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Alarm.com Reports Third Quarter 2020 Results


Business Wire | Nov 5, 2020 04:02PM EST

Alarm.com Reports Third Quarter 2020 Results

Nov. 05, 2020

TYSONS, Va.--(BUSINESS WIRE)--Nov. 05, 2020--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, 2020. Alarm.com also provided its financial outlook for SaaS and license revenue for the fourth quarter of 2020 and increased its guidance for the full year of 2020.

"We are pleased to report strong results this quarter," said Steve Trundle, President and CEO of Alarm.com. "Our more than 9,000 service provider partners have been able to operate very effectively around the challenges posed by the pandemic and have been successfully activating new subscribers with an increasing range of connected property services. Our team also delivered innovative new products that will enhance our service providers' competitive position. While there continue to be challenges, we feel we are well positioned to manage through the uncertainty caused by the pandemic."

Third Quarter2020 Financial Results as Compared to Third Quarter 2019

* SaaS and license revenue increased 17.9% to $100.1 million, compared to $84.9 million. * Total revenue increased 24.2% to $158.9 million, compared to $127.9 million. * GAAP net income attributable to common stockholders was $36.1 million, or $0.71 per diluted share, compared to $17.7 million, or $0.35 per diluted share. * Non-GAAP adjusted EBITDA increased to $34.5 million, compared to $26.3 million. * Non-GAAP adjusted net income attributable to common stockholders increased to $24.8 million, or $0.49 per diluted share, compared to $18.6 million or $0.37 per diluted share.

Balance Sheet and Cash Flow

* Total cash and cash equivalents increased to $247.2 million as of September 30, 2020, compared to $119.6 million as of December 31, 2019. * For the quarter ended September 30, 2020, cash flows from operations was $18.6 million and free cash flow was $15.1 million, compared to cash flows from operations of $1.0 million and negative free cash flow of $4.0 million for the quarter ended September 30, 2019.

Recent Business Highlights

* Launched Flex I/O: Flex I/O is a versatile, completely wireless device that extends security and awareness across a property and to assets in any location. The battery-powered device leverages LTE CAT-M capabilities to create new security applications that existing hub-connected sensors cannot address. It's easily installed on a backyard gate, detached garage, remote storage unit, or tethered to other assets like a boat, tractor or lawn mower. The Flex I/O sensor seamlessly integrates with Alarm.com powered systems, acting as just another sensor in the system even though it may be physically located many miles away, and it triggers notifications to subscribers as well as video recordings when activity is detected, or an asset is moved.

* EnergyHub Expands Customer Base: In an expanded partnership, National Grid will now manage commercial and industrial demand response programs through EnergyHub's Mercury DERMS platform. With a single platform, NationalGrid can manage an expanding ecosystem of energy resources for both commercial and industrial and residential assets that includes in-home batteries and electric vehicles. EnergyHub also announced a new partnership with the Los Angeles Department of Water and Power, or LADWP, the largest municipal utility in the country, to manage their thermostat-based demand response program. The EnergyHub platform will allow LADWP to flexibly manage peak demand and contribute to addressing regional distribution constraints and climate goals.

* Launched Smart Water Valve + Meter to Security Channel Service Providers: Smart Water Valve + Meter is part of a comprehensive water management solution that monitors usage and responds to a range of sensors to quickly protect properties from damage caused by water leaks and floods. The innovative new device enables an additional service plan. Developed by Building36 for its plumbing and HVAC service provider partners, Smart Water Valve + Meter is now also available for Alarm.com's service providers.

* Award Winning Technology: Alarm.com's Smart Gateway won the IoT Evolution Product of the Year. Smart Gateway is a cloud-managed access point that provides a dedicated Wi-Fi network for Alarm.com video cameras, and is designed to significantly reduce support intensity for service providers. Highlights, an animated summary of important activity in a subscribers' home, won an ESX Innovation Award in the category of consumer mobile apps. Highlights complements Alarm.com's video analytics service and enhances the overall user experience while increasing routine engagement with the Alarm.com mobile app. Wellcam(tm), the first smart home video solution designed to connect families and empower healthy, independent living, won New Product of the Year from Security Today. Wellcam helps families, medical professionals and others monitor the activity and well-being of loved ones or patients in both at-home or healthcare settings.

Financial Outlook

At this time, the general economic situation remains fluid and it remains challenging to predict the full scope and duration of the impacts of the COVID-19 pandemic. Alarm.com is providing guidance for the fourth quarter of 2020 and increasing its guidance for the full year of 2020 based upon what it currently sees in its markets.

For the fourth quarter of 2020:

* SaaS and license revenue is expected to be in the range of $101.2 million to $101.4 million.

For the full year of 2020:

* SaaS and license revenue is expected to be in the range of $389.0 million to $389.2 million. * Total revenue is expected to be in the range of $594.0 million to $604.2 million, which includes anticipated hardware and other revenue in the range of $205.0 million to $215.0 million. * Non-GAAP adjusted EBITDA is expected to be in the range of $113.0 million to $115.0 million. * Non-GAAP adjusted net income attributable to common stockholders is expected to be in the range of $80.0 million to $81.5 million, based on an estimated tax rate of 21.0%. * Based on an expected 51.0 million weighted average diluted shares outstanding, non-GAAP adjusted net income attributable to common stockholders is expected to be $1.57 to $1.60 per diluted share.

The guidance provided above is forward-looking in nature. Actual results may differ materially. See the cautionary note regarding "Forward-Looking Statements" below. The guidance provided above is based on expectations as of the date of this press release and Alarm.com undertakes no obligation to update guidance after such date.

Conference Call and Webcast Information

Alarm.com will host a conference call to discuss its third quarter 2020 financial results and its outlook for the fourth quarter and full year of 2020. A live audio webcast is scheduled to begin at 4:30 p.m. ET on November 5, 2020. 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 13, 2020 by dialing 855.859.2056 (U.S./Canada) or 404.537.3406 (International) and providing Conference ID: 6882929. 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 attributable to common stockholders 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 (benefit) / 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 expense from our non-GAAP financial measures improves the comparability of our results to the results of other companies in our industry.

Secondary offering expense We exclude secondary offering expense because we do not consider costs associated with the secondary offering to be indicative of our core operating performance and we believe that the exclusion of this expense allows us to better provide meaningful information about our operating performance, facilitates comparisons to our historical operating results and 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 (benefit) / expense: Included in operating expenses are incremental costs directly related to business and asset acquisitions as well as changes in the fair value of contingent consideration liabilities, when applicable. We exclude acquisition-related (benefit) / expense from our non-GAAP financial measures because we believe that the exclusion of this expense allows us to better provide meaningful information about our operating performance, facilitates comparisons to our historical operating results, improves the comparability of our results to the results of other companies in our industry, and ultimately, we believe helps investors better understand the acquisition-related (benefit) / expense and the effects of the transaction on our results of operations.

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 attributable to common stockholders 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 attributable to common stockholders per share, basic and diluted, we do not exclude interest expense.

Interest income and other income, net: We exclude interest income and 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," "believe," "continue," "designed," "enable," "ensure," "expect," "intend," "will," and other similar terms and phrases, and such forward-looking statements include, but are not limited to, the statements regarding the Company's positioning, the benefits of recently launched offerings, and the Company's guidance for the fourth quarter and full year of 2020 described under "Financial Outlook" above and key assumptions related thereto. 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 results and business operations may be negatively impacted by the COVID-19 pandemic, the Company's actual operating results may differ significantly from any guidance provided, certain precautions the Company is taking due to the COVID-19 pandemic could harm its business, the Company's quarterly results may fluctuate, downturns in general economic and market conditions, including due to the COVID-19 pandemic, may reduce demand, the reliability of the Company's network operations centers, the Company's ability to retain service provider partners and residential and commercial subscribers and sustain its growth rate, 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 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 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 August 5, 2020 and other subsequent filings the Company makes with the Securities and Exchange Commission from time to time, including its Form 10-Q for the quarter ended September 30, 2020. 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 Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Revenue:

SaaS and license $ 100,126 $ 84,924 $ 287,780 $ 247,313 revenue

Hardware and other 58,725 42,956 164,647 114,562 revenue

Total revenue 158,851 127,880 452,427 361,875

Cost of revenue:

Cost of SaaS and 14,344 12,438 39,673 37,428 license revenue

Cost of hardware and 46,839 35,085 128,495 93,601 other revenue

Total cost of revenue 61,183 47,523 168,168 131,029

Operating expenses:

Sales and marketing 18,410 14,533 52,405 43,392

General and 17,410 18,701 55,634 51,785 administrative

Research and 36,914 29,461 113,280 84,375 development

Amortization and 6,878 5,467 20,023 15,833 depreciation

Total operating 79,612 68,162 241,342 195,385 expenses

Operating income 18,056 12,195 42,917 35,461

Interest expense (556) (715) (2,069) (2,322)

Interest income 118 2,703 734 4,317

Other income, net 24,753 6,380 24,910 6,468

Income before income 42,371 20,563 66,492 43,924 taxes

Provision for income 6,546 2,873 5,471 3,428 taxes

Net income 35,825 17,690 61,021 40,496

Net loss attributableto redeemable 259 - 865 - noncontrollinginterest

Net incomeattributable to $ 36,084 $ 17,690 $ 61,886 $ 40,496 common stockholders



Per share informationattributable to common stockholders:

Net income per share:

Basic $ 0.74 $ 0.36 $ 1.27 $ 0.84

Diluted $ 0.71 $ 0.35 $ 1.22 $ 0.81

Weighted averagecommon shares outstanding:

Basic 49,007,343 48,518,041 48,842,333 48,360,927

Diluted 50,979,679 50,152,807 50,673,752 50,238,409



Stock-basedcompensation expense Three Months Ended Nine Months Endedincluded in operating September 30, September 30,expenses:

2020 2019 2020 2019

Sales and marketing $ 734 $ 534 $ 2,263 $ 1,385

General and 2,154 1,714 6,033 4,762 administrative

Research and 4,560 2,787 12,605 8,574 development

Total stock-based $ 7,448 $ 5,035 $ 20,901 $ 14,721 compensation expense

ALARM.COM HOLDINGS, INC.

Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

September 30,2020

December 31,2019

Assets

Current assets:

Cash and cash equivalents

$

247,176

$

119,629

Accounts receivable, net of allowance for credit losses of $2,400 and $2,584, respectively, and net of allowance for product returns of $1,341 and $1,075, respectively

81,883

76,373

Inventory, net

40,199

34,168

Other current assets, net of allowance for credit losses of $30 and $16, respectively

17,854

13,504

Total current assets

387,112

243,674

Property and equipment, net

42,639

38,548

Intangible assets, net

91,384

103,438

Goodwill

105,662

104,963

Deferred tax assets

20,749

19,137

Operating lease right-of-use assets

33,899

30,523

Other assets, net of allowance for credit losses of $66 and $0, respectively

16,600

17,516

Total assets

$

698,045

$

557,799

Liabilities, redeemable noncontrolling interest and stockholders' equity

Current liabilities:

Accounts payable, accrued expenses and other current liabilities

$

50,029

$

48,727

Accrued compensation

18,918

16,342

Deferred revenue

4,411

3,043

Operating lease liabilities

9,470

7,683

Total current liabilities

82,828

75,795

Deferred revenue

8,461

7,455

Long-term debt

111,000

63,000

Operating lease liabilities

38,605

37,199

Other liabilities

7,724

7,489

Total liabilities

248,618

190,938

Redeemable noncontrolling interest

10,711

11,210

Stockholders' equity

Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding as of September 30, 2020 and December 31, 2019

-

-

Common stock, $0.01 par value, 300,000,000 shares authorized; 49,256,397 and 48,700,963 shares issued; and 49,109,244 and 48,700,713 shares outstanding as of September 30, 2020 and December 31, 2019, respectively

493

487

Additional paid-in capital

392,765

365,627

Treasury stock, at cost; 147,153 and 0 shares as of September 30, 2020 and December 31, 2019, respectively

(5,149)

-

Retained earnings / (accumulated deficit)

50,607

(10,463)

Total stockholders' equity

438,716

355,651

Total liabilities, redeemable noncontrolling interest and stockholders' equity

$

698,045

$

557,799

ALARM.COM HOLDINGS, INC.

Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)

September December 30, 31, 2020 2019

Assets

Current assets:

Cash and cash equivalents $ 247,176 $ 119,629

Accounts receivable, net of allowance for creditlosses of $2,400 and $2,584, respectively, and net of 81,883 76,373 allowance for product returns of $1,341 and $1,075,respectively

Inventory, net 40,199 34,168

Other current assets, net of allowance for credit 17,854 13,504 losses of $30 and $16, respectively

Total current assets 387,112 243,674

Property and equipment, net 42,639 38,548

Intangible assets, net 91,384 103,438

Goodwill 105,662 104,963

Deferred tax assets 20,749 19,137

Operating lease right-of-use assets 33,899 30,523

Other assets, net of allowance for credit losses of 16,600 17,516 $66 and $0, respectively

Total assets $ 698,045 $ 557,799

Liabilities, redeemable noncontrolling interest and stockholders' equity

Current liabilities:

Accounts payable, accrued expenses and other current $ 50,029 $ 48,727 liabilities

Accrued compensation 18,918 16,342

Deferred revenue 4,411 3,043

Operating lease liabilities 9,470 7,683

Total current liabilities 82,828 75,795

Deferred revenue 8,461 7,455

Long-term debt 111,000 63,000

Operating lease liabilities 38,605 37,199

Other liabilities 7,724 7,489

Total liabilities 248,618 190,938

Redeemable noncontrolling interest 10,711 11,210

Stockholders' equity

Preferred stock, $0.001 par value, 10,000,000 sharesauthorized; no shares issued and outstanding as of - - September 30, 2020 and December 31, 2019

Common stock, $0.01 par value, 300,000,000 sharesauthorized; 49,256,397 and 48,700,963 shares issued;and 49,109,244 and 48,700,713 shares outstanding as 493 487 of September 30, 2020 and December 31, 2019,respectively

Additional paid-in capital 392,765 365,627

Treasury stock, at cost; 147,153 and 0 shares as ofSeptember 30, 2020 and December 31, 2019, (5,149) - respectively

Retained earnings / (accumulated deficit) 50,607 (10,463)

Total stockholders' equity 438,716 355,651

Total liabilities, redeemable noncontrolling interest $ 698,045 $ 557,799 and stockholders' equity

ALARM.COM HOLDINGS, INC.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Nine Months EndedSeptember 30,

Cash flows from operating activities:

2020

2019

Net income

$

61,021

$

40,496

Adjustments to reconcile net income to net cash from operating activities:

Provision for / (recovery of) credit losses on accounts receivable

(237)

722

Reserve for product returns

1,491

(105)

Recovery of credit losses on notes receivable

(368)

(3,319)

Provision for excess and obsolete inventory

1,178

15

Amortization on patents and tooling

604

506

Amortization and depreciation

20,023

15,833

Amortization of debt issuance costs

81

81

Amortization of operating leases

6,562

5,570

Deferred income taxes

(1,480)

1,502

Change in fair value of contingent liability

(2,593)

-

Stock-based compensation

20,901

14,721

Gain on notes receivable

-

(6,931)

Acquired in-process research and development

3,297

850

Gain on sale of investment

(24,737)

-

Impairment of investment

-

605

Changes in operating assets and liabilities:

Accounts receivable

(7,131)

(16,004)

Inventory

(7,209)

1,997

Other current and non-current assets

(5,549)

(3,131)

Accounts payable, accrued expenses and other current liabilities

5,897

(22,457)

Deferred revenue

2,374

(1,153)

Operating lease liabilities

(7,427)

(6,139)

Other liabilities

(28)

188

Cash flows from operating activities

66,670

23,847

Cash flows from / (used in) investing activities:

Additions to property and equipment

(10,677)

(10,660)

Purchases of in-process research and development

(3,297)

(850)

Issuances or purchases of notes receivable

(600)

(26,074)

Receipt of payment on notes receivable

2,023

31,695

Proceeds from sale of investment

25,687

-

Purchases of patents and patent licenses

(900)

-

Cash flows from / (used in) investing activities

12,236

(5,889)

Cash flows from financing activities:

Proceeds from credit facility

50,000

-

Repayments of credit facility

(2,000)

(3,000)

Payments of deferred consideration for business acquisitions

(819)

-

Purchases of treasury stock

(5,149)

-

Issuances of common stock from equity-based plans

6,609

3,304

Cash flows from financing activities

48,641

304

Net increase in cash and cash equivalents

127,547

18,262

Cash and cash equivalents at beginning of the period

119,629

146,061

Cash and cash equivalents at end of the period

$

247,176

$

164,323

ALARM.COM HOLDINGS, INC.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Nine Months Ended September 30,

Cash flows from operating activities: 2020 2019

Net income $ 61,021 $ 40,496

Adjustments to reconcile net income to net cash from operating activities:

Provision for / (recovery of) credit losses on (237) 722 accounts receivable

Reserve for product returns 1,491 (105)

Recovery of credit losses on notes receivable (368) (3,319)

Provision for excess and obsolete inventory 1,178 15

Amortization on patents and tooling 604 506

Amortization and depreciation 20,023 15,833

Amortization of debt issuance costs 81 81

Amortization of operating leases 6,562 5,570

Deferred income taxes (1,480) 1,502

Change in fair value of contingent liability (2,593) -

Stock-based compensation 20,901 14,721

Gain on notes receivable - (6,931)

Acquired in-process research and development 3,297 850

Gain on sale of investment (24,737) -

Impairment of investment - 605

Changes in operating assets and liabilities:

Accounts receivable (7,131) (16,004)

Inventory (7,209) 1,997

Other current and non-current assets (5,549) (3,131)

Accounts payable, accrued expenses and other current 5,897 (22,457) liabilities

Deferred revenue 2,374 (1,153)

Operating lease liabilities (7,427) (6,139)

Other liabilities (28) 188

Cash flows from operating activities 66,670 23,847

Cash flows from / (used in) investing activities:

Additions to property and equipment (10,677) (10,660)

Purchases of in-process research and development (3,297) (850)

Issuances or purchases of notes receivable (600) (26,074)

Receipt of payment on notes receivable 2,023 31,695

Proceeds from sale of investment 25,687 -

Purchases of patents and patent licenses (900) -

Cash flows from / (used in) investing activities 12,236 (5,889)

Cash flows from financing activities:

Proceeds from credit facility 50,000 -

Repayments of credit facility (2,000) (3,000)

Payments of deferred consideration for business (819) - acquisitions

Purchases of treasury stock (5,149) -

Issuances of common stock from equity-based plans 6,609 3,304

Cash flows from financing activities 48,641 304

Net increase in cash and cash equivalents 127,547 18,262

Cash and cash equivalents at beginning of the period 119,629 146,061

Cash and cash equivalents at end of the period $ 247,176 $ 164,323

ALARM.COM HOLDINGS, INC.

Reconciliation of Non-GAAP Measures

(in thousands)

(unaudited)

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2020

2019

2020

2019

Adjusted EBITDA:

Net income

$

35,825

$

17,690

$

61,021

$

40,496

Adjustments:

Interest expense, interest income and other income, net

(24,315)

(8,368)

(23,575)

(8,463)

Provision for income taxes

6,546

2,873

5,471

3,428

Amortization and depreciation expense

6,878

5,467

20,023

15,833

Stock-based compensation expense

7,448

5,035

20,901

14,721

Secondary offering expense

-

-

543

-

Acquisition-related (benefit) / expense

(304)

1,590

2,044

1,590

Litigation expense

2,418

2,033

6,467

10,682

Total adjustments

(1,329)

8,630

31,874

37,791

Adjusted EBITDA

$

34,496

$

26,320

$

92,895

$

78,287

Adjusted net income:

Net income, as reported

$

35,825

$

17,690

$

61,021

$

40,496

Provision for income taxes

6,546

2,873

5,471

3,428

Income before income taxes

42,371

20,563

66,492

43,924

Adjustments:

Less: interest income and other income, net

(24,871)

(9,083)

(25,644)

(10,785)

Amortization expense

4,084

3,404

12,209

10,338

Stock-based compensation expense

7,448

5,035

20,901

14,721

Secondary offering expense

-

-

543

-

Acquisition-related (benefit) / expense

(304)

1,590

2,044

1,590

Litigation expense

2,418

2,033

6,467

10,682

Non-GAAP adjusted income before income taxes

31,146

23,542

83,012

70,470

Income taxes 1

(6,541)

(4,944)

(17,433)

(14,799)

Non-GAAP adjusted net income

$

24,605

$

18,598

$

65,579

$

55,671

1 Income taxes are calculated using a rate of 21.0% for each of the three and nine months ended September 30, 2020 and 2019. The 21.0% effective tax rate for each of the three and nine months ended September 30, 2020 and 2019 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

(in thousands)

(unaudited)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Adjusted EBITDA:

Net income $ 35,825 $ 17,690 $ 61,021 $ 40,496

Adjustments:

Interest expense, interest (24,315) (8,368) (23,575) (8,463) income and other income, net

Provision for income taxes 6,546 2,873 5,471 3,428

Amortization and depreciation 6,878 5,467 20,023 15,833 expense

Stock-based compensation 7,448 5,035 20,901 14,721 expense

Secondary offering expense - - 543 -

Acquisition-related (benefit) (304) 1,590 2,044 1,590 / expense

Litigation expense 2,418 2,033 6,467 10,682

Total adjustments (1,329) 8,630 31,874 37,791

Adjusted EBITDA $ 34,496 $ 26,320 $ 92,895 $ 78,287



Adjusted net income:

Net income, as reported $ 35,825 $ 17,690 $ 61,021 $ 40,496

Provision for income taxes 6,546 2,873 5,471 3,428

Income before income taxes 42,371 20,563 66,492 43,924

Adjustments:

Less: interest income and (24,871) (9,083) (25,644) (10,785) other income, net

Amortization expense 4,084 3,404 12,209 10,338

Stock-based compensation 7,448 5,035 20,901 14,721 expense

Secondary offering expense - - 543 -

Acquisition-related (benefit) (304) 1,590 2,044 1,590 / expense

Litigation expense 2,418 2,033 6,467 10,682

Non-GAAP adjusted income 31,146 23,542 83,012 70,470 before income taxes

Income taxes^ 1 (6,541) (4,944) (17,433) (14,799)

Non-GAAP adjusted net income $ 24,605 $ 18,598 $ 65,579 $ 55,671

^1 Income taxes are calculated using a rate of 21.0% for each of the three andnine months ended September 30, 2020 and 2019. The 21.0% effective tax rate foreach of the three and nine months ended September 30, 2020 and 2019 exclude theincome tax effect on the non-GAAP adjustments and reflect the estimatedlong-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 EndedSeptember 30,

Nine Months EndedSeptember 30,

2020

2019

2020

2019

Adjusted net income attributable to common stockholders:

Net income attributable to common stockholders, as reported

$

36,084

$

17,690

$

61,886

$

40,496

Provision for income taxes

6,546

2,873

5,471

3,428

Income attributable to common stockholders before income taxes

42,630

20,563

67,357

43,924

Adjustments:

Less: interest income and other income, net

(24,871)

(9,083)

(25,644)

(10,785)

Amortization expense

4,084

3,404

12,209

10,338

Stock-based compensation expense

7,448

5,035

20,901

14,721

Secondary offering expense

-

-

543

-

Acquisition-related (benefit) / expense

(304)

1,590

2,044

1,590

Litigation expense

2,418

2,033

6,467

10,682

Non-GAAP adjusted income attributable to common stockholders before income taxes

31,405

23,542

83,877

70,470

Income taxes 1

(6,595)

(4,944)

(17,614)

(14,799)

Non-GAAP adjusted net income attributable to common stockholders

$

24,810

$

18,598

$

66,263

$

55,671

ALARM.COM HOLDINGS, INC.

Reconciliation of Non-GAAP Measures - continued

(in thousands, except share and per share data)

(unaudited)

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Adjusted net incomeattributable to common stockholders:

Net income attributable tocommon stockholders, as $ 36,084 $ 17,690 $ 61,886 $ 40,496 reported

Provision for income taxes 6,546 2,873 5,471 3,428

Income attributable to commonstockholders before income 42,630 20,563 67,357 43,924 taxes

Adjustments:

Less: interest income and (24,871) (9,083) (25,644) (10,785) other income, net

Amortization expense 4,084 3,404 12,209 10,338

Stock-based compensation 7,448 5,035 20,901 14,721 expense

Secondary offering expense - - 543 -

Acquisition-related (benefit) (304) 1,590 2,044 1,590 / expense

Litigation expense 2,418 2,033 6,467 10,682

Non-GAAP adjusted incomeattributable to common 31,405 23,542 83,877 70,470 stockholders before incometaxes

Income taxes^ 1 (6,595) (4,944) (17,614) (14,799)

Non-GAAP adjusted net incomeattributable to common $ 24,810 $ 18,598 $ 66,263 $ 55,671 stockholders

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2020

2019

2020

2019

Adjusted net income attributable to common stockholders per share:

Net income attributable to common stockholders per share - basic, as reported

$

0.74

$

0.36

$

1.27

$

0.84

Provision for income taxes

0.13

0.06

0.11

0.08

Income attributable to common stockholders before income taxes

0.87

0.42

1.38

0.92

Adjustments:

Less: interest income and other income, net

(0.51)

(0.18)

(0.52)

(0.22)

Amortization expense

0.09

0.07

0.25

0.21

Stock-based compensation expense

0.15

0.10

0.43

0.30

Secondary offering expense

-

-

0.01

-

Acquisition-related (benefit) / expense

(0.01)

0.03

0.04

0.03

Litigation expense

0.05

0.04

0.13

0.22

Non-GAAP adjusted income before income taxes

0.64

0.48

1.72

1.46

Income taxes 1

(0.13)

(0.10)

(0.36)

(0.31)

Non-GAAP adjusted net income attributable to common stockholders per share - basic

$

0.51

$

0.38

$

1.36

$

1.15

Non-GAAP adjusted net income attributable to common stockholders per share - diluted

$

0.49

$

0.37

$

1.31

$

1.11

Weighted average common shares outstanding:

Basic, as reported

49,007,343

48,518,041

48,842,333

48,360,927

Diluted, as reported

50,979,679

50,152,807

50,673,752

50,238,409

1 Income taxes are calculated using a rate of 21.0% for each of the three and nine months ended September 30, 2020 and 2019. The 21.0% effective tax rate for each of the three and nine months ended September 30, 2020 and 2019 exclude the income tax effect on the non-GAAP adjustments and reflect the estimated long-term corporate tax rate.

Three Months Ended Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Adjusted net incomeattributable to common stockholdersper share:

Net incomeattributable tocommon stockholders $ 0.74 $ 0.36 $ 1.27 $ 0.84 per share - basic, asreported

Provision for income 0.13 0.06 0.11 0.08 taxes

Income attributableto common 0.87 0.42 1.38 0.92 stockholders beforeincome taxes

Adjustments:

Less: interest income (0.51) (0.18) (0.52) (0.22) and other income, net

Amortization expense 0.09 0.07 0.25 0.21

Stock-based 0.15 0.10 0.43 0.30 compensation expense

Secondary offering - - 0.01 - expense

Acquisition-related (0.01) 0.03 0.04 0.03 (benefit) / expense

Litigation expense 0.05 0.04 0.13 0.22

Non-GAAP adjustedincome before income 0.64 0.48 1.72 1.46 taxes

Income taxes^ 1 (0.13) (0.10) (0.36) (0.31)

Non-GAAP adjusted netincome attributableto common $ 0.51 $ 0.38 $ 1.36 $ 1.15 stockholders pershare - basic



Non-GAAP adjusted netincome attributableto common $ 0.49 $ 0.37 $ 1.31 $ 1.11 stockholders pershare - diluted



Weighted averagecommon shares outstanding:

Basic, as reported 49,007,343 48,518,041 48,842,333 48,360,927

Diluted, as reported 50,979,679 50,152,807 50,673,752 50,238,409

^1 Income taxes are calculated using a rate of 21.0% for each of the three andnine months ended September 30, 2020 and 2019. The 21.0% effective tax rate foreach of the three and nine months ended September 30, 2020 and 2019 exclude theincome tax effect on the non-GAAP adjustments and reflect the estimatedlong-term corporate tax rate.

ALARM.COM HOLDINGS, INC.

Reconciliation of Non-GAAP Measures - continued

(in thousands)

(unaudited)

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2020

2019

2020

2019

Free cash flow:

Cash flows from operating activities

$

18,622

$

980

$

66,670

$

23,847

Additions to property and equipment

(3,561)

(4,952)

(10,677)

(10,660)

Non-GAAP free cash flow

$

15,061

$

(3,972)

$

55,993

$

13,187

View source version on businesswire.com: https://www.businesswire.com/news/home/20201105006098/en/

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

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






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