Alarm.com(US:ALRM)2025-05-09 15:46PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2025, including key financial statements and notes, reporting total revenue of $238.8 million and net income of $27.7 million Condensed Consolidated Statements of Operations (Q1 2025 vs Q1 2024) | Financial Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total revenue | $238,822 | $223,283 | | SaaS and license revenue | $163,800 | $150,344 | | Hardware and other revenue | $75,022 | $72,939 | | Operating income | $29,647 | $18,725 | | Net income | $27,712 | $23,404 | | Net income attributable to common stockholders | $27,950 | $23,595 | | Diluted EPS | $0.52 | $0.44 | Condensed Consolidated Balance Sheets | Balance Sheet Item | As of March 31, 2025 (in thousands) | As of December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $1,186,195 | $1,220,701 | | Total Assets | $2,077,431 | $2,038,208 | | Convertible senior notes, net (current & noncurrent) | $984,975 | $983,477 | | Total Liabilities | $1,265,243 | $1,266,915 | | Total Stockholders' Equity | $759,603 | $726,546 | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Cash flows from operating activities | $24,057 | $49,853 | | Cash flows used in investing activities | ($55,179) | ($3,961) | | Cash flows (used in) / from financing activities | ($3,476) | $6,356 | | Net (decrease) / increase in cash | ($34,716) | $52,068 | Notes to the Condensed Consolidated Financial Statements The notes detail accounting policies and financial data, covering revenue recognition, the $23.4 million CHeKT acquisition, $1 billion in convertible senior notes, segment performance, and a $29.1 million investment in Safe Streets USA, LLC - On February 10, 2025, the company acquired 81% of CHeKT, Inc. for $23.6 million in cash, net of holdbacks. The acquisition resulted in $23.6 million of goodwill, which was allocated to the Alarm.com segment464849 - The company has two outstanding series of convertible senior notes: $500.0 million of 0% notes due in 2026 and $500.0 million of 2.25% notes due in 20298999 - For Q1 2025, the Alarm.com segment generated $34.3 million in operating income, while the Other segment reported an operating loss of $4.7 million140 - Subsequent to the quarter end, on April 28, 2025, the company paid $29.1 million in cash to purchase a 24.7% stake in Safe Streets USA, LLC143 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, noting a 7% revenue increase to $238.8 million, a 95% SaaS and license revenue renewal rate, and details liquidity with $1.19 billion in cash Q1 2025 Financial Highlights | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $238.8 million | $223.3 million | | SaaS and license revenue | $163.8 million | $150.3 million | | Net income | $27.7 million | $23.4 million | | Non-GAAP adjusted EBITDA | $43.5 million | $37.0 million | - The SaaS and license revenue renewal rate for the trailing twelve months ended March 31, 2025, was 95%, up from 94% in the prior year period161171 - Recent strategic activities include the acquisition of 81% of CHeKT, Inc. on February 10, 2025, and a $29.1 million investment for a 24.7% stake in Safe Streets USA, LLC on April 28, 2025157159 - The company paid $33.5 million in April 2025 for the 2024 cash tax increase resulting from the requirement to capitalize and amortize R&D expenditures under Section 174 of the Tax Cuts and Jobs Act222 Results of Operations This section compares Q1 2025 and Q1 2024 operating results, showing a 7% total revenue increase to $238.8 million and a 58% operating income growth to $29.6 million, partly due to reduced general and administrative expenses - Total revenue increased 7% YoY, with SaaS and license revenue growing 9% due to an increase in the subscriber base and hardware revenue growing 3%200 - General and administrative expenses decreased by 8% ($2.3 million), mainly due to a $4.3 million decrease in the provision for credit losses, which was elevated in Q1 2024 due to a specific loan to a distribution partner206 - Research and development expenses increased by 4% ($2.4 million) due to higher costs for external consultants, software licenses, and personnel207 - The effective tax rate increased to 20.9% in Q1 2025 from 10.5% in Q1 2024. The prior year's rate was lower due to a tax benefit from the closure of an IRS examination and a tax windfall from stock-based compensation212 Liquidity and Capital Resources As of March 31, 2025, the company held $1.19 billion in cash, with operating cash flow decreasing to $24.1 million, and investing activities increasing to $55.2 million due to the CHeKT acquisition and a new loan - As of March 31, 2025, the company had $1.19 billion in cash and cash equivalents and $775.3 million in working capital220221 Cash Flow Summary (Q1 2025 vs Q1 2024) | Cash Flow Activity | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Operating Activities | $24,057 | $49,853 | | Investing Activities | ($55,179) | ($3,961) | | Financing Activities | ($3,476) | $6,356 | - The $51.2 million increase in cash used for investing was primarily due to the $23.6 million paid for the CHeKT acquisition and a $21.5 million note receivable issued to a service provider partner238 - The company repurchased 86,400 shares of its common stock for $5.1 million under its stock repurchase program231 Quantitative and Qualitative Disclosures About Market Risk The company identifies inflation and foreign currency exchange rates as primary market risks, deeming both immaterial due to U.S. dollar-denominated operations and no material inflationary impact - The primary market risks are identified as inflation and foreign currency exchange245 - Management believes inflation has not had a material effect on business operations or financial condition247 - Foreign currency exchange risk is considered immaterial as most revenue and expenses are denominated in U.S. dollars248 Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter, and is integrating the CHeKT business - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025250 - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls251 - The company is in the process of integrating CHeKT, acquired on February 10, 2025, into its internal control over financial reporting251 PART II. OTHER INFORMATION Legal Proceedings The company is involved in several patent infringement lawsuits, including cases with EcoFactor, Inc. and Causam Enterprises, Inc., and is indemnifying CSG in a Ubiquitous Connectivity, LP litigation - The company is defending a lawsuit from EcoFactor, Inc. alleging infringement of five U.S. patents. The case is currently stayed pending patent reexamination and review proceedings114253 - A lawsuit from Causam Enterprises, Inc. alleges infringement of four U.S. patents. This district court case is stayed pending final resolution of a related ITC investigation where the ITC found in favor of Alarm.com116255256 - The company is indemnifying its service provider partner CSG in an ongoing patent litigation brought by Ubiquitous Connectivity, LP, where a trial is scheduled for July 2026119258 Risk Factors This section details risks including fluctuating quarterly results, intense competition, reliance on service provider partners, potential security solution failures, cybersecurity threats, and complex data privacy regulations - The company faces intense competition from other technology platforms, traditional security providers, and large technology companies like Google, Amazon, and Apple that are targeting the connected property market291293295 - A substantial portion of revenue comes from a limited number of service provider partners. ADT represented over 15% but not more than 20% of revenue in 2022, 2023, and 2024312 - The business is subject to risks from failure of its security and life safety solutions, cybersecurity breaches, and dependence on third-party wireless carriers, whose network shutdowns (e.g., 3G) can require costly subscriber upgrades271301324 - The company is subject to complex and evolving regulations, including data privacy laws like GDPR in Europe and CCPA/CPRA in California, which can increase compliance costs and legal risks339341342 Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased 86,400 shares of common stock for approximately $5.1 million under its $100 million repurchase program, leaving $94.9 million available Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2025 | — | $ — | | February 2025 | — | $ — | | March 2025 | 86,400 | $58.55 | | Total | 86,400 | $58.55 | - As of March 31, 2025, approximately $94.9 million remained available for purchase under the company's stock repurchase program422 Defaults Upon Senior Securities The company reports no defaults upon senior securities during the reporting period - None424 Mine Safety Disclosures This item is not applicable to the company - Not applicable425 Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025 - During the three months ended March 31, 2025, no directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement426 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, lease amendments, CEO/CFO certifications, and Inline XBRL data files - The list of exhibits includes required CEO and CFO certifications (31.1, 31.2, 32.1) and Inline XBRL documents432