ended December 31, 2025, and we do not expect any material changes in the near term to the underlying assumptions used to calculate deferred tax assets and liabilities as well as uncertain tax positions for the year ended December 31, 2025. However, if changes in these assumptions occur, and, should those changes be significant, they could have a material impact on our deferred tax assets and liabilities as well as our provision for income taxes.

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Stock-Based Compensation

On April 17, 2025, our board of directors adopted, and on June 4, 2025, our stockholders approved, our 2025 Equity Incentive Plan, or 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. We compensate our executive officers, board of directors and employees with stock-based compensation plans under our 2025 Plan. 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, which requires considerable judgment. 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. The expected term for options granted is estimated using our historical experience, including information related to options we have granted.

Recent Accounting Pronouncements

See Note 2 of our consolidated financial statements for information related to recently issued accounting standards.

Liquidity and Capital Resources

Working Capital

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

We define working capital as current assets minus current liabilities. Our cash and cash equivalents as of December 31, 2025 are available for working capital purposes. Our investment policy defines allowable investments and establishes guidelines relating to credit quality, diversification and maturities of our investments to preserve capital, maintain liquidity and limit the amount of credit risk exposure. As of December 31, 2025, our cash and cash equivalents were primarily held in money market accounts.

Liquidity and Capital Resources

As of December 31, 2025, we had $960.6 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. To date, we have principally financed our operations through cash generated by operating activities and through private and public equity and debt financings. We mitigate the risk of loss for our cash and cash equivalents by depositing funds with a number of reputable financial institutions and monitoring both the risk profiles and investment strategies of money market funds.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 amended Internal Revenue Code Section 174, or Section 174, to eliminate the option to immediately deduct research and development expenditures in the year incurred, requiring these expenditures to be capitalized and amortized over five years for domestic expenditures and over 15 years for foreign expenditures. We calculated the 2023 federal and state cash tax increase from Section 174 to be $43.5 million, which we paid in April 2024, and we calculated the 2024 federal and state cash tax increase from Section 174 to be $33.5 million, which we paid in April 2025.

On July 4, 2025, the 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 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.

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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. Over the next 12 months, we expect our capital expenditure requirements to be between $8.0 million and $11.0 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. As of December 31, 2025, maturities of lease liabilities for our various leases are as follows: $14.3 million in 2026, $14.6 million in 2027, $13.6 million in 2028, $12.0 million in 2029, $11.3 million in 2030 and $37.1 million in 2031 and thereafter.

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.

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.

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 the 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.

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 the extent of influence, we concluded that the equity investments in Safe Haven and All Access, which are included in the Alarm.com segment, do not meet the criteria for consolidation and will be accounted for under the equity method of accounting.

On August 15, 2025, EnergyHub acquired all of the issued and outstanding shares of capital stock of 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 all of the issued and outstanding shares of capital stock of BTR, we paid $12.4 million in cash on August 15, 2025, after deducting $1.6 million related to agreed holdback provisions.

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.

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.

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Our future working capital, capital expenditure and cash requirements will depend on many factors, including the impact of the Macroeconomic Conditions on the economy and our operations, the rate of our revenue growth, the amount and timing of our investments in human resources and capital equipment, future acquisitions and investments, and the timing and extent of our introduction of new solutions and platform and solution enhancements. As the impact of the Macroeconomic Conditions on the economy and our operations evolves, we will continue to assess our liquidity needs. To the extent our cash and cash equivalents and cash flows from operating activities are insufficient to fund our future activities, we may need to borrow additional funds or raise funds from public or private equity or debt financings. If we raise additional funds through the incurrence of indebtedness, such indebtedness would likely have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing would be dilutive to our current stockholders.

The following discussion summarizes our current and long-term material cash requirements as of December 31, 2025, which we expect to fund primarily with proceeds from our 2026 Notes and 2029 Notes as well as from operating cash flows:

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(1)See Note 13 to our consolidated financial statements for details on the components of other long-term liabilities. As of December 31, 2025, we recorded a liability for long-term accrued taxes and interest payable of $8.9 million. Due to the uncertainty in the timing of future payments, we have excluded the liability related to these uncertain tax positions from the table above. See Note 19 to our consolidated financial statements for additional information regarding income taxes.

(2)Represents amounts due under multi-year, non-cancelable contracts with third-party vendors, as well as other commitments.

The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The table does not include obligations under agreements that we can cancel without a significant penalty. Future events could cause actual payments to differ from these estimates.

Convertible Senior Notes - 2026

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.

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

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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.

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.

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

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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 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.

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.

Sources of Liquidity

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 and received proceeds of $484.3 million, net of $15.7 million of transaction fees and other debt issuance costs. 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. The 2026 Notes are discussed in more detail above under “Convertible Senior Notes - 2026.”

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 and received proceeds of $485.2 million, net of $14.8 million of transaction fees and other debt issuance costs. The 2029 Notes are discussed in more detail above under "Convertible Senior Notes - 2029 Notes."

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Dividends

We did not declare or pay dividends during the years ended December 31, 2025, 2024 or 2023. We cannot provide any assurance that we will declare or pay cash dividends on our common stock in the future. We currently anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and we do not anticipate paying cash dividends in the foreseeable future. Payment of future cash dividends, if any, will be at the discretion of the board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of current or then-existing debt instruments and other factors the board of directors deems relevant.

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.

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.

Historical Cash Flows

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

Operating Activities

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.

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For 2025, cash flows from operating activities were $153.3 million, compared to $206.4 million for 2024. This $53.1 million decrease in cash flows from operating activities was due to a $122.5 million decrease in cash from operating assets and liabilities, partially offset by a $60.3 million increase in non-cash and other reconciling items and a $9.1 million increase in net income.

The $122.5 million decrease in cash from operating assets and liabilities was primarily due to a $82.6 million change in accounts receivable, accounts payable and other current liabilities primarily due to the timing of disbursements and the collection of receipts, a $14.2 million change in inventory resulting from an increase in the change of purchased inventory in 2025 as compared to 2024 as well as a $12.7 million income tax receivable recorded in 2025. The $60.3 million increase in non-cash and other reconciling items was primarily due to a $64.5 million change in deferred income taxes, which was primarily driven by the enactment of the 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 $7.8 million in distributions received from our equity method investees in 2025. These increases in non-cash and other reconciling items were partially offset by a $8.1 million decrease in stock-based compensation as well as a $7.6 million increase in gains from investments in unconsolidated entities in 2025 as compared to 2024.

For 2024, cash flows from operating activities were $206.4 million, compared to $136.0 million for 2023. This $70.4 million increase in cash flows from operating activities was due to a $42.2 million increase in net income, a $19.7 million increase in cash from operating assets and liabilities and a $8.5 million increase in non-cash and other reconciling items. The $19.7 million increase in cash from operating assets and liabilities was primarily due to differences in the timing of disbursements and the collection of receipts, partially offset by a $12.4 million change in inventory purchased in 2024 as compared to 2023. The $8.5 million increase in non-cash and other reconciling items was primarily due to a $13.2 million change in deferred income taxes, which was primarily driven by the capitalization and amortization of research and development expenditures under Section 174, as well as a $4.0 million increase in the provision for credit losses on notes receivable related to a loan we provided to an affiliated entity of one of our distribution partners in 2024. These increases in non-cash and other reconciling items were partially offset by a $6.0 million decrease in stock-based compensation and a $2.3 million decrease in amortization and depreciation expense in 2024 as compared to 2023 as well as a $1.4 million inventory write-down in 2023 that did not occur in 2024.

Investing Activities

Our investing activities typically include acquisitions, capital expenditures, investments in unconsolidated entities, notes receivable issued to companies with offerings complementary to ours and proceeds from the repayment of those notes receivable. 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 2025, cash flows used in investing activities was $358.5 million, compared to $24.7 million in 2024. The $333.8 million increase in cash used in investing activities was primarily due to an increase of $194.9 million in purchases of investments in unconsolidated entities in 2025 as compared to 2024 as well as an increase of $24.8 million in notes receivable issued, primarily due to the $21.5 million note receivable issued to SafeStreets in 2025 that did not occur in 2024. The increase in cash used in investing activities was also due to $23.6 million paid to purchase 81% of the issued and outstanding shares of capital stock of CHeKT on February 10, 2025, $12.4 million paid to purchase all of the issued and outstanding shares of capital stock of BTR on August 15, 2025 and $77.2 million paid to purchase all of the issued and outstanding shares of capital stock of RGS on November 21, 2025.

For 2024, cash flows used in investing activities was $24.7 million, compared to $26.0 million in 2023. The $1.3 million decrease in cash used in investing activities was primarily due to the $9.7 million paid to purchase 100% of the issued and outstanding shares of capital stock of EBS Spółka z ograniczoną odpowiedzialnością, or EBS, net of cash acquired, and the $5.9 million paid to purchase certain assets from Vintra, Inc., or Vintra, including direct transaction costs, in 2023 which did not occur in 2024. These decreases in cash used in investing activities were partially offset by a $9.3 million increase in purchases of investments in unconsolidated entities, a $2.6 million increase in purchases of equipment, $1.4 million paid to purchase certain assets of Kapacity.io in 2024 which did not occur in 2023 as well as a $0.9 million increase in payments related to capitalized software development costs in 2024 as compared to 2023.

Financing Activities

Cash generated by financing activities includes proceeds from the 2026 Notes, 2029 Notes and proceeds from the issuance of common stock from employee stock option exercises and from our employee stock purchase plan. 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.

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For 2025, cash flows used in financing activities was $55.0 million, compared to cash flows from financing activities of $346.4 million in 2024. The $401.4 million decrease in cash flows from in financing activities was primarily due to the $485.2 million in proceeds received from the issuance of the 2029 Notes, net of issuances costs paid in 2024, which did not occur in 2025. These decreases in cash flows from financing activities were partially offset by a $33.4 million decrease in purchases of shares of our common stock in 2025 as compared to 2024, and $63.1 million purchases of capped calls related to the 2029 Notes in 2024, which did not occur in 2025.

For 2024, cash flows from financing activities was $346.4 million, compared to cash flows used in financing activities of $31.9 million in 2023. The $378.3 million increase in cash flows from in financing activities was primarily due to $485.2 million in proceeds from the issuance of the 2029 Notes, net of issuances costs paid in 2024, which did not occur in 2023. These increases in cash flows from financing activities were partially offset by a $47.7 million increase in purchases of shares of our common stock and $63.1 million in purchases of capped calls related to the 2029 Notes in 2024, which did not occur in 2023.

Non-GAAP Measures

We define non-GAAP adjusted EBITDA as our net income before interest expense, interest income, certain activity within other income / (expense), net, provision for income taxes, income from equity method investments, net, amortization and depreciation expense, stock-based compensation expense, acquisition-related expense, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation. We do not consider these items to be indicative of our core operating performance. The non-cash items include amortization and depreciation expense; income from equity method investments, net; amortization of debt issuance costs for the 2026 Notes and 2029 Notes included in interest expense; stock-based compensation expense related to restricted stock units and other forms of equity compensation, including, but not limited to, the sale of common stock. We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements. Non-GAAP adjusted EBITDA is not a measure calculated in accordance with GAAP. See the table below for a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.

We have included non-GAAP adjusted EBITDA in this report because it is a key measure our management uses to understand and evaluate our core operating performance and trends, to generate future operating plans, to make strategic decisions regarding the allocation of capital and to make investments in initiatives that are focused on cultivating new markets for our solutions. We also use non-GAAP adjusted EBITDA, a non-GAAP financial measure, as a performance measure under our executive bonus plan. Further, we believe the exclusion of certain expenses in calculating non-GAAP adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related expense and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance. Accordingly, we believe non-GAAP adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Our use of non-GAAP adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are: (a) although amortization and depreciation are non-cash charges, the assets being amortized and depreciated may have to be replaced in the future, and non-GAAP adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) non-GAAP adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) non-GAAP adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) non-GAAP adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate non-GAAP adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

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Because of these and other limitations, you should consider non-GAAP adjusted EBITDA alongside our other GAAP-based financial performance measures, net income and our other GAAP financial results. The following table presents a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measure, for each of the periods indicated (in thousands):