Alarm.com
Mar 15, 2017
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Alarm.com Reports Fourth Quarter and Full Year 2016 Results

-- SaaS and license revenue of $46.9 million for the fourth quarter and $173.5 million for the full year --
-- Total revenue of $69.8 million for the fourth quarter and $261.1 million for the full year --
-- GAAP net income of $3.0 million for the fourth quarter and $10.2 million for the full year --
-- Non-GAAP adjusted EBITDA of $14.3 million for the fourth quarter and $49.0 million for the full year --

TYSONS, Va., March 15, 2017 (GLOBE NEWSWIRE) -- Alarm.com Holdings, Inc. (Nasdaq:ALRM), the leading platform for the intelligently connected property, today reported financial results for its fourth quarter and full year ended December 31, 2016. Alarm.com also introduced its financial outlook for 2017 first quarter SaaS and license revenue and its guidance for the full year 2017.

"We're pleased to report solid results for the quarter as we closed another year of continued growth and profitability," said Steve Trundle, President and CEO of Alarm.com.  "During the year, we launched innovative new technology for our service provider partners, and we continued to develop growth initiatives that we believe will allow us to extend the Alarm.com platform into new markets in the future.  With the acquisition of Connect and Piper from Icontrol Networks now completed, we can grow our research and development capacity and further increase our participation in the Internet of Things secular trend."

Fourth Quarter 2016 Financial Results:

Full Year 2016 Financial Results:

Balance Sheet and Cash Flow:

Business Highlights

Financial Outlook

Alarm.com is introducing its outlook for 2017 first quarter SaaS and license revenue and its guidance for the full year.
This includes an anticipated partial year contribution from the closing of the acquisition of the Connect and Piper business units from Icontrol Networks on March 8, 2017.

For the first quarter of 2017:

For the full year 2017:

Conference Call and Webcast Information

Alarm.com's fourth quarter results conference call and webcast is scheduled to begin at 5:00 p.m. ET on March 15, 2017. To participate on the live call, analysts and investors should dial 877.445.1593 (U.S./Canada) or 267.753.2138 (International) at least ten minutes prior to the start time of the call. A telephonic replay of the call will be available through March 22, 2017 by dialing 800.585.8367 (U.S./Canada) or 855.859.2056  (International) and providing Conference ID: 77162881. 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 use 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.

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 net income, non-GAAP adjusted net income attributable to common stockholders and non-GAAP adjusted net income per share. We have included non-GAAP measures in this press release because they are key measures used by our management to understand and evaluate our core operating performance and trends and generate future operating plans, make strategic decisions regarding the allocation of capital, and investments in initiatives that are focused on cultivating new markets for our solutions. 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.

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 and acquisition-related expense 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. The litigation expense we exclude from this calculation relates to non-ordinary course litigation expenses, including those expenses resulting from ongoing intellectual property litigation. Notably, we do not adjust for ordinary course legal expenses, including those expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

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

Stock-based compensation: We exclude stock-based compensation expense, which relates to 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. Included in stock-based compensation expense for the year ended December 31, 2015 was $0.8 million related to the purchase of an employee's stock awards. 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 incurred in litigation and litigation-related matters of non-ordinary course lawsuits, 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.  Included in the litigation expense for the year ended December 31, 2016 is $0.4 million of expense we incurred in the first three quarters of 2016 prior to adjusting for a non-ordinary course lawsuit.

Acquisition-related expense: Included in operating expense 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 these transaction and integration costs on our total operating expenses.

Amortization: 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 when we evaluate our on-going 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.

Interest expense: We record interest expense primarily related to our debit 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 / (expense), net: We exclude other income / (expense), net because we do not consider it 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 future financial performance for the first quarter and full-year 2017, the Company's ability to continue to expand its platform to benefit its service providers and to deliver enhanced customer experiences, the Company's ability to grow its research and development capacity and increase its participation in the Internet of Things (IoT) secular trend, the Company's ability to accelerate the development of intelligent, data-driven smart home and business services and video services and video analytics applications, and the Company's ability to help service providers create and maintain high-value accounts . 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 integration of the Connect and Piper business units into the Company (the Acquisition) could subject the Company to significant additional liabilities for which it may not be indemnified, the Acquisition may cause disruption in the Company's business or in the Connect and Piper business units, the Company may experience difficulties in realizing the expected benefits of the Acquisition, the Company's actual post-Acquisition operating results may differ significantly from any guidance provided, the Company's ability to retain service providers and 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 providers, customers and employees, consumer demand for interactive security and home automation services, 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 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 29, 2016, the "Risk Factors" section of the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016 filed with the Securities and Exchange Commission on November 14, 2016 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.

 
ALARM.COM HOLDINGS, INC.
Consolidated Statements of Operations
(in thousands, except share and per share data)
 
 Three Months Ended
December 31,
 Year Ended
December 31,
 2016 2015 2016 2015 2014
Revenue:         
SaaS and license revenue$46,888  $38,689  $173,540  $140,936  $111,515 
Hardware and other revenue22,906  18,232  87,566  67,952  55,797 
Total revenue69,794  56,921  261,106  208,888  167,312 
Cost of revenue:         
Cost of SaaS and license revenue8,450  6,628  30,229  25,722  23,007 
Cost of hardware and other revenue18,265  13,481  69,151  51,652  44,172 
Total cost of revenue26,715  20,109  99,380  77,374  67,179 
Operating expenses:         
Sales and marketing9,448  7,835  38,980  32,240  25,836 
General and administrative15,802  9,477  57,926  35,473  26,113 
Research and development12,048  13,335  44,272  40,002  23,193 
Amortization and depreciation1,627  1,438  6,490  5,808  3,991 
Total operating expenses38,925  32,085  147,668  113,523  79,133 
Operating income4,154  4,727  14,058  17,991  21,000 
Interest expense(53) (50) (190) (178) (196)
Other income / (expense), net175  (286) 513  (348) (485)
Income before income taxes4,276  4,391  14,381  17,465  20,319 
Provision for income taxes1,300  1,116  4,227  5,697  6,817 
Net income2,976  3,275  10,154  11,768  13,502 
Dividends paid to participating securities      (18,987)  
Income allocated to participating securities(2) (8) (12)   (12,939)
Net income / (loss) attributable to common
stockholders
$2,974  $3,267  $10,142  $(7,219) $563 
          
Per share information attributable to common
stockholders:
         
Net income / (loss) per share:         
Basic$0.06  $0.07  $0.22  $(0.30) $0.25 
Diluted$0.06  $0.07  $0.21  $(0.30) $0.14 
Weighted average common shares outstanding:         
Basic46,018,630  45,468,451  45,716,757  24,108,362  2,276,694 
Diluted48,025,847  47,353,327  47,875,522  24,108,362  3,890,121 
Cash dividends declared per share$  $  $  $0.36  $ 
          
Stock-based compensation expense included
in operating expenses:
         
Sales and marketing$114  $112  $536  $372  $338 
General and administrative523  180  1,430  2,486  1,862 
Research and development484  377  2,035  1,266  1,067 
Total stock-based compensation expense$1,121  $669  $4,001  $4,124  $3,267 
          


ALARM.COM HOLDINGS, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
 
 December 31,
 2016 2015
Assets   
Current assets:   
Cash and cash equivalents$140,634  $128,358 
Accounts receivable, net29,810  21,348 
Inventory10,543  6,474 
Other current assets9,197  4,870 
Total current assets190,184  161,050 
Property and equipment, net20,180  15,446 
Intangible assets, net4,568  6,318 
Goodwill24,723  24,723 
Deferred tax assets16,752  11,915 
Other assets4,838  6,643 
Total Assets$261,245  $226,095 
Liabilities and stockholders' equity   
Current liabilities:   
Accounts payable, accrued expenses and other current liabilities$28,300  $19,276 
Accrued compensation8,814  7,514 
Deferred revenue2,585  2,289 
Total current liabilities39,699  29,079 
Deferred revenue10,040  9,701 
Long-term debt6,700  6,700 
Other liabilities13,557  10,484 
Total Liabilities69,996  55,964 
Commitments and contingencies   
Stockholders' equity   
Preferred stock, $0.001 par value, 10,000,000 shares authorized; 0 shares issued and     
outstanding as of December 31, 2016 and 2015   
Common stock, $0.01 par value, 300,000,000 shares authorized; 46,172,318 and     
45,581,662 shares issued; and 46,142,483 and 45,485,294 shares outstanding as of     
December 31, 2016 and 2015461  455 
Additional paid-in capital308,697  297,781 
Treasury stock (35,523 shares at cost of $1.20 per share)  (42)
Accumulated other comprehensive income   
Accumulated deficit(117,909) (128,063)
Total Stockholders' Equity191,249  170,131 
Total Liabilities and Stockholders' Equity$261,245  $226,095 
 


ALARM.COM HOLDINGS, INC.
Consolidated Statements of Cash Flows (in thousands)
 
 Year ended December 31,
Cash flows from operating activities:2016 2015 2014
Net income$10,154  $11,768  $13,502 
Adjustments to reconcile net income to net cash from operating activities:     
Provision for doubtful accounts648  276  1,371 
Reserve for product returns2,071  1,559  1,863 
Amortization on patents and tooling786  391  201 
Amortization and depreciation6,490  5,808  3,991 
Amortization of debt issuance costs103  108  70 
Deferred income taxes(4,837) (3,552) (1,735)
Change in fair value of contingent liability(230) (470)  
Undistributed losses from equity investees81  681  514 
Stock-based compensation4,001  3,347  3,267 
Impairment of cost method investment    200 
Other, net    129 
Changes in operating assets and liabilities (net of business acquisitions):     
Accounts receivable(11,181) (5,910) (3,898)
Inventory(4,068) 378  (4,334)
Other assets(837) (2,725) (1,136)
Accounts payable, accrued expenses and other current liabilities10,458  5,966  444 
Deferred revenue636  1,081  1,234 
Other liabilities3,225  8,431  (48)
Cash flows from operating activities17,500  27,137  15,635 
Cash flows used in investing activities:     
Business acquisitions, net of cash acquired  (5,632) (3,186)
Additions to property and equipment(9,055) (10,347) (6,892)
Investment in cost and equity method investees(139) (247)  
Distribution from cost method investee    2,545 
Issuances of notes receivable(3,073) (406) (755)
Repayments of notes receivable2,441     
Purchases of licenses to patents(1,600) (1,000)  
Disposition of marketable securities    2,000 
Cash flows used in investing activities(11,426) (17,632) (6,288)
Cash flows from / (used in) financing activities:     
Proceeds from issuance of common stock from initial public offering, net of
underwriting discount and commission
  97,976   
Proceeds from issuance of debt, net of debt issuance costs    6,376 
Repayments of term loan    (7,500)
Payments of debt issuance costs(131)    
Payments for long-term business acquisition liabilities(417) (417)  
Dividends paid to common stockholders  (1,013)  
Dividends paid to employees for unvested shares  (57)  
Dividends paid to redeemable convertible preferred stockholders  (18,930)  
Payments of offering costs  (2,632) (2,399)
Repurchases of common stock(11) (1) (7)
Proceeds from early exercise of stock-based awards  129  1,548 
Issuances of common stock from equity based plans1,661  344  554 
Tax windfall benefit from stock-based awards5,100  882  1,070 
Cash flows from / (used in) financing activities6,202  76,281  (358)
Net increase in cash and cash equivalents12,276  85,786  8,989 
Cash and cash equivalents at beginning of the period128,358  42,572  33,583 
Cash and cash equivalents at end of the period$140,634  $128,358  $42,572 
 


ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures
(in thousands)
(unaudited)
 
 Three Months Ended
December 31,
 Year Ended
December 31,
 2016 2015 2016 2015 2014
Adjusted EBITDA:         
Net income$2,976  $3,275  $10,154  $11,768  $13,502 
Adjustments:         
Interest expense and other income / (expense), net(122) 336  (323) 526  681 
Provision for income taxes1,300  1,116  4,227  5,697  6,817 
Amortization and depreciation1,627  1,438  6,490  5,808  3,991 
Stock-based compensation expense1,121  669  4,001  4,124  3,267 
Acquisition-related expense5,301  100  11,098  100   
Litigation expense2,108  2,834  13,387  6,347  63 
Total adjustments11,335  6,493  38,880  22,602  14,819 
Adjusted EBITDA$14,311  $9,768  $49,034  $34,370  $28,321 
          
Adjusted net income:         
Net income, as reported$2,976  $3,275  $10,154  $11,768  $13,502 
Adjustments:         
Other income / (expense), net(175) 286  (513) 348  485 
Amortization382  561  1,750  2,151  1,568 
Stock-based compensation expense1,121  669  4,001  4,124  3,267 
Acquisition-related expense5,301  100  11,098  100   
Litigation expense2,108  2,834  13,387  6,347  63 
Income tax1(2,656) (1,130) (8,739) (4,261) (1,803)
Non-GAAP adjusted net income$9,057  $6,595  $31,138  $20,577  $17,082 
 
1 Income tax for the adjustments for other income / (expense), net, amortization expense, stock-based compensation expense, acquisition-related expense
and litigation expense are calculated at the effective tax rate, 30.4% and 25.4% for the three months ended December 31, 2016 and 2015 and
29.4%, 32.6% and 33.5% for the years ended December 31, 2016, 2015 and 2014.
 


ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures - continued
(in thousands, except share and per share data)
(unaudited)
 
 Three Months Ended
December 31,
 Year Ended
December 31,
 2016 2015 2016 2015 2014
Adjusted net income attributable to common
stockholders:
         
Net income (loss) attributable to common
stockholders, as reported
$2,974  $3,267  $10,142  $(7,219) $563 
Adjustments:         
Dividends paid to participating securities      18,987   
Other income / (expense), net(175) 286  (513) 348  485 
Amortization expense382  561  1,750  2,151  1,568 
Stock-based compensation expense1,121  669  4,001  4,124  3,267 
Acquisition-related expense5,301  100  11,098  100   
Litigation expense2,108  2,834  13,387  6,347  63 
Income tax1(2,656) (1,130) (8,739) (4,261) (1,803)
Less: Income allocated to participating securities      (13,511)  
Non-GAAP adjusted net income attributable to
common stockholders
$9,055  $6,587  $31,126  $7,066  $4,143 
          
Adjusted net income per share:         
Net income (loss) per share - basic, as reported$0.06  $0.07  $0.22  $(0.30) $0.25 
Adjustments:         
Dividends paid to participating securities      0.79   
Other income / (expense), net  0.01  (0.01) 0.01  0.21 
Amortization expense0.01  0.01  0.04  0.09  0.69 
Stock-based compensation expense0.02  0.01  0.09  0.17  1.43 
Acquisition-related expense0.12    0.24     
Litigation expense0.05  0.06  0.29  0.26  0.03 
Income tax1(0.06) (0.02) (0.19) (0.18) (0.79)
Less: Income allocated to participating securities      (0.56)  
Non-GAAP adjusted net income per share - basic$0.20  $0.14  $0.68  $0.28  $1.82 
          
Non-GAAP adjusted net income per share - diluted$0.19  $0.14  $0.65  $0.27  $1.07 
          
Weighted average common shares outstanding:         
Basic, as reported46,018,630  45,468,451  45,716,757  24,108,362  2,276,694 
          
Diluted, as reported48,025,847  47,353,327  47,875,522  24,108,362  3,890,121 
Dilutive shares      1,770,412   
Non-GAAP weighted average common shares
outstanding - diluted
48,025,847  47,353,327  47,875,522  25,878,774  3,890,121 
 
1 Income tax for the adjustments for other income / (expense), net, amortization expense, stock-based compensation expense, acquisition-related expense
and litigation expense are calculated at the effective tax rate, 30.4% and 25.4% for the three months ended December 31, 2016 and 2015 and
29.4%, 32.6% and 33.5% for the years ended December 31, 2016, 2015 and 2014.
 
Investor Relations:
Jonathan Schaffer
The Blueshirt Group
ir@alarm.com

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