Raymond James & Associates North American Equities Conference

Sep 15, 2020

Okay. Thanks everybody for joining us today. My name is Adam Tindle. I cover the IT supply chain and connected devices here at Raymond James. Very happy to be here with the team from alarm.com. We have Steve who is the CFO of the company. We also have David Trone who is the VP of IR participating in meetings. We will do a fireside chat format for this presentation here. We'll kind of keep it fairly informal. If you do have a question in the audience, you'll have a button to click within your application here that you could submit a question. That will just email a question to me. If you'd like to skip that step and email me directly, it's adam.tindle,tindle,@raymondjames.com. And I'll be happy to get your question in for Steve. And Steve, I know that there's going to be various levels of investor education here in the audience. So I figured we would start with a fairly high level view of kind of the core market, for this company. So, for alarm.com, for those that are not as familiar, if you could maybe set the stage for the quick history of the company, the size of that core residential market, the penetration level, how far we are along in terms of subscribers, and what alarm.com's competitive position. So I'll throw you a a four part multiparter right at the beginning to to wake you right up. Alrighty. Thanks, Adam, and thanks for having us. This is a great opportunity to communicate with some international investors I know, and this is always a great conference. Certainly, as we were talking, I hope we can do this in person next year. Let's let's all hope. But, again, good morning or good evening, everyone. This is Steve Valenzuela. Before I begin, I do wanna say that we do have an investor presentation on our website. If you go to alarm.com under events, you'll see a a nice investor presentation which gives you a good background. Also has a timeline there and also has a safe harbor, which I need to say that, this presentation is subject to the safe harbor. And so read that, of course. And then also separately, there's a separate group of videos, and some of those are customer testimonials about alarm.com. So that'll give you some good background as well. But to answer the start to answer the four part question, Let me give you a little bit of background, kind of how the company was started. Steve Trondeau, the CEO, founder of the company, was CTO of MicroStrategy in the early and was getting an alarm system installed. And he asked the installer what happens if somebody cuts that wire, and the installer says you have no security system. So, Steve realized that there was an opportunity here being a, you know, a technologist and a CTO. And to make a long story short, he incubated alarm.com within MicroStrategy from 2000 to 02/2008, then spun out alarm.com in 2008 with ABS Capital as an investor. And then that was right around the time, interestingly, that Apple came out with the iPhone and the App Store. So it was very good timing. And so the other innovation major innovation that alarm.com came out with is to take the plain old security system, whereas in the past, you could only go, you know, in your control panel at your home and turn off and turn on your alarm system. So the innovation another innovation that Steve and team came out with was to make the security system interactive. Meaning, you can use an app, and we we were actually one of the apps in the Apple App Store where you can use an app, and outside of your home, you could disarm and arm your alarm system. So that was around 02/2008. Also important to mention, around that time, alarm.com was trying to do DIY. We were trying to sell out of Best Buy out of the office and realized it was gonna be a very, very long haul. And so, Steam and team realized that there's all these dealers out there that are providing security systems. And so, started signing up dealers. Dealers started getting very good, success rates in terms of signing up new subscribers, and that kinda build build up to the point where 02/2012, we got to a million subscribers. And then next year, we got to 2,000,000 and really went up from there. And today, we have over 6,800,000 subscribers, and we have over 9,000 dealers. And so it really took a a period of time to get that you know, get the inflection point with the number of dealers we needed, and we call these dealer service provider partners because they truly are even though they're independent businesses, they really are partners. We work closely with them to really come up with, you know, to provide them the software that they use to provide the security system and the smart home to their end customers, either residential or commercial. And so, when you look at the the go to market, if you will, for alarm.com, again, we actually focus on technology. So we focus on the software. We provide the software for the dealers to be able to provide the alarm systems and the security system and smart property systems to the end subscriber. And, then the dealers are focused on the marketing sales installation. So it's a great relationship, and, we provide a lot of technology that a lot of investors don't realize for the dealer as well to better operate their back end, to be enter enter to be able to interact with the central station when there is an alarm. The alarm.com dealer portal obviously enables that connection. We don't actually handle the alarm itself. That's handled by the dealer themselves. And then there's a lot of analytics that the dealers get from the alarm.com system to be able to determine what's happening with the alarm system, to be able to add new subscribers. It's all through the dealer portal. So our solution is a hosted software that we actually host for the dealers and operate the software for the dealers. And so when you look at the, kinda going to your next one part of your four part question here is the market potential. So the market is is very large because we operate in a number of different segments. So, you know, if you think about the history of the company starting with North American residential, even today, of the 140,000,000 homes in North America, only about 24 to 25,000,000 of those have professionally installed monitor security systems. And of those, and it depends upon which data point you look at, about 10,000,000 or so probably have, interactive security systems. In And alarm.com, at the beginning of this year, we said we had 6,800,000 interactive subscribers. So we have a good good good share of the market there, and that's just North American residential. And then you think about commercial, which is an area that we really got into just in the last two and a half years, the market for commercial is about 4,000,000,000 in terms of security systems. And commercial is interesting in that there is a higher penetration of security systems with commercial. But, again, most of those are the legacy systems that are not interactive. So, again, think about alarm.com as being an app based interactive security system where you can interact with your alarm system outside of your property. So if you have a restaurant or you have a a series of chain of of retail stores, you can actually use the alarm.com app to be able to see what's happening in restaurants. And you can manage access to your restaurants for your employees, and you can monitor what's happening around your property. So that that that's those are really a big commercial is a big opportunity for us. International as well is a big opportunity. We started investing in international right around the time we went public in 02/2015. And today, we have a number of partners internationally, including Securitas is a good partner of ours. They've been expanding into a number of countries. We have dealers in both Latin America, Europe, and and Asia. Last quarter, we we signed an agreement with ADT International, Johnson Controls, which we think is a great opportunity. It's not the same ADT as ADT in North America. It's a different company, but we think there's a good opportunity with Johnson Controls to expand internationally. So we think international is a growth opportunity for us. And then over the last couple of years, one thing that's been a major driver of growth has been video. Video has been, the adoption of video has been very strong as the video cameras have really gotten a lot better with the the the technology. And then the innovations that we've come out with video analytics where you get smart alerts, and it makes the system a lot more smart and provides a lot of value and value to the end subscriber in terms of being able to tell what's happening in your property. So video analytics is a big growth area for us and an area where we've actually driven a lot of innovation, and we continue to innovate in that area. So I think that kinda gives you an overview, if you will, of market opportunity. And we think we're in the early stages of a long term growth cycle for both the smart property as well as security systems. But we think over the next ten years, every property will be a smart property, given all the features and capabilities. And we're expanding into water. We have a water valve plus meter that we recently announced that we think is a great opportunity to, you know, protect properties from water damage, which is typically 10 times the insurance claim compared to fire. And then we have the other segment as well with EnergyHub at PointCentral. So we a wide opportunity, if you will, for both for the smart property and the security system. Yep. That's a helpful overview, Steve. Thank you. So a lot for investors to think about there. And I think the way that a lot of investors will simplify it would be to say, we've got kind of the core market, how the company started, this kind of residential, domestic residential market. Then we've got, you know, the international opportunity that you talked about. We've got the commercial opportunity that you talked about, and then some of these other, you know, things like energy hub, etcetera. So I just wanna stay on, you know, the core residential market for for a moment, given it's the largest and and, longest standing business under the umbrella. You touched on this a little bit, but the the go to market there is different than some of the smart home products that investors might be more familiar with on the retail side. So, just briefly touch on the go to market, that service provider channel, and I guess more specifically help, investors with how the pricing model works for dealers. Why do they choose to partner with alarm.com? What does pricing for a core residential, dealer look like? Yeah. So, we, very early on, again, around 02/2008, 02/2009, started partnering with these service providers. And we really, you know, provide them a lot of support, a lot lot of training. And so we've invested in a lot of technologies to help the service provider and their technicians to be able to be very efficient, to be able to remotely diagnose if there's a problem later with a service with a subscriber system to be able to, you know, have a service provider quickly be able to come up to speed. Because, again, we provide all the technology, so we host it. So when a service provider becomes a a dealer of alarm.com, they don't have to in you know, invest in technologies. They have to invest in training, of course, but we provide the technology. We provide what's called the dealer portal. So a dealer comes online. They actually start adding subscribers into the dealer portal. And the way the economics work so we don't charge the dealer for, you know, for adding a subscriber. We charge the dealer on a per month basis, the ARPU, based upon the configuration of the end subscriber system. So to give you an idea of a residential system, let's say, let's say a dealer has installed an average system into a home, and it might have some, smart features like a thermostat and some cameras. You know, the the average they might be charging the end customer, the the residential customer might be in the, you know, anywhere from 50 to $55 per month. Our average ARPU that we charge the dealer is, you know, in the mid to upper $5 per month. And, again, it's based it's kind of like a cell phone plan. The more features that the end subscriber has, the more we charge the dealer and the more they charge the end subscriber. And so what we've done is, you know, again, that that dealer channel has been written to us since we've not raised prices to the dealers. What we do is we provide incentives to the dealers as they get more volume. The next million subscribers, they get a little bit lower discount, if you will. But what we've been really focusing on is providing the the subscribers more of technology that allows the service provider to charge more and adds more value. An example being video and then video analytics. So if a dealer has a customer that has video, they're probably, you know, charging the customer a bit more, and we're probably charging that dealer, you know, in the upper end of the $5 range. If they have video analytics, which really provides a lot of value add, and in fact, some dealers are just going standardizing with video analytics because it's so compelling if a customer has video, we might charge the dealer, you know, closer to $6 $6.50 or $7 a month, because we typically charge 80¢ to a dollar more to the dealer if the customer has video analytics. So, we focused on providing more innovations that allow the dealer to be able to monetize more and allows alarm.com to charge the dealer more, but the economics work well for everybody. The end subscriber gets a it's it's a better system, and the dealer is able to monetize that, and alarm.com is able to monetize that. So when when you think about alarm.com, you know, we're really a software company. We provide the SaaS operating system for the smart property. And so that's really the area that we focus on. You know, over 70% of our revenue is recurring SaaS revenue. We do have about 30%, of our revenue being hardware. About 65% of that, that hardware are video cameras because video has done so well. But our goal really is to drive down the cost of hardware over time so that we drive the high recurring SaaS revenue. And when you think about the historical trend rates in terms of retention, we've talked about in the past of retention, you know, a number of years ago was 92%, and now the retention is 94% in terms of subscribers. And we're actually seeing a continued nice little uptick in retention as the systems become more valuable. And it's one of these things where once you have an alarm.com system, the benefits you get are just so compelling. And it's not just the alarm system. You know? It's fire. It's carbon monoxide, but it's also all the smart features. Being able to have the convenience of being able to let in your housekeeper, your dock walker, you know, opening being able to tell if your garage door is open, you know, being able to remotely close the garage door, open the locks to your house, seeing who's around your property. These are things that become very compelling, and you just get used to it, and and you really don't wanna give up give it up. So it's very sticky for the end subscriber as well with all these features. Right. And and that take rate, so to speak, is fairly light relative to the overall dealer's contract, just $5 or so a month. Right? So may makes sense from from their standpoint. I wanna zoom in on just kind of a a near term debate. You know, you addressed a large dealer's announcement to partner with Google on the last call. We've seen partnerships, like this in the past actually have little material impact to Alarm. Actually, specifically, a Google partnership with a different dealer really had had no impact from Alarm. But it's really obviously, we've seen a big pullback in the stock, and investors are concerned about it. So maybe you could just touch on the message there, recap kind of the message and what could be similar or different about this versus the last time Google tried to do this. Yeah. I think that, well, of all, the dealer, you know, we don't like to talk too much about our dealers, other customers, but I would say that this dealer is a you know, has publicly said that alarm.com is a great partner of theirs. We partner you know, we power over 3,000,000 of their subscribers, and we work closely with this dealer. And so we have a great partnership with them. I can't really comment too much about the Google relationship. So it'll be it'll be interesting to see, but but, you know, we're excited about the opportunities with all of our dealers, including this dealer. We think the technology that we have is is pretty complex and pretty compelling because we have to integrate with all these different control panels, with all these different party devices. Know, we we integrate with, like, Sonos. We integrate with the the garage door opening companies, rainbow sprinkler systems, and that takes a lot of development, a lot of technology. And then when you think you multiply that by many different countries, the complexity is really there. And when you think about, you know, with this specific dealer, we got the relationship with this dealer back in February when we acquired, the business that was licensing the software to just this dealer, and then we started working with them on their new platform that's based that is alarm.com, and that took two years to come out with that solution. It's doing really well in the marketplace, by the way. But so these are very complex systems, and, you know, we're continuing innovations. We're continuing the video analytics capabilities, the potential. And so, you know, we we feel we're in a very good position. We have great dealers and great partnerships. And so we'll see, but, you know, I think it's too early to tell. But I I think if anything, it, you know, perhaps makes people realize that this is a growth market. Right? If if a company like Google is looking at this and continuing to make investments, they probably wanna have more of their devices in the home, which makes, you know, which makes sense. And, you know, we do integrate with the Nest Thermostat. The Nest Thermostat is actually pretty good. We have our own thermostat, but we integrate with that. We don't integrate with the Nest cameras. And I guess, perhaps going forward, we might. That might be part of the part of the initiative. But but I think if anything, it shows that, you know, just like we believe, and Steve Frondo from the very early days said this is going to be a a long term secular growth growth industry for many, many years, and having a presence in the home is really valuable. And I think that's what Google realizes, and that's I'm sure others like Amazon and Apple and Samsung and and others and LG are also looking at this and, realizing the same. So I think if anything, it just validates the importance of this market. Yeah. And maybe you could touch on I mean, it wasn't too long ago that you actually introduced a new software platform product with that specific dealer, the command and control platform. It seems like everything that we can hear on the numbers that the dealer reports and stuff like that and the way that you guys are talking about it that that platform has been a success. But maybe you want to just quickly touch on how long that took to develop, what kind of uptake that you're seeing there, and do you think that's a product that will continue for some time now? Yes. So that product, again, was the engineering work started on that after we acquired the the legacy product Pulse that that the prior company we acquired was licensing to this dealer. And so that was in March of seventeen, and then this dealer came out with their command and control about two years later in beginning of nineteen. So it took two years, and that's based on that is alarm.com software. So it took two years to be able to take the, you know, the the various, you know, look and feel that this dealer wanted for their what they call the command and control, and that's starting with alarm.com software. So these are very complex. You know, we had to integrate with different panels, and so it takes quite a bit of work, and there's a there's a lot of complexity there. But, yeah, I would say that, you know, from what everything we've seen, we're very pleased with the success of command and control. I think they are also very pleased with the success. It's a very good product. Again, it's alarm.com software that we host and we operate for this dealer. And, you know, it's it's a little bit different version of what we have to for other dealers, but it's still the alarm.com platform that our other dealers have. It's just that, you know, this dealer has a little bit different look and feel and some other different inter integrations. But but other than that, they get the benefit of, you know, the alarm.com technology just like all of our 9,000 other dealers and the video and video analytic capability. The only thing I would say is that for this dealer, we don't sell as much hardware. Typically, they they don't get the cameras from us. And so, which which is fine. I mean, again, hardware is simply an enabler for for SaaS. And, you know, the trend over the, you know, over the years is one of the early innovations, again, was the video the the radio module for making the systems cellular based versus landline, which was the earlier systems. And so today, we actually license the radio modules to the control panel manufacturers. The control panel is the brains, if you will, that goes into your closet in your home for the security system. And so we don't make those control panels. We provide, technology to be able to integrate into that control panel and then the radio module. And so, again, we're licensing that radio module now. So we're selling fewer of the radio modules when we used to sell, you know, millions and millions of dollars of radio modules. So we're fine with not having as much hardware revenue. Getting to an emailed question. Know, obviously, the heart of the question is, you know, understand that the potential headwinds from that announcement with Google, but is there, you know, maybe stepping back a bigger picture where this is showing further investment in the smart property in general? And would you expect to see, you know, rarely do we see Google, you know, do something and then Amazon or Apple, these other big players not respond? You know, as you kind of think about a crystal ball and what those other big players could do, how do you think that would develop? And would alarm.com potentially participate in something like that with them? Yeah. I think that's an interesting question. Again, you know, I can't specifically comment on any anything there, but I would say, generally, it's a it's a very logical conclusion that it's a to get into the home, and the ability to get into the home has been recognized certainly by, you know, Amazon. With the Amazon Alexa, they've done quite well. Although I I kinda feel that the, the voice assistants are kind of waning a little bit where people are, you know, maybe not using them as much, but I think the value of being in a home certainly is recognized by Amazon. I gotta imagine Apple is looking at this as well and Samsung, LG. And so, you know, I think if anything, like you said, it probably does perhaps get people to look and say, hey. What is Google doing here? You know, what should we be doing? And so I think it it just highlights the importance of the industry, and I think Alarm is in a great position. We have, you know, a great market position. We have great dealers. We have the lion's share of the market. And these relationships we built I mean, if you think about it, it's been, you know, twelve years where we built these relationship with these service providers. They standardize a lot on alarm.com because of the technology, because of the the complexity. Even those systems are becoming easier to use for the end subscriber, that makes it actually harder if you think about it from a technology point of view to be able to make all these innovations and with video analytics. And so, you know, I think alarm.com, you know, given our our our our reputation in the industry of being a great provider, great partner to the service providers, providing great support. We have a great support center in Minneapolis, Minnesota, where we have a dedicated team that all they do all day long is answer questions for the service providers. Even if it's about Amazon, Alexa, or Google Home, you know, we we we get on the phone. And and when the technician is in the home or the or the business, we're helping them to make sure if there's any issues. And we're continuing to innovate, because, again, a lot of investors don't realize, you know, almost half of our software is supporting the dealers, and they're back in. And so, even this large dealer has dealers who need to have that software and the alarm.com dealer portal. And so there's a lot of, you know, innovations and and analytics for the dealer that we've developed over the years that makes their business operate a lot more smoothly. So, yeah, I think it's it's it's it just validates that this is a very good growth area, and you wanna be in the home. You wanna be in the home. Yep. And and keep those questions coming. Again, if you have questions, if you wanna email me directly, adam.tindle@raymondjames.com. I'll be happy to get those over to Steve. We've got about fifteen minutes left, Steve. I wanna see if we can tackle international, then commercial, then twenty twenty near term stuff. So let's start on international just because we've got, you know, kind of an international flavor to this conference, international audience of investors that are largely dialing in here. You you recapped earlier kind of the core residential, how it went from, you know, 1,000,000 subscribers to 2,000,000 to 6,800,000 and kinda hits this s curve, so to speak, when you, get these, you know, next million subscribers takes a shorter period. Right? Right. So maybe just kinda compare the timeline that you saw in residential to what you're currently experiencing in international and just some of the key milestones that investors should look out for. Yeah. That's a very good point. I think, international, has, you know, taken, you know, longer, if you will, because of the each of the different countries we have to to establish relationships with different carriers. And then there's different certifications required in those countries, and then, of course, local language support. But today, the good news is we're in over 40 countries, and we've done all that heavy lifting, if you will. We there still obviously is a is a a lot of opportunity internationally. At the very beginning stages, and we're certainly not hit that inflection point yet in international. We have some, you know, recently, we signed up, ADT International, which is, you know, owned by Johnson Controls, and they're a new new dealer we announced last quarter. We have Securitas, and we have a number of dealers in different countries. And so we're seeing, you know, good opportunities in Europe, Latin America, and just starting to see some opportunities in Asia. We have dealers in Australia and New Zealand. But I would say that international is still, you know, at the early stages of of and not hitting that inflection point yet. Prior to COVID, we had a number of new dealers who were launching this year, which has been delayed. So probably, international has been more impacted by COVID and more slowed down by COVID because of the lockdown was more more severe in some of the countries, and that slowed down some of our new dealers who are rolling out the alarm.com system to their installed base. But we think it's just a matter of time. It's not a it's just a it's just a slowdown of the implementations, and they're continuing to to to make those innovations and and make those make those those add those new subscribers. And so it's just slowing it down a bit, but we think international is a great opportunity great opportunity. You know, if you think about over the years, future years, international should be 25 to 30% of our revenue, and today, it's only two to 3% of our revenue. So we think there's quite of opportunity, but we're not at that inflection point yet for international. Okay. Helpful. And then maybe kind of a similar question for commercial. You touched on, the size of the market a little bit. Just, you know, OpenEye obviously gives you some new dealers, new customers. Just where are we at? You know, when does the s curve really start to accelerate there? So Internet commercial is I would say it's it's it's probably bigger than international right now, but both have very good growth opportunities. Commercial, we actually, you know, really came out with alarm.com for business about two and a half years ago, and that was really that's really geared towards small business. So if you have a, you know, a restaurant chain with five or six different restaurants, you could, you know, use alarm.com for business, and you could manage your property. We came out with access control, which allows the owner to provide access for their employees that, you know, they can give a key electronic key to the employees. So the longer comfort business has done quite well. And to the point where we we we now acquired OpenEye in October of last year, which expands us into the enterprise segment of the commercial market, which is about a $4,000,000,000 market opportunity. And the difference with OpenEye is that their platform is sold through large integrators that sell into, like, Olive Garden, Bed Bath and Beyond, Gonzaga University, and, you know, many other customers. Some of those we can't name, that are big companies that have many, you know, many franchisees or they have theme parks and and and such. And so there's, there's quite a big opportunity. Now I will say that just like international, commercial has been more impacted by COVID than North American residential because of certainly, some of the restaurants have not opened. Some of the, you know, commercial stores have not opened. But we think, again, it's just a matter of of of just a push out, if you will, of time. It's the opportunity is still the pipeline is very good for OpenEye. And once you know, I think once things open up, I think we'll continue to see good growth in commercial. Commercial, again, is, you know, most commercial businesses do need a security system that, as I mentioned, most of those are the legacy systems. So we think there's a lot of opportunity for commercial to provide the interactive systems of alarm.com for, you know, both for OpenEye as well as for, as well as the alarm.com for business. And we when we think about, you know, the world is not getting any safer for commercial businesses or residential customers, and so they really need a a good security system. And with video analytics like alarm.com, they can see what's happening around their property, make sure their employees are safe, and make sure that their properties are are safe even if they're not at of the establishment. So we think it's a I think both of those are very good growth opportunities, international and commercial. Yep. Yep. I wanna zoom in, just real quick with the remaining five to ten minutes that we have here. 2020 performance was, you know, fairly different than a lot of businesses that we've seen out there. You know, your recurring revenue model and the durability of the business was certainly on display. So maybe for investors who haven't seen the story or haven't kind of lived through it, walk us through the impact that you saw and then where we stand today. Yeah. So we did see, you know, in March and April, as we talked about on the q one call in May, that we did see an impact from COVID shutdown where, March and April, we started to see, you know, with the shelter in place, the, installations being at about 70% of the pre COVID levels. And the retention the good news is retention has stayed solid. If not, it's actually ticked up a little bit, which is great. And then we started to see North America in a quick recovery, and not all dealers. Certainly, some dealers are doing better better than ours. But the the I think there are some macro trends that are really driving the need system for the smart home that really helped our dealers. And our dealers adapted pretty quickly to being able to go into homes even, you know, even with COVID, with protective equipment. And what's interesting too is some of the benefit with people being home is the dealers were able to reach customers, and so they were able to, you know, to get get some new customers that way. But I think the dealers have just done a good job of adapting to the COVID situation, which obviously is something that, you know, if it wasn't for COVID, we would even have better growth. But I think North American residential has done, you know, for the most part, really well. Overall, the dealers are doing quite well given the given the circumstances. Not as, you know, we we would certainly be doing much better if it wasn't for COVID. Yep. And and entering this year, you explained For the make of the person. Yeah. Because of the recurring SaaS nature of the business, it continues to, you know, grow. It continues to evolve, and the dealers we have and, again, you have 9,000 dealers out there that are every day putting in new systems. And certainly with COVID, not at the same rate, but we're you know, we continue to see that that benefit. Okay. And we've got about five minutes left. I've got a couple emailed questions to get to. I do wanna ask. So entering 2020, you explained that there would be some investments that might limit some of the normal operating leverage near term, but you're obviously very thoughtful thoughtful about long term opportunities. So maybe just take us, through how those investments that you spoke about are playing out and really how investors can think about operating leverage What's the right level of investment for this company? Yes. So we've I think we've done a good job of balancing both the level of investments and provided a good level of EBITDA and profitability and cash flow at the same time of investing in the business. You know, we do invest a lot in r and d because and even in this here period of COVID, we've actually continued to hire and actually been able to attract some good engineers, some software engineers who weren't able to hire before. But when you think about, you know, alarm.com, we we spend about 25 to 26% of our revenue on r and d because that's really our expertise. There's a lot of innovations we're we're focusing on, like continuing to expand commercial. There's a lot of features and capabilities we're investing there for both for OpenEye as well as for alarm.com for business. International takes investment because you've got to train. You've gotta get the certifications in the countries. Video and video analytics is a an area of investment for us. We're continuing to evolve our AI system to make it smarter. So for example, for commercial business, to be able to do a line counting, to be able to tell if, you know, if a commercial business needs to send more employees to a store, to be able to do AB testing. So there's a lot of areas of investment there. And I think the, you know, the performance this year in a COVID environment and the and the the durability, as you mentioned, of the of the of the model and of the revenue shows, the areas we've invested have have been appropriate and have a good return. And when you look at over the last five years, you know, we've more than doubled the revenue. We more than doubled the EBITDA. So I think, you know, when we when investors think about alarm.com, they should think about a team that that is conscious of both the level of investment and providing a good level of profitability. We do think that, you know, longer term, certainly, there's even today, we could have a lot higher profitability, but it would be at the expense of not investing in the areas that we think will provide a long term growth trend for the company over the next ten years. So it would be a disservice today to, you know, to have a much higher profitability level and not make those investments given the opportunities we see with the water valve plus meter we just announced that's coming out with the video analytics, you know, and there's other technologies we're investing in with the car sensor that we have. So there's a lot of technologies that we're investing in, and many of those, of course, we haven't discussed, because we're, you know, we're we're we're innovating. And but I think investors should have confidence that, you know, that we that we do provide a good level of profitability and a good level of cash flow based on our, you know, our performance over the last five years. And and when you look at the m and a and the acquisitions we've done, I think we've done a good job. I mean, we've, you know, we've made we've been careful with m and a. We just haven't acquired just to acquire. And pretty much all the acquisitions we've done have paid off really well, including OpenEye. You know, OpenEye has certainly been delayed with COVID, but we're really happy with OpenEye and the team there. It's really done a great job. And then we've got the object video that we acquired, the connect piece we acquired, and, you know, a number of other technologies we've acquired that actually done quite well. EnergyHub is doing really well with residential demand response given the, you know, the the need to manage your utility and, you know, the the the the drain on the utilities and the and the need to be able to control their, you know, energy use. So now we're we're very pleased with the areas we've invested in. I think when we think about R and D and investments, we think about the return too. So we're not just, you know, investing in areas just to drive the top line. We're also thinking about it's got to have an ROI. Okay. That's helpful. And maybe just the quick take on how investors can think about SaaS and license revenue growth, what's the right level EBITDA margin, what's the right level? There once was a time where it was kind of 20 plus percent in each of those, and you had the magic rule of 40 that everybody likes. What's as I think about kind of long term or even 2021, just maybe take us through what the right levels to for what you think the business could support on those two lines. Yeah. I think that we we've, you know, be careful not to set too many expectations. We did say when we went public, five years ago that we had a and we haven't really given a growth trajectory. And we're trying not to get hung up on on on just one year growth rate because we think over the next ten years, the growth rate is, you know, is the growth opportunity is quite compelling. So I I don't wanna really give out a necessarily growth number there. But I would say from a profitability point of view, the history of where we've been profitability wise, we have been around the 20% range, I think, certainly makes sense of continuing that. Now at some point, you know, you could certainly see, you know, cutting back on r and d, and you could see EBITDA in the 30% range. You know, if you're spending if we're investing 26% in r and d today, at some point in the distant future, you could see typical r and d investment would be 12 to 14%. And so you could certainly see 30% plus EBITDA, but that would be that would be the wrong thing to do today. So I think investors should think that we're making the right investments. We're at about the same, you know, level, you know, of investment, you know, that we told that we told investors we would be at the same level of EBITDA. If anything, we've probably been overperforming on EBITDA this year because of the, you know, not traveling and such. And so I think we're very optimistic, if you will, about the growth opportunities and about the level of profitability we can provide. Okay. Well, I think we're out of time. That was a great summary, Steve. Thank you so much for your time. Thanks to the audience for all your questions. If you do have additional questions that you want me to follow-up with that you didn't get, answered on this, email them to me. We'll we'll get them to the alarm team. They're very, gracious with their time. So we appreciate it, Steve. Thank you very much. Thanks, Adam. Thanks for the opportunity. Have a great day. Thanks, everyone. Bye bye.