Alarm.com
Aug 15, 2016
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Alarm.com Reports Second Quarter 2016 Results

-- SaaS and license revenue of $42.0 million for the second quarter, a 23% increase year-over-year --
-- Total revenue of $64.4 million for the second quarter, a 24% increase year-over-year --
-- Net income of $1.9 million and adjusted net income1 of $7.0 million for the second quarter--
-- Adjusted EBITDA1 of $11.9 million for the second quarter, a 50% increase year-over-year --

TYSONS, Va., Aug. 15, 2016 (GLOBE NEWSWIRE) -- Alarm.com Holdings, Inc. (Nasdaq:ALRM), the leading platform solution for the connected home and business, today reported financial results for its second quarter ended June 30, 2016. The company also provided its financial outlook for 2016 third quarter SaaS and license revenue and increased its guidance for the full year 2016.

"Our service providers continued to perform and see solid demand in the second quarter and that drove business momentum for Alarm.com," said Steve Trundle, President and CEO of Alarm.com.  "The market for IoT-enabled solutions continues to grow as homeowners and businesses realize the benefits of interactive security and home automation.  We remain focused on delivering a superior experience to both subscribers and service providers through market-leading technology."

Second Quarter 2016 Results

Balance Sheet and Cash Flow

Recent Business Highlights

Alarm.com also announced that Ralph Terkowitz of ABS Capital has resigned as a member of the company's Board of Directors effective as of August 15, 2016. "Ralph joined our Board in 2009 when we were a small company and he was very helpful as we matured through our formative years as a private company and through our IPO," Trundle said. "We are very thankful for his seven years of service and wish him the best in his future endeavors."

Financial Outlook

Alarm.com is providing its outlook for 2016 third quarter SaaS and license revenue and increasing its guidance for the full year.

For the third quarter of 2016:

  For the full year 2016:

Conference Call and Webcast Information

Alarm.com's second quarter results conference call and webcast is scheduled to begin at 5:00 p.m. ET on August 15, 2016. 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 22, 2016 by dialing 855.859.2056 (U.S./Canada) or 404.537.3406 (International) and providing Conference ID: 50535738. Alarm.com will also offer a live and archived webcast of the conference call accessible via the company's Investor Relations website at http://investors.alarm.com/.

About Alarm.com Holdings, Inc.

Alarm.com is the leading platform solution for the connected home and business. 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.

1Non-GAAP Financial Measures

To supplement our unaudited 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 Alarm.com's 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 ongoing intellectual property litigation. Notably, we do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

Alarm.com excludes 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 three and six months ended June 30, 2015 is $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 involved in ongoing intellectual property litigation to be indicative of our core operating performance. We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

Acquisition-related expense: Included in operating expense are external incremental costs directly related to completing the acquisition and integration of the Connect and Piper businesses units from Icontrol Networks, Inc. Included in the acquisition-related expense for the six months ended June 30, 2016 is $0.6 million of expense we incurred in the first quarter of 2016 prior to the announcement of the proposed acquisition in June 2016. 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 Alarm.com's performance to other companies in our industry as other companies may be more or less acquisitive than Alarm.com and therefore amortization expense may vary significantly by company based on their acquisition history.

Interest expense: 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. We made this retrospective change in the second quarter of 2016. For 2015 and the first quarter of 2016, we excluded interest expense from all of our non-GAAP measures. During these periods, the amount of interest expense ranged from $41,000 to $50,000 per quarter and was primarily related to our debt facility.

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 third quarter and full-year 2016, the company's ability to continue to expand its platform to benefit its service providers and to deliver enhanced customer experiences, the company's expected timing and anticipated completion of its acquisition of two business units from Icontrol Networks, Inc. and the anticipated growth of the market for IoT-enabled solutions. 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 closing conditions that may or may not occur related to the acquisition of two business units from Icontrol Networks, Inc., our ability to maintain a relationship with Connect's key customer and otherwise realize the anticipated benefits of the acquisition, the substantial additional debt and significant liabilities we will assume upon closing of the proposed acquisition, our ability to retain service providers and subscribers and grow sales, our ability to manage our growth and execute on our business strategies, the effects of increased competition and evolving technologies, our ability to integrate acquired assets and businesses and to manage service providers, customers and employees during the pendency of the proposed acquisition, consumer demand for interactive security and home automation services, the reliability of our network operations centers, our reliance on our service provider network to attract new customers and retain existing customers, the reliability of our 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 March 31, 2016 filed with the Securities and Exchange Commission on May 10, 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.

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

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

ALARM.COM HOLDINGS, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
    
 June 30,
 2016
 December 31, 2015
Assets   
Current assets:   
Cash and cash equivalents$134,164  $128,358 
Accounts receivable, net27,502  21,348 
Inventory9,453  6,474 
Other current assets6,481  4,870 
Total current assets177,600  161,050 
Property and equipment, net17,361  15,446 
Intangible assets, net5,385  6,318 
Goodwill24,723  24,723 
Deferred tax assets12,913  11,915 
Other assets3,948  6,643 
Total Assets$241,930  $226,095 
Liabilities and stockholders' equity   
Current liabilities:   
Accounts payable, accrued expenses and other current liabilities$27,330  $19,276 
Accrued compensation6,065  7,514 
Deferred revenue2,418  2,289 
Total current liabilities35,813  29,079 
Deferred revenue9,964  9,701 
Long-term debt6,700  6,700 
Other liabilities11,871  10,484 
Total Liabilities64,348  55,964 
Stockholders' equity   
Preferred stock, $0.001 par value, 10,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2016 and December 31, 2015.   
Common stock, $0.01 par value, 300,000,000 shares authorized; 45,678,564 and 45,581,662 shares issued; and 45,624,695 and 45,485,294 shares outstanding as of June 30, 2016 and December 31, 2015.456  455 
Additional paid-in capital300,578  297,781 
Treasury stock, 0 shares as of June 30, 2016 and 35,523 shares at a cost of $1.20 per share as of December 31, 2015.  (42)
Accumulated other comprehensive income   
Accumulated deficit(123,452) (128,063)
Total Stockholders' Equity177,582  170,131 
Total Liabilities and Stockholders' Equity$241,930  $226,095 
        


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,
 2016 2015 2016 2015
Revenue:       
SaaS and license revenue$42,010  $34,134  $82,022  $66,089 
Hardware and other revenue22,413  17,815  41,444  31,871 
Total revenue64,423  51,949  123,466  97,960 
Cost of revenue:       
Cost of SaaS and license revenue7,211  6,297  13,992  12,330 
Cost of hardware and other revenue17,972  14,190  32,307  24,966 
Total cost of revenue25,183  20,487  46,299  37,296 
Operating expenses:       
Sales and marketing9,851  8,064  18,827  15,980 
General and administrative14,191  8,514  27,320  15,584 
Research and development10,777  9,079  20,747  16,831 
Amortization and depreciation1,613  1,528  3,204  2,866 
Total operating expenses36,432  27,185  70,098  51,261 
Operating income2,808  4,277  7,069  9,403 
Interest expense(47) (42) (88) (84)
Other income / (expense), net88  (62) 199  (55)
Income before income taxes2,849  4,173  7,180  9,264 
Provision for income taxes976  1,664  2,569  3,714 
Net income1,873  2,509  4,611  5,550 
Dividends paid to participating securities  (18,987)   (18,987)
Net income / (loss) attributable to common stockholders$1,873  $(16,478) $4,611  $(13,437)
        
Per share information attributable to common stockholders:       
Net income / (loss) per share:       
Basic$0.04  $(6.09) $0.10  $(5.03)
Diluted$0.04  $(6.09) $0.10  $(5.03)
Weighted average common shares outstanding:       
Basic45,602,061  2,706,369  45,564,059  2,671,783 
Diluted47,523,187  2,706,369  47,405,511  2,671,783 
Cash dividends declared per share$  $0.36  $  $0.36 
        
Stock-based compensation expense included in operating expenses:       
Sales and marketing$151  $86  $292  $146 
General and administrative236  1,226  463  1,520 
Research and development555  293  1,039  500 
Total stock-based compensation expense$942  $1,605  $1,794  $2,166 
                


ALARM.COM HOLDINGS, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
  
 Six Months Ended
 June 30,
 2016 2015
Cash flows from operating activities:   
Net income$4,611  $5,550 
Adjustments to reconcile net income to net cash from operating activities:   
Provision for doubtful accounts261  389 
Reserve for product returns1,008  763 
Amortization for patents and tooling364  124 
Amortization and depreciation3,204  2,866 
Amortization of debt issuance costs54  54 
Deferred income taxes(998) (2,125)
Change in fair value of contingent liability(190) 70 
Undistributed losses from equity investees45  188 
Stock-based compensation1,794  1,389 
Other, net  (76)
Changes in operating assets and liabilities (net of business acquisition):   
Accounts receivable(7,422) (7,447)
Inventory(2,978) (1,416)
Other assets(1,510) (1,171)
Accounts payable, accrued expenses and other current liabilities7,268  7,367 
Deferred revenue393  351 
Other liabilities1,577  840 
Cash flows from operating activities7,481  7,716 
Cash flows used in investing activities:   
Business acquisition, net of cash acquired  (5,632)
Additions to property and equipment(4,564) (2,012)
Investment in cost method investee(139) (54)
Issuances of notes receivable(73) (219)
Repayments of notes receivable2,441   
Purchases of licenses to patents  (1,000)
Cash flows used in investing activities(2,335) (8,917)
Cash flows from / (used in) financing activities:   
Payments of long-term consideration for business acquisitions(217)  
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  (1,205)
Repurchases of common stock(9) (1)
Proceeds from early exercise of stock options  124 
Issuances of common stock from equity-based plans427  184 
Tax windfall benefit from stock options459  410 
Cash flows from / (used in) financing activities660  (20,488)
Net increase / (decrease) in cash and cash equivalents5,806  (21,689)
Cash and cash equivalents at beginning of the period128,358  42,572 
Cash and cash equivalents at end of the period$134,164  $20,883 
        


ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures
(in thousands)
(unaudited)
    
 Three Months Ended June 30, Six Months Ended
 June 30,
 2016 2015 2016 2015
Adjusted EBITDA       
Net income$1,873  $2,509  $4,611  $5,550 
Adjustments:       
Interest expense and other income / (expense), net(41) 104  (111) 139 
Provision for income tax976  1,664  2,569  3,714 
Amortization and depreciation1,613  1,528  3,204  2,866 
Stock-based compensation expense942  1,605  1,794  2,166 
Acquisition-related expense2,040    2,610   
Litigation expense4,461  513  7,939  513 
Total adjustments9,991  5,414  18,005  9,398 
Adjusted EBITDA$11,864  $7,923  $22,616  $14,948 
        
Adjusted net income:       
Net income, as reported$1,873  $2,509  $4,611  $5,550 
Adjustments:       
Other income / (expense), net(88) 62  (199) 55 
Amortization expense435  565  933  1,028 
Stock-based compensation expense942  1,605  1,794  2,166 
Acquisition-related expense2,040    2,610   
Litigation expense4,461  513  7,939  513 
Income tax 2(2,672) (1,095) (4,682) (1,509)
Non-GAAP adjusted net income$6,991  $4,159  $13,006  $7,803 
 
2 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, 34.3% and 39.9% for the three months ended June 30, 2016 and 2015 and 35.8% and 40.1% for the six months ended June 30, 2016 and 2015.


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,
 2016 2015 2016 2015
Adjusted net income attributable to common stockholders:       
Net income (loss) attributable to common stockholders, as reported$1,873  $(16,478) $4,611  $(13,437)
Adjustments:       
Dividends paid to participating securities  18,987    18,987 
Other income / (expense), net(88) 62  (199) 55 
Amortization expense435  565  933  1,028 
Stock-based compensation expense942  1,605  1,794  2,166 
Acquisition-related expense2,040    2,610   
Litigation expense4,461  513  7,939  513 
Income tax 2(2,672) (1,095) (4,682) (1,509)
Less: income allocated to participating securities  (3,979)   (7,472)
Non-GAAP adjusted net income attributable to common stockholders$6,991  $180  $13,006  $331 
        
Adjusted net income per share:       
Net income (loss) per share - basic, as reported$0.04  $(6.09) $0.10  $(5.03)
Adjustments:       
Dividends paid to participating securities  7.02    7.11 
Other income / (expense), net  0.02    0.02 
Amortization expense0.01  0.21  0.02  0.38 
Stock-based compensation expense0.02  0.59  0.04  0.81 
Acquisition-related expense0.04    0.06   
Litigation expense0.10  0.19  0.17  0.19 
Income tax 2(0.06) (0.40) (0.10) (0.56)
Less: income allocated to participating securities  (1.47)   (2.80)
Non-GAAP adjusted net income per share - basic$0.15  $0.07  $0.29  $0.12 
        
Non-GAAP adjusted net income per share - diluted$0.15  $0.04  $0.27  $0.08 
        
Weighted average common shares outstanding:       
Basic, as reported45,602,061  2,706,369  45,564,059  2,671,783 
        
Diluted, as reported47,523,187  2,706,369  47,405,511  2,671,783 
Dilutive shares  1,577,046    1,596,491 
Non-GAAP weighted average common shares outstanding - diluted47,523,187  4,283,415  47,405,511  4,268,274 
            
2 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, 34.3% and 39.9% for the three months ended June 30, 2016 and 2015 and 35.8% and 40.1% for the six months ended June 30, 2016 and 2015.