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Alarm.com Reports Second Quarter 2019 Results

August 8, 2019 4:07 PM

-- Second quarter SaaS and license revenue increased 16.0% year-over-year to $82.3 million ---- Second quarter total revenue increased 16.4% year-over-year to $121.7 million ---- Second quarter GAAP net income of $13.8 million, compared to $10.7 million for the second quarter of 2018 ---- Second quarter non-GAAP adjusted EBITDA of $27.7 million, compared to $23.4 million for the second quarter of 2018 --

TYSONS, Va., Aug. 08, 2019 (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, 2019. Alarm.com also provided its financial outlook for SaaS and license revenue for the third quarter of 2019 and increased its revenue guidance for the full year of 2019.

“We are pleased to report solid financial results for the second quarter," said Steve Trundle, President and CEO of Alarm.com. "Our global base of service provider partners continues to lead the market with the full range of Alarm.com’s connected property solutions in both the residential and commercial markets.”

Second Quarter 2019 Financial Results as Compared to Second Quarter 2018

Balance Sheet and Cash Flow

Recent Business Highlights

Financial Outlook

Alarm.com is providing its outlook for SaaS and license revenue for the third quarter of 2019 and is increasing its revenue guidance for the full year 2019.

For the third quarter of 2019:

For the full year of 2019:

Conference Call and Webcast Information

Alarm.com will host a conference call to discuss its second quarter 2019 financial results and its outlook for the third quarter and full year of 2019. A live audio webcast is scheduled to begin at 4:30 p.m. ET on August 8, 2019. 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 August 16, 2019 by dialing 855.859.2056 (U.S./Canada) or 404.537.3406 (International) and providing Conference ID: 4994317. Alarm.com will also offer a live and archived webcast of the conference call accessible on 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 consumers and businesses depend on Alarm.com's technology to manage and control their property from anywhere. Our platform integrates with a growing variety of Internet of Things (IoT) devices through our apps and interfaces. Our security, video, access control, intelligent automation, energy management, and wellness 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 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 incremental costs directly related to business and asset acquisitions. 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.

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 do not consider this tax adjustment 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 continued success of the Company’s service provider partners and the Company’s future financial performance for the third quarter and full year 2019. 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 Company's dependence on its suppliers, the reliability of the Company’s hardware and wireless network suppliers, future financial prospects and enhanced United States tax, tariff, import/export restrictions, or other trade barriers, particularly tariffs from China 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 9, 2019 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 TroneAlarm.com[email protected]

Media Relations:Matthew ZartmanAlarm.com[email protected]

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,
2019 2018 2019 2018
Revenue:
SaaS and license revenue $82,334 $70,968 $162,389 $138,956
Hardware and other revenue 39,326 33,520 71,606 58,288
Total revenue 121,660 104,488 233,995 197,244
Cost of revenue:
Cost of SaaS and license revenue 12,665 11,027 24,990 21,833
Cost of hardware and other revenue 31,891 25,461 58,516 43,032
Total cost of revenue 44,556 36,488 83,506 64,865
Operating expenses:
Sales and marketing 15,631 14,612 28,859 25,434
General and administrative 13,872 18,119 33,084 34,281
Research and development 28,418 21,521 54,914 41,898
Amortization and depreciation 5,138 5,238 10,366 10,263
Total operating expenses 63,059 59,490 127,223 111,876
Operating income 14,045 8,510 23,266 20,503
Interest expense (786) (751) (1,607) (1,423)
Other income, net 850 420 1,702 816
Income before income taxes 14,109 8,179 23,361 19,896
Provision for / (benefit from) income taxes 313 (2,554) 555 (1,352)
Net income 13,796 10,733 22,806 21,248
Income allocated to participating securities — (1) — (4)
Net income attributable to common stockholders $13,796 $10,732 $22,806 $21,244
Per share information attributable to common stockholders:
Net income per share:
Basic $0.29 $0.23 $0.47 $0.45
Diluted $0.27 $0.22 $0.45 $0.43
Weighted average common shares outstanding:
Basic 48,388,696 47,439,311 48,281,068 47,333,435
Diluted 50,283,990 49,497,088 50,244,384 49,406,444
Stock-based compensation expense included in operating expenses: Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Sales and marketing $471 $319 $851 $554
General and administrative 1,781 1,481 3,048 2,509
Research and development 3,168 1,744 5,787 3,150
Total stock-based compensation expense $5,420 $3,544 $9,686 $6,213

ALARM.COM HOLDINGS, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)
June 30, 2019 December 31, 2018
Assets
Current assets:
Cash and cash equivalents$150,851 $146,061
Accounts receivable, net60,021 49,510
Inventory, net23,895 22,990
Other current assets33,724 9,502
Total current assets268,491 228,063
Property and equipment, net29,774 27,757
Intangible assets, net72,181 79,067
Goodwill63,591 63,591
Deferred tax assets29,579 28,952
Operating lease right-of-use assets27,745 —
Other assets14,060 13,555
Total assets$505,421 $440,985
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities$61,297 $58,430
Accrued compensation11,810 13,484
Deferred revenue3,560 3,356
Operating lease liabilities6,549 —
Total current liabilities83,216 75,270
Deferred revenue7,420 7,820
Long-term debt65,000 67,000
Operating lease liabilities35,503 —
Other liabilities1,854 13,306
Total liabilities192,993 163,396
Stockholders’ equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares
issued and outstanding as of June 30, 2019 and December 31, 2018.— —
Common stock, $0.01 par value, 300,000,000 shares authorized; 48,481,967 and
48,103,038 shares issued; and 48,481,390 and 48,102,081 shares
outstanding as of June 30, 2019 and December 31, 2018, respectively.485 481
Additional paid-in capital353,131 341,139
Accumulated deficit(41,188) (64,031)
Total stockholders’ equity312,428 277,589
Total liabilities and stockholders’ equity$505,421 $440,985

ALARM.COM HOLDINGS, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended June 30,
Cash flows from operating activities:2019 2018
Net income$22,806 $21,248
Adjustments to reconcile net income to net cash from operating activities:
Provision for doubtful accounts460 57
Reserve for product returns(44) 174
Provision for notes receivable(3,319) —
Amortization on patents and tooling334 512
Amortization and depreciation10,366 10,263
Amortization of debt issuance costs54 54
Amortization of operating lease right-of-use assets2,938 —
Deferred income taxes(627) (1,338)
Stock-based compensation9,686 6,213
Disposal of property and equipment— 285
Changes in operating assets and liabilities:
Accounts receivable(10,927) (12,150)
Inventory(905) (541)
Other current and non-current assets(4,709) (9,492)
Accounts payable, accrued expenses and other current liabilities(2,604) 1,110
Deferred revenue(196) (707)
Operating lease liabilities(604) —
Other liabilities158 (484)
Cash flows from operating activities22,867 15,204
Cash flows used in investing activities:
Additions to property and equipment(5,708) (6,131)
Issuances or purchases of notes receivable(20,061) —
Receipt of payment on notes receivable7,400 —
Cash flows used in investing activities(18,369) (6,131)
Cash flows from financing activities:
Repayments of credit facility(2,000) (2,000)
Repurchases of common stock— (1)
Issuances of common stock from equity based plans2,292 2,558
Cash flows from financing activities292 557
Net increase in cash and cash equivalents4,790 9,630
Cash and cash equivalents at beginning of the period146,061 96,329
Cash and cash equivalents at end of the period$150,851 $105,959

ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures
(in thousands)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Adjusted EBITDA:
Net income $13,796 $10,733 $22,806 $21,248
Adjustments:
Interest expense and other income, net (64) 331 (95) 607
Provision for / (benefit from) income taxes 313 (2,554) 555 (1,352)
Amortization and depreciation expense 5,138 5,238 10,366 10,263
Stock-based compensation expense 5,420 3,544 9,686 6,213
Litigation expense 3,112 6,117 8,649 9,388
Total adjustments 13,919 12,676 29,161 25,119
Adjusted EBITDA $27,715 $23,409 $51,967 $46,367
Adjusted net income:
Net income, as reported $13,796 $10,733 $22,806 $21,248
Provision for / (benefit from) income taxes 313 (2,554) 555 (1,352)
Income before income taxes 14,109 8,179 23,361 19,896
Adjustments:
Less: Other income, net (850) (420) (1,702) (816)
Amortization expense 3,403 3,797 6,934 7,617
Stock-based compensation expense 5,420 3,544 9,686 6,213
Litigation expense 3,112 6,117 8,649 9,388
Non-GAAP adjusted income before income taxes 25,194 21,217 46,928 42,298
Income taxes 1 (5,291) (4,456) (9,855) (8,883)
Non-GAAP adjusted net income $19,903 $16,761 $37,073 $33,415

1 Income taxes are calculated using a rate of 21.0% for each of the three and six months ended June 30, 2019 and 2018. The 21.0% effective tax rate for each of the three and six months ended June 30, 2019 and 2018 exclude the income tax effect on the non-GAAP adjustments and reflect the estimated long-term corporate tax rate.

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,
2019 2018 2019 2018
Adjusted net income attributable to common stockholders:
Net income attributable to common stockholders, as reported $13,796 $10,732 $22,806 $21,244
Provision for / (benefit from) income taxes 313 (2,554) 555 (1,352)
Income attributable to common stockholders before income taxes 14,109 8,178 23,361 19,892
Adjustments:
Less: Other income, net (850) (420) (1,702) (816)
Amortization expense 3,403 3,797 6,934 7,617
Stock-based compensation expense 5,420 3,544 9,686 6,213
Litigation expense 3,112 6,117 8,649 9,388
Non-GAAP adjusted income attributable to common stockholders before income taxes 25,194 21,216 46,928 42,294
Income taxes 1 (5,291) (4,456) (9,855) (8,882)
Non-GAAP adjusted net income attributable to common stockholders $19,903 $16,760 $37,073 $33,412

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Adjusted net income per share:
Net income per share - basic, as reported $0.28 $0.23 $0.47 $0.45
Provision for / (benefit from) income taxes 0.01 (0.05) 0.02 (0.02)
Income before income taxes 0.29 0.18 0.49 0.43
Adjustments:
Less: Other income, net (0.02) (0.01) (0.04) (0.02)
Amortization expense 0.07 0.08 0.14 0.16
Stock-based compensation expense 0.11 0.07 0.20 0.13
Litigation expense 0.07 0.13 0.18 0.20
Non-GAAP adjusted income before income taxes 0.52 0.44 0.97 0.90
Income taxes 1 (0.11) (0.09) (0.20) (0.19)
Non-GAAP adjusted net income per share - basic $0.41 $0.36 $0.77 $0.71
Non-GAAP adjusted net income per share - diluted $0.40 $0.34 $0.74 $0.68
Weighted average common shares outstanding:
Basic, as reported 48,388,696 47,439,311 48,281,068 47,333,435
Diluted, as reported 50,283,990 49,497,088 50,244,384 49,406,444

1 Income taxes are calculated using a rate of 21.0% for each of the three and six months ended June 30, 2019 and 2018. The 21.0% effective tax rate for each of the three and six months ended June 30, 2019 and 2018 exclude the income tax effect on the non-GAAP adjustments and reflect the estimated long-term corporate tax rate.

ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures - continued
(in thousands)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Free cash flow:
Cash flows from operating activities $24,054 $11,684 $22,867 $15,204
Additions to property and equipment (2,746) (3,084) (5,708) (6,131)
Non-GAAP free cash flow $21,308 $8,600 $17,159 $9,073

alarm-com-logo-2019.jpg

Source: Alarm.com Holdings, Inc.

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