Alarm.com
Aug 8, 2017
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Alarm.com Reports Second Quarter 2017 Results

-- SaaS and license revenue of $58.9 million, up 40% year-over-year --
-- Total revenue of $86.0 million, up 33% year-over-year --
-- GAAP net income of $9.9 million, compared to $1.9 million for the second quarter of 2016 --
-- Non-GAAP adjusted EBITDA of $15.9 million, up 31% year-over-year --

TYSONS, Va., Aug. 08, 2017 (GLOBE NEWSWIRE) -- Alarm.com Holdings, Inc. (Nasdaq:ALRM), the leading platform for the intelligently connected property, today reported financial results for its second quarter ended June 30, 2017.  Alarm.com also provided its financial outlook for 2017 third quarter SaaS and license revenue, and increased its guidance for the full year 2017.

"We're pleased with our second quarter results and the continued performance of our service provider partners in the market," said Steve Trundle, President and CEO of Alarm.com.  "The market for connected property security, monitoring, and automation solutions continues to grow, and we further enhanced our video and commercial offerings in the second quarter."

Second Quarter 2017 Financial Results

Balance Sheet and Cash Flow

Recent Business Highlights

Financial Outlook

Alarm.com is providing its outlook for 2017 third quarter SaaS and license revenue and increasing its guidance for the full year.

For the third quarter of 2017:

For the full year 2017:

Conference Call and Webcast Information

Alarm.com's second quarter results conference call and live audio webcast is scheduled to begin at 5:00 p.m. ET on August 8, 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 August 15, 2017 by dialing 855.859.2056 (U.S./Canada) or 404.537.3406 (International) and providing Conference ID: 51825778.  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 financial and operating 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. 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 is $0.2 million and $0.3 million of expense we incurred in the three and six months ended June 30, 2016, respectively, prior to adjusting this measure 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 this transaction and its 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 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.

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 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 overall growth in the market for connected property security, monitoring, video and automation solutions and its future financial performance for the third quarter and full-year 2017. 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 continued integration of the Connect and Piper business units into the Company (the "Acquisition"), which 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 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 10, 2017 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)
(unaudited)
 
 Three Months Ended
 June 30,
 Six Months Ended
 June 30,
 2017 2016 2017 2016
Revenue:       
SaaS and license revenue$58,928  $42,010  $109,154  $82,022 
Hardware and other revenue27,060  22,413  51,028  41,444 
Total revenue85,988  64,423  160,182  123,466 
Cost of revenue:       
Cost of SaaS and license revenue8,500  7,211  16,592  13,992 
Cost of hardware and other revenue21,335  17,972  39,878  32,307 
Total cost of revenue29,835  25,183  56,470  46,299 
Operating expenses:       
Sales and marketing11,899  9,851  22,213  18,827 
General and administrative13,450  14,191  28,825  27,320 
Research and development20,062  10,777  34,583  20,747 
Amortization and depreciation4,846  1,613  7,710  3,204 
Total operating expenses50,257  36,432  93,331  70,098 
Operating income5,896  2,808  10,381  7,069 
Interest expense(674) (47) (890) (88)
Other income, net137  88  374  199 
Income before income taxes5,359  2,849  9,865  7,180 
(Benefit from) / provision for income taxes(4,506) 976  (3,963) 2,569 
Net income9,865  1,873  13,828  4,611 
Income allocated to participating securities(5) (2) (8) (7)
Net income attributable to common stockholders$9,860  $1,871  $13,820  $4,604 
        
Per share information attributable to common stockholders:       
Net income per share:       
Basic$0.21  $0.04  $0.30  $0.10 
Diluted$0.20  $0.04  $0.28  $0.10 
Weighted average common shares outstanding:       
Basic46,442,327  45,602,061  46,334,499  45,564,059 
Diluted49,000,553  47,523,187  48,906,812  47,405,511 
        
Stock-based compensation expense included in operating expenses:Three Months Ended
 June 30,
 Six Months Ended
 June 30,
 2017 2016 2017 2016
Sales and marketing$65  $151  $178  $292 
General and administrative755  236  1,324  463 
Research and development1,095  555  1,726  1,039 
Total stock-based compensation expense$1,915  $942  $3,228  $1,794 
        


ALARM.COM HOLDINGS, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited) 
 June 30, 2017 December 31, 2016
Assets   
Current assets:   
Cash and cash equivalents$68,916  $140,634 
Accounts receivable, net41,986  29,810 
Inventory10,263  10,543 
Other current assets16,031  9,197 
Total current assets137,196  190,184 
Property and equipment, net22,610  20,180 
Intangible assets, net101,144  4,568 
Goodwill64,092  24,723 
Deferred tax assets23,746  16,752 
Other assets7,453  4,838 
Total Assets$356,241  $261,245 
Liabilities and stockholders' equity   
Current liabilities:   
Accounts payable, accrued expenses and other current liabilities$36,465  $28,300 
Accrued compensation8,873  8,814 
Deferred revenue2,885  2,585 
Total current liabilities48,223  39,699 
Deferred revenue9,816  10,040 
Long-term debt72,700  6,700 
Other liabilities14,216  13,557 
Total Liabilities144,955  69,996 
Stockholders' equity   
Preferred stock, $0.001 par value, 10,000,000 shares authorized;     
  0 shares issued and outstanding as of June 30, 2017 and December 31, 2016.   
Common stock, $0.01 par value, 300,000,000 shares authorized; 46,707,046 and 46,172,318 shares issued;      
  and 46,684,647 and 46,142,483 shares outstanding as of June 30, 2017 and December 31, 2016.467  461 
Additional paid-in capital314,919  308,697 
Accumulated deficit(104,100) (117,909)
Total Stockholders' Equity211,286  191,249 
Total Liabilities and Stockholders' Equity$356,241  $261,245 


 
ALARM.COM HOLDINGS, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 Six Months Ended
 June 30,
 2017 2016
Cash flows from operating activities:   
Net income$13,828  $4,611 
Adjustments to reconcile net income to net cash from operating activities:   
Provision for doubtful accounts20  261 
Reserve for product returns1,144  1,008 
Amortization for patents and tooling574  364 
Amortization and depreciation7,710  3,204 
Amortization of debt issuance costs47  54 
Deferred income taxes(2,833) (539)
Change in fair value of contingent liability  (190)
Undistributed losses from equity investee120  45 
Stock-based compensation3,228  1,794 
Changes in operating assets and liabilities (net of business acquisitions):   
Accounts receivable(1,998) (7,422)
Inventory579  (2,978)
Other assets(5,425) (1,510)
Accounts payable, accrued expenses and other current liabilities7,602  7,268 
Deferred revenue(495) 393 
Other liabilities635  1,577 
Cash flows from operating activities24,736  7,940 
Cash flows used in investing activities:   
Business acquisitions, net of cash acquired(154,289)  
Additions to property and equipment(5,714) (4,564)
Investment in cost method investee  (139)
Issuances of notes receivable(4,000) (73)
Repayments of notes receivable  2,441 
Cash flows used in investing activities(164,003) (2,335)
Cash flows from financing activities:   
Proceeds from credit facility67,000   
Repayments of credit facility(1,000)  
Payments of long-term consideration for business acquisitions  (217)
Repurchases of common stock(2) (9)
Issuances of common stock from equity-based plans1,551  427 
Cash flows from financing activities67,549  201 
Net (decrease) / increase in cash and cash equivalents(71,718) 5,806 
Cash and cash equivalents at beginning of the period140,634  128,358 
Cash and cash equivalents at end of the period$68,916  $134,164 
    


ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures
(in thousands)
(unaudited)
 
 Three Months Ended
 June 30,
 Six Months Ended
 June 30,
 2017 2016 2017 2016
Adjusted EBITDA       
  Net income$9,865  $1,873  $13,828  $4,611 
  Adjustments:       
Less: Interest expense and other income, net537  (41) 516  (111)
Provision for income tax(4,506) 976  (3,963) 2,569 
Amortization and depreciation4,846  1,613  7,710  3,204 
Stock-based compensation expense1,915  942  3,228  1,794 
Acquisition-related expense1,973  2,040  5,621  2,610 
Litigation expense1,251  4,676  3,044  8,225 
Total adjustments6,016  10,206  16,156  18,291 
Adjusted EBITDA$15,881  $12,079  $29,984  $22,902 
        
Adjusted net income:       
Net income, as reported$9,865  $1,873  $13,828  $4,611 
Adjustments:       
Less: Other income, net(137) (88) (374) (199)
Amortization3,530  435  5,023  933 
Stock-based compensation expense1,915  942  3,228  1,794 
Acquisition-related expense1,973  2,040  5,621  2,610 
Litigation expense1,251  4,676  3,044  8,225 
Income tax 2(2,436) (2,746) (4,884) (4,781)
Non-GAAP adjusted net income$15,961  $7,132  $25,486  $13,193 

2  Income tax for the adjustments for other income, net, amortization expenses, acquisition-related expense and litigation expense are calculated at the statutory rate of 36.0% for the three and six months ended June 30, 2017. Income tax for stock-based compensation expense is calculated at 2.8% which is the statutory rate adjusted for windfall benefits. Income tax for the adjustments for other income, net, amortization expense, stock-based compensation, acquisition-related expense and litigation expense are calculated at the effective tax rate of 34.3% and 35.8% for the three and six months ended June 30, 2016, respectively.


 
ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures - continued
(in thousands, except share and per share data)
(unaudited)
 
 Three Months Ended
 June 30,
 Six Months Ended
 June 30,
 2017 2016 2017 2016
Adjusted net income attributable to common stockholders:       
Net income attributable to common stockholders, as reported$9,860  $1,871  $13,820  $4,604 
Adjustments:       
Less: Other income, net(137) (88) (374) (199)
Amortization3,530  435  5,023  933 
Stock-based compensation expense1,915  942  3,228  1,794 
Acquisition-related expense1,973  2,040  5,621  2,610 
Litigation expense1,251  4,676  3,044  8,225 
Income tax 2(2,436) (2,746) (4,884) (4,781)
Non-GAAP adjusted net income attributable to common stockholders$15,956  $7,130  $25,478  $13,186 


 
 Three Months Ended
 June 30,
 Six Months Ended
 June 30,
 2017 2016 2017 2016
Adjusted net income per share:       
Net income (loss) per share - basic, as reported$0.21  $0.04  $0.30  $0.10 
Adjustments:       
Less: Other income, net    (0.01)  
Amortization0.08  0.01  0.11  0.02 
Stock-based compensation expense0.04  0.02  0.07  0.04 
Acquisition-related expense0.04  0.04  0.12  0.06 
Litigation expense0.03  0.10  0.07  0.18 
Income tax 2(0.05) (0.06) (0.11) (0.10)
Non-GAAP adjusted net income per share - basic$0.35  $0.15  $0.55  $0.30 
        
Non-GAAP adjusted net income per share - diluted$0.33  $0.15  $0.52  $0.28 
        
Weighted average common shares outstanding:       
Basic, as reported46,442,327  45,602,061  46,334,499  45,564,059 
        
Diluted, as reported49,000,553  47,523,187  48,906,812  47,405,511 

2  Income tax for the adjustments for other income, net, amortization expenses, acquisition-related expense and litigation expense are calculated at the statutory rate of 36.0% for the three and six months ended June 30, 2017. Income tax for stock-based compensation expense is calculated at 2.8% which is the statutory rate adjusted for windfall benefits. Income tax for the adjustments for other income, net, amortization expense, stock-based compensation, acquisition-related expense and litigation expense are calculated at the effective tax rate of 34.3% and 35.8% for the three and six months ended June 30, 2016, respectively.

Investor Relations:
Jonathan Schaffer
The Blueshirt Group
ir@alarm.com

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