Document


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 7, 2018
 
Alarm.com Holdings, Inc.
(Exact name of registrant as specified in its charter)
       
 
 
 
 
 
Delaware
 
001-37461
 
26-4247032
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
        
8281 Greensboro Drive, Suite 100, Tysons, Virginia
 
22102
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (877) 389-4033
  
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
 

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Item 2.02 Results of Operations and Financial Condition.

On November 7, 2018, Alarm.com Holdings, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2018. The press release is furnished hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this Current Report, including the exhibit attached hereto, is furnished under Item 2.02 of this report and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.
 
(d)Exhibits
Exhibit No.
  
Description
  

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
Alarm.com Holdings, Inc.
 
 
 
Date:
November 7, 2018
 
 
 
By:
/s/ Steve Valenzuela
 
 
 
Steve Valenzuela
 
 
 
Chief Financial Officer

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Exhibit


Exhibit 99.1

Alarm.com Reports Third Quarter 2018 Results

-- Third Quarter SaaS and License Revenue grew 20.0% year-over-year to $74.3 million --
-- Third Quarter Total Revenue grew 24.3% year-over-year to $111.8 million --
-- Third Quarter GAAP Net Loss of $7.7 million, compared to $15.1 million Net Income for the Third Quarter of 2017 --
-- Third Quarter Non-GAAP Adjusted EBITDA increased to $25.8 million, compared to $19.5 million for the Third Quarter of 2017 --

TYSONS, VA., November 7, 2018 -- Alarm.com Holdings, Inc. (Nasdaq: ALRM), the leading platform for the intelligently connected property, today reported financial results for its third quarter ended September 30, 2018. Alarm.com also provided its financial outlook for SaaS and license revenue for the fourth quarter of 2018 and increased its guidance for the full year of 2018.

“We’re pleased to report another solid quarter of growth,” said Steve Trundle, President and CEO of Alarm.com. “Our service providers continued to succeed in the market and expand their use of Alarm.com’s smart home and business services. The Alarm.com team also extended our technology advantage with the introduction of new products, including our video analytics service.”

Third Quarter 2018 Financial Results as Compared to Third Quarter 2017

SaaS and license revenue grew 20.0% to $74.3 million, compared to $61.9 million. SaaS and license revenue includes software license revenue of $10.5 million, compared to $9.3 million.
Total revenue grew 24.3% to $111.8 million, compared to $90.0 million.
GAAP net loss was $7.7 million, or $0.16 loss per diluted share, compared to $15.1 million net income, or $0.31 income per diluted share, primarily due to a $28.0 million expense related to an agreement to settle a putative class action lawsuit.
Non-GAAP adjusted EBITDA increased to $25.8 million, compared to $19.5 million.
Non-GAAP adjusted net income increased to $18.2 million, or $0.36 per diluted share, compared to $13.3 million or $0.27 per diluted share.

Balance Sheet and Cash Flow

Total cash and cash equivalents increased to $124.2 million as of September 30, 2018, compared to $96.3 million as of December 31, 2017.
For the quarter ended September 30, 2018, cash flows from operations were $19.8 million, an increase of $6.0 million from $13.8 million for the quarter ended September 30, 2017.
For the quarter ended September 30, 2018, free cash flow was $16.6 million, an increase of $4.7 million from $11.9 million for the quarter ended September 30, 2017.

Recent Business Highlights

Launched Video Analytics Service: Alarm.com’s video analytics and computer vision team deployed an artificial intelligence architecture and launched a new Video Analytics service for residential and business subscribers. The object classification and object tracking capabilities can distinguish between people, vehicles and animals, identify and monitor important events, and ignore routine activity. Subscribers can selectively control and manage notifications to enable an intelligent new layer of property awareness that enhances their Alarm.com video service.

Integrated Scenes with Siri Shortcuts for iOS and watchOS: Alarm.com subscribers can now create custom phrases for Siri to trigger connected device actions through their Alarm.com system. With a simple voice command, they can engage Alarm.com’s Scenes feature to adjust multiple devices in their home or business. Combining mobility and voice with multi-device smart home automations enables high-value voice assistant interactions with Alarm.com’s services from anywhere.

Launched In-App Severe Weather Messaging: Alarm.com’s service provider partners can now push critical information through the Alarm.com mobile app to customers affected by hurricanes and other major community emergencies that can impact system connectivity. Emergency Messaging enables Alarm.com’s service provider partners to reinforce their commitment to unmatched service during times when safety and security are top of mind for their customers. They can inform customers about approaching severe weather events, set expectations about potential service interruptions, and provide updated contact information.

Hosted PowerUp Training Conference: An extension of Alarm.com’s award-winning training program, the PowerUp Conference is an intensive multi-day learning experience designed to help service providers become more efficient at

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selling, installing, and supporting the full range of Alarm.com's smart home and business services. The immersive, hands-on training event offered more than 20 different sessions across 6 tracks customized to specific roles and responsibilities, such as installation technician, business operations, and sales and marketing. Attendance for this year's conference increased to more than 140 participants representing 50 service provider partners, and the expanded agenda offered innovative new learning experiences, including interactive troubleshooting, consultative workshops, and augmented support training.

EnergyHub Expands Partnership with Arizona Public Service (APS): EnergyHub’s distributed energy resource management system (DERMS) was selected to manage a range of grid-edge devices for APS, the largest and longest-serving electric utility in Arizona. EnergyHub’s platform will deliver load shifting, renewables matching, voltage support, peak demand reduction, and other critical grid services using a diverse range of grid-edge devices including battery energy storage, smart solar inverters, water heaters, and connected thermostats. EnergyHub has been working with APS on its connected thermostat energy efficiency program since 2017.

PointCentral Extends Solution with New CRM Integrations: PointCentral, an Alarm.com subsidiary, announced integrations with two new CRM platforms for the vacation rental management market. These robust application level interfaces further extend PointCentral’s enterprise-scale property automation solutions into workflows for guest access and property servicing and turnovers. PointCentral customers benefit from improved operations and greater satisfaction for both guests and property owners.

Financial Outlook

Alarm.com is providing its outlook for SaaS and license revenue for the fourth quarter of 2018 and is increasing its guidance for the full year 2018.

For the fourth quarter of 2018:

SaaS and license revenue is expected to be in the range of $76.3 million to $76.5 million.

For the full year of 2018:

SaaS and license revenue is expected to be in the range of $289.5 million to $289.7 million.
Total revenue is expected to be in the range of $407.5 million to $409.7 million, which includes anticipated hardware and other revenue in the range of $118.0 million to $120.0 million.
Non-GAAP adjusted EBITDA is expected to be in the range of $91.0 million to $91.5 million.
Non-GAAP adjusted net income is expected to be in the range of $63.8 million to $64.2 million, based on an estimated tax rate of 21.0%.
Based on an expected 50.0 million weighted average diluted shares outstanding, non-GAAP adjusted net income is expected to be $1.28 per diluted share.

Conference Call and Webcast Information

Alarm.com will host a conference call to discuss its third quarter 2018 financial results and its outlook for the fourth quarter and full year 2018. A live audio webcast is scheduled to begin at 4:30 p.m. ET on November 7, 2018. To participate on the live call, analysts and investors should dial 866.588.3290 (U.S./Canada) or 262.558.6169 (International) at least ten minutes prior to the start time of the call. A telephonic replay of the call will be available through November 15, 2018 by dialing 855.859.2056 (U.S./Canada) or 404.537.3406 (International) and providing Conference ID: 3438676. Alarm.com will also offer a live and archived webcast of the conference call accessible via Alarm.com’s Investor Relations website at http://investors.alarm.com.

About Alarm.com Holdings, Inc.

Alarm.com is the leading platform for the intelligently connected property. Millions of people depend on Alarm.com's technology to monitor and control their property from anywhere. Centered on security and remote monitoring, our platform addresses a wide range of market needs and enables application-based control for a growing variety of Internet of Things (IoT) devices. Our security, video monitoring, intelligent automation and energy management solutions are available through our network of thousands of professional service providers in North America and around the globe. Alarm.com's common stock is traded on Nasdaq under the ticker symbol ALRM. For more information, please visit www.alarm.com.


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Non-GAAP Financial Measures

To supplement our consolidated selected financial data presented on a basis consistent with GAAP, this press release contains certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP adjusted income before income taxes, non-GAAP adjusted net income, non-GAAP adjusted income attributable to common stockholders before income taxes, non-GAAP adjusted net income attributable to common stockholders, non-GAAP adjusted net income per share and free cash flow. We have included non-GAAP measures in this press release because they are financial, operating or liquidity measures used by our management to (i) understand and evaluate our core operating performance and trends and generate future operating plans, (ii) make strategic decisions regarding the allocation of capital and investments in initiatives that are focused on cultivating new markets for our solutions and (iii) provide useful information to management about the amount of cash generated by the business after necessary capital expenditures. We also use certain non-GAAP financial measures, including adjusted EBITDA, as performance measures under our executive bonus plan. Further, we believe that these non-GAAP measures of our financial results provide useful information to investors and others in understanding and evaluating our results of operations, business trends and financial condition. While we believe the use of these non-GAAP measures provides useful information to investors and management in analyzing our financial performance, non-GAAP measures have inherent limitations in that they do not reflect all of the amounts and transactions that are included in our financial statements prepared in accordance with GAAP. Non-GAAP measures do not serve as an alternative to GAAP nor do we consider our non-GAAP measures in isolation, accordingly we present non-GAAP financial measures only in connection with GAAP results. We urge investors to consider non-GAAP measures only in conjunction with our GAAP financials and to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures, which are included in this press release.

We consider free cash flow to be a liquidity measure, which we define as cash flows from operating activities less purchases of property and equipment.

With respect to our expectations under “Financial Outlook” above, reconciliation of adjusted EBITDA and adjusted net income guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures, in particular, non-ordinary course litigation expense, acquisition-related expense and tax windfall adjustments can have unpredictable fluctuations based on unforeseen activity that is out of our control and/or cannot reasonably be predicted. We expect the above charges to have a significant and potentially highly variable impact on our future GAAP financial results.

We exclude one or more of the following items from non-GAAP financial and operating measures:

Stock-based compensation expense: We exclude stock-based compensation expense, which relates to stock options 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 that excluding stock-based compensation from our non-GAAP financial measures improves the comparability of our results to the results of other companies in our industry.

Litigation expense: We exclude non-ordinary course litigation expense because we do not consider legal costs and settlement fees incurred 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 legal expenses, including those expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

Acquisition-related expense: Included in operating expenses are external incremental costs directly related to completing the acquisition and integration of the Connect and Piper business units from Icontrol Networks, Inc. We exclude acquisition-related expense from our non-GAAP financial measures because we believe it is useful for investors to understand the effects of this transaction and its integration costs on our total operating expenses.

Depreciation expense: We record depreciation primarily for investments in property and equipment. We exclude depreciation in calculating adjusted EBITDA because we do not consider depreciation when we evaluate our ongoing business operations. For non-GAAP adjusted net income, non-GAAP adjusted net income attributable to common stockholders and non-GAAP adjusted net income per share, basic and diluted, we do not exclude depreciation.

Amortization expense: 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 our non-GAAP financial measures 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 that 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 us and therefore, amortization expense may vary significantly by company based on their acquisition history.


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Interest expense: We record interest expense primarily related to our debt facility. We exclude interest expense in calculating our adjusted EBITDA calculation. For non-GAAP adjusted net income, non-GAAP adjusted net income attributable to common stockholders and non-GAAP adjusted net income per share, basic and diluted, we do not exclude interest expense.

Other income, net: We exclude other income, net from our non-GAAP financial measures because we do not consider it part of our ongoing results of operations.

Income taxes: We exclude the impact related to our provision for income taxes from our adjusted EBITDA calculation. We also exclude the impact related to the adoption of the accounting standard for employee share-based transactions from our provision for income taxes within our non-GAAP adjusted net income, non-GAAP adjusted net income attributable to common stockholders and non-GAAP adjusted net income per share, basic and diluted. We do not consider these tax adjustments to be part of our ongoing results of operations.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by their use of terms and phrases such as “anticipate,” “expect,” “will,” “believe,” “continue,” “enable” and other similar terms and phrases, and such forward-looking statements include, but are not limited to, the statements regarding the Company’s continued enhancements of its platform and integrations, introduction of new product offerings and the Company’s future financial performance for the fourth quarter and full-year 2018. The events described in these forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to: the Company’s ability to retain service provider partners and residential and commercial subscribers and grow sales, the Company’s ability to manage growth and execute on its business strategies, the effects of increased competition and evolving technologies, the Company’s ability to integrate acquired assets and businesses and to manage service provider partners, customers and employees, consumer demand for interactive security, video monitoring, intelligent automation, energy management and wellness solutions, the reliability of the Company’s network operations centers, the Company’s reliance on its service provider network to attract new customers and retain existing customers, the reliability of the Company’s hardware and wireless network suppliers, future financial prospects, as well as other risks and uncertainties discussed in the “Risk Factors” section of the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 7, 2018 and other subsequent filings the Company makes with the Securities and Exchange Commission from time to time. In addition, the forward-looking statements included in this press release represent the Company’s views and expectations as of the date hereof and are based on information currently available to the Company. The Company anticipates that subsequent events and developments may cause the Company’s views to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so except as required by law. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date hereof.


Investor Relations:
David Trone
Alarm.com
dtrone@alarm.com

Media Relations:
Matthew Zartman
Alarm.com
mzartman@alarm.com

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ALARM.COM HOLDINGS, INC.
Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)


 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
SaaS and license revenue
$
74,292

 
$
61,924

 
$
213,248

 
$
171,078

Hardware and other revenue
37,556

 
28,038

 
95,844

 
79,066

Total revenue
111,848

 
89,962

 
309,092

 
250,144

Cost of revenue:
 
 
 
 
 
 
 
Cost of SaaS and license revenue
11,501

 
9,545

 
33,334

 
26,137

Cost of hardware and other revenue
30,491

 
22,288

 
73,523

 
62,166

Total cost of revenue
41,992

 
31,833

 
106,857

 
88,303

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
14,128

 
10,426

 
39,562

 
32,639

General and administrative
43,662

 
12,974

 
77,943

 
41,799

Research and development
22,869

 
19,257

 
64,767

 
53,840

Amortization and depreciation
5,891

 
5,071

 
16,154

 
12,781

Total operating expenses
86,550

 
47,728

 
198,426

 
141,059

Operating (loss) / income
(16,694
)
 
10,401

 
3,809

 
20,782

Interest expense
(736
)
 
(658
)
 
(2,159
)
 
(1,548
)
Other income, net
717

 
342

 
1,533

 
716

(Loss) / income before income taxes
(16,713
)
 
10,085

 
3,183

 
19,950

Benefit from income taxes
(9,061
)
 
(5,018
)
 
(10,413
)
 
(8,981
)
Net (loss) / income
(7,652
)
 
15,103

 
13,596

 
28,931

Income allocated to participating securities

 
(6
)
 
(2
)
 
(14
)
Net (loss) / income attributable to common stockholders
$
(7,652
)
 
$
15,097

 
$
13,594

 
$
28,917

 
 
 
 
 
 
 
 
Per share information attributable to common stockholders:
 
 
 
 
 
 
 
Net (loss) / income per share:
 
 
 
 
 
 
 
Basic
$
(0.16
)
 
$
0.32

 
$
0.29

 
$
0.62

Diluted
$
(0.16
)
 
$
0.31

 
$
0.27

 
$
0.59

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
47,812,642

 
46,886,345

 
47,494,926

 
46,520,469

Diluted
47,812,642

 
49,259,701

 
49,593,918

 
49,074,279

 
 
 
 
 
 
 
 
Stock-based compensation expense included in operating expenses:
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Sales and marketing
$
301

 
$
181

 
$
855

 
$
359

General and administrative
1,191

 
584

 
3,700

 
1,908

Research and development
1,965

 
1,141

 
5,115

 
2,867

Total stock-based compensation expense
$
3,457

 
$
1,906

 
$
9,670

 
$
5,134


5

ALARM.COM HOLDINGS, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)


 
September 30,
2018
 
December 31, 2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
124,243

 
$
96,329

Accounts receivable, net
55,461

 
40,634

Inventory, net
16,906

 
14,177

Other current assets
16,864

 
12,796

Total current assets
213,474

 
163,936

Property and equipment, net
28,349

 
23,459

Intangible assets, net
82,868

 
94,286

Goodwill
63,591

 
63,591

Deferred tax assets
26,596

 
18,444

Other assets
12,482

 
7,925

Total assets
$
427,360

 
$
371,641

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable, accrued expenses and other current liabilities
$
57,994

 
$
29,084

Accrued compensation
11,473

 
12,127

Deferred revenue
3,539

 
3,292

Total current liabilities
73,006

 
44,503

Deferred revenue
8,335

 
9,386

Long-term debt
68,000

 
71,000

Other liabilities
13,278

 
13,925

Total liabilities
162,619

 
138,814

Stockholders’ equity
 
 
 
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2018 and December 31, 2017.

 

Common stock, $0.01 par value, 300,000,000 shares authorized; 48,003,929 and 47,215,720 shares issued; and 47,999,924 and 47,202,310 shares outstanding as of September 30, 2018 and December 31, 2017, respectively.
480

 
472

Additional paid-in capital
336,220

 
321,032

Accumulated deficit
(71,959
)
 
(88,677
)
Total stockholders’ equity
264,741

 
232,827

Total liabilities and stockholders’ equity
$
427,360

 
$
371,641


6

ALARM.COM HOLDINGS, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

 
Nine Months Ended 
 September 30,
Cash flows from operating activities:
2018
 
2017
Net income
$
13,596

 
$
28,931

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Provision for doubtful accounts
108

 
(360
)
Reserve for product returns
210

 
1,732

Amortization on patents and tooling
701

 
817

Amortization and depreciation
16,154

 
12,781

Amortization of debt issuance costs
81

 
70

Deferred income taxes
(9,108
)
 
(6,360
)
Undistributed losses from equity investees

 
120

Stock-based compensation
9,670

 
5,134

Disposal of property and equipment
285

 

Changes in operating assets and liabilities (net of business acquisitions):
 
 
 
Accounts receivable
(15,145
)
 
(1,342
)
Inventory
(2,729
)
 
(2,775
)
Other assets
(5,072
)
 
(8,122
)
Accounts payable, accrued expenses and other current liabilities
28,472

 
7,975

Deferred revenue
(804
)
 
(493
)
Other liabilities
(1,441
)
 
437

Cash flows from operating activities
34,978

 
38,545

Cash flows used in investing activities:
 
 
 
Business acquisitions, net of cash acquired

 
(154,289
)
Additions to property and equipment
(9,317
)
 
(7,652
)
Investment in cost and equity method investees

 
(42
)
Issuances of notes receivable

 
(5,000
)
Receipt of payment on notes receivable

 
4,000

Cash flows used in investing activities
(9,317
)
 
(162,983
)
Cash flows from financing activities:
 
 
 
Proceeds from credit facility

 
67,000

Repayments of credit facility
(3,000
)
 
(1,700
)
Repurchases of common stock
(1
)
 
(9
)
Issuances of common stock from equity based plans
5,254

 
3,153

Cash flows from financing activities
2,253

 
68,444

Net increase / (decrease) in cash and cash equivalents
27,914

 
(55,994
)
Cash and cash equivalents at beginning of the period
96,329

 
140,634

Cash and cash equivalents at end of the period
$
124,243

 
$
84,640


7

ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures
(in thousands)
(unaudited)


 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Adjusted EBITDA:
 
 
 
 
 
 
 
Net (loss) / income
$
(7,652
)
 
$
15,103

 
$
13,596

 
$
28,931

Adjustments:
 
 
 
 
 
 
 
Interest expense and other income, net
19

 
316

 
626

 
832

Benefit from income taxes
(9,061
)
 
(5,018
)
 
(10,413
)
 
(8,981
)
Amortization and depreciation expense
5,891

 
5,071

 
16,154

 
12,781

Stock-based compensation expense
3,457

 
1,906

 
9,670

 
5,134

Acquisition-related expense

 
221

 

 
5,842

Litigation expense
33,167

 
1,879

 
42,555

 
4,923

Total adjustments
33,473

 
4,375

 
58,592

 
20,531

Adjusted EBITDA
$
25,821

 
$
19,478

 
$
72,188

 
$
49,462

 
 
 
 
 
 
 
 
Adjusted net income:
 
 
 
 
 
 
 
Net (loss) / income, as reported
$
(7,652
)
 
$
15,103

 
$
13,596

 
$
28,931

Benefit from income taxes
(9,061
)
 
(5,018
)
 
(10,413
)
 
(8,981
)
(Loss) / income before income taxes
(16,713
)
 
10,085

 
3,183

 
19,950

Adjustments:
 
 
 
 
 
 
 
Less: Other income, net
(717
)
 
(342
)
 
(1,533
)
 
(716
)
Amortization expense
3,801

 
3,682

 
11,418

 
8,705

Stock-based compensation expense
3,457

 
1,906

 
9,670

 
5,134

Acquisition-related expense

 
221

 

 
5,842

Litigation expense
33,167

 
1,879

 
42,555

 
4,923

Non-GAAP adjusted income before income taxes
22,995

 
17,431

 
65,293

 
43,838

Income taxes 1
(4,829
)
 
(4,096
)
 
(13,712
)
 
(12,012
)
Non-GAAP adjusted net income
$
18,166

 
$
13,335

 
$
51,581

 
$
31,826


1 Income taxes are calculated using a rate of 21.0% for each of the three and nine months ended September 30, 2018, as compared to 23.5% and 27.4% for the same periods in the prior year. The effective tax rate excludes the impact of the accounting standard for employee share-based payments (ASU 2016-09). The 21.0% rate for the three and nine months ended September 30, 2018 reflects the estimated long-term corporate tax rate which incorporates the impact of the Tax Cuts and Jobs Act signed into law in December 2017.




8

ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures - continued
(in thousands, except share and per share data)
(unaudited)


 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Adjusted net income attributable to common stockholders:
 
 
 
 
 
 
 
Net (loss) / income attributable to common stockholders, as reported
$
(7,652
)
 
$
15,097

 
$
13,594

 
$
28,917

Benefit from income taxes
(9,061
)
 
(5,018
)
 
(10,413
)
 
(8,981
)
(Loss) / income attributable to common stockholders before income taxes
(16,713
)
 
10,079

 
3,181

 
19,936

Adjustments:
 
 
 
 
 
 
 
Less: Other income, net
(717
)
 
(342
)
 
(1,533
)
 
(716
)
Amortization expense
3,801

 
3,682

 
11,418

 
8,705

Stock-based compensation expense
3,457

 
1,906

 
9,670

 
5,134

Acquisition-related expense

 
221

 

 
5,842

Litigation expense
33,167

 
1,879

 
42,555

 
4,923

Non-GAAP adjusted income attributable to common stockholders before income taxes
22,995

 
17,425

 
65,291

 
43,824

Income taxes 1
(4,829
)
 
(4,095
)
 
(13,711
)
 
(12,008
)
Non-GAAP adjusted net income attributable to common stockholders
$
18,166

 
$
13,330

 
$
51,580

 
$
31,816


 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Adjusted net income per share:
 
 
 
 
 
 
 
Net (loss) / income per share - basic, as reported
$
(0.16
)
 
$
0.32

 
$
0.29

 
$
0.62

Benefit from income taxes
(0.20
)
 
(0.11
)
 
(0.22
)
 
(0.19
)
(Loss) / income before income taxes
(0.36
)
 
0.21

 
0.07

 
0.43

Adjustments:
 
 
 
 
 
 
 
Less: Other income, net
(0.01
)
 
(0.01
)
 
(0.03
)
 
(0.02
)
Amortization expense
0.08

 
0.08

 
0.24

 
0.19

Stock-based compensation expense
0.07

 
0.04

 
0.20

 
0.11

Acquisition-related expense

 

 

 
0.13

Litigation expense
0.70

 
0.05

 
0.90

 
0.10

Non-GAAP adjusted income before income taxes
0.48

 
0.37

 
1.38

 
0.94

Income taxes 1
(0.10
)
 
(0.09
)
 
(0.29
)
 
(0.26
)
Non-GAAP adjusted net income per share - basic
$
0.38

 
$
0.28

 
$
1.09

 
$
0.68

 
 
 
 
 
 
 
 
Non-GAAP adjusted net income per share - diluted
$
0.36

 
$
0.27

 
$
1.04

 
$
0.65

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic, as reported
47,812,642

 
46,886,345

 
47,494,926

 
46,520,469

Diluted, as reported 2
49,808,615

 
49,259,701

 
49,593,918

 
49,074,279


1 Income taxes are calculated using a rate of 21.0% for each of the three and nine months ended September 30, 2018, as compared to 23.5% and 27.4% for the same periods in the prior year. The effective tax rate excludes the impact of the accounting standard for employee share-based payments (ASU 2016-09). The 21.0% rate for the three and nine months ended September 30, 2018 reflects the estimated long-term corporate tax rate which incorporates the impact of the Tax Cuts and Jobs Act signed into law in December 2017.

2 For periods with GAAP net losses and non-GAAP adjusted net income, the weighted-average outstanding shares used to calculate diluted non-GAAP adjusted net income per share includes potentially dilutive securities that were excluded from the calculation of GAAP net income per share as the effect was anti-dilutive.

9

ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures - continued
(in thousands)
(unaudited)


 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Free cash flow:
 
 
 
 
 
 
 
Cash flows from operating activities
$
19,774

 
$
13,809

 
$
34,978

 
$
38,545

Additions to property and equipment
(3,186
)
 
(1,938
)
 
(9,317
)
 
(7,652
)
Non-GAAP free cash flow
$
16,588

 
$
11,871

 
$
25,661

 
$
30,893


10