Alarm.com(ALRM) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents Alarm.com Holdings, Inc.'s unaudited condensed consolidated financial statements for Q2 and H1 2025 and 2024, covering operations, balance sheets, cash flows, and equity Financial Statements (Unaudited) This section presents Alarm.com Holdings, Inc.'s unaudited condensed consolidated financial statements for Q2 and H1 2025 and 2024, including operations, balance sheets, cash flows, and equity Condensed Consolidated Statements of Operations Total revenue for Q2 2025 increased 8.8% to $254.3 million, with operating income up 24.2% to $32.0 million and diluted EPS at $0.63 Q2 2025 vs Q2 2024 Statement of Operations (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $254,308 | $233,807 | +8.8% | | SaaS and license revenue | $169,993 | $155,927 | +9.0% | | Hardware and other revenue | $84,315 | $77,880 | +8.3% | | Operating Income | $32,022 | $25,774 | +24.2% | | Net Income Attributable to Common Stockholders | $34,552 | $33,511 | +3.1% | | Diluted EPS | $0.63 | $0.62 | +1.6% | Six Months Ended June 30, 2025 vs 2024 Statement of Operations (in thousands, except per share) | Metric | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $493,130 | $457,090 | +7.9% | | Operating Income | $61,669 | $44,499 | +38.6% | | Net Income Attributable to Common Stockholders | $62,502 | $57,106 | +9.5% | | Diluted EPS | $1.15 | $1.06 | +8.5% | Condensed Consolidated Balance Sheets Total assets increased to $2.10 billion as of June 30, 2025, with cash decreasing to $1.02 billion due to investments, and total stockholders' equity growing to $797.3 million Balance Sheet Summary (in thousands) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,024,862 | $1,220,701 | | Total Current Assets | $1,292,556 | $1,481,592 | | Total Assets | $2,098,054 | $2,038,208 | | Total Current Liabilities | $662,256 | $188,806 | | Total Liabilities | $1,246,121 | $1,266,915 | | Total Stockholders' Equity | $797,345 | $726,546 | - The significant decrease in cash was driven by a substantial increase in 'Investments in unconsolidated entities', which rose from $17.2 million to $198.6 million[16] - The increase in current liabilities is primarily due to the reclassification of $498.3 million of convertible senior notes to current, as they mature in 2026[16] Condensed Consolidated Statements of Cash Flows Net cash from operating activities for H1 2025 was $46.8 million, with $233.0 million used in investing activities and $9.6 million in financing activities Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating Activities | $46,773 | $72,816 | | Investing Activities | ($232,988) | ($9,159) | | Financing Activities | ($9,594) | $346,768 | | Net (Decrease) / Increase in Cash | ($195,993) | $410,292 | | Cash at End of Period | $1,033,139 | $1,111,371 | - The significant cash used in investing activities in H1 2025 was driven by $174.7 million for purchases of investments in unconsolidated entities and $23.4 million for a business acquisition[18] Notes to the Condensed Consolidated Financial Statements This section details accounting policies, including the $23.6 million CHeKT acquisition, significant equity investments, $1 billion in convertible notes, and ongoing patent infringement legal proceedings - On February 10, 2025, the company acquired 81% of CHeKT, Inc. for $23.6 million in cash, resulting in $23.6 million of goodwill allocated to the Alarm.com segment[51][52][53] - In Q2 2025, the company made significant equity method investments, including $119.3 million for 32.5% of Safe Haven, $19.2 million for 32.5% of All Access, and $29.1 million for 24.7% of Safe Streets[63][65] - The company has two outstanding convertible senior notes: $500 million 0% notes due 2026 and $500 million 2.25% notes due 2029[93][104] - The company is involved in several legal proceedings concerning patent infringement with EcoFactor, Causam, and SkyBell, but has determined a loss is not probable or reasonably estimable at this time[118][120][123] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 and H1 2025 financial results, highlighting a 9% YoY revenue increase to $254.3 million, driven by SaaS growth, significant equity investments, and new tax legislation benefits Q2 2025 Financial Highlights (in millions) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $254.3M | $233.8M | +9% | | SaaS and license revenue | $170.0M | $155.9M | +9% | | Net Income | $34.2M | $32.5M | +5.2% | | Non-GAAP adjusted EBITDA | $48.4M | $42.8M | +13.1% | - The company made significant equity investments in Q2 2025, purchasing stakes in Safe Streets (24.7%), Safe Haven (32.5%), and All Access (32.5%)[169][170] - The newly enacted One Big Beautiful Bill Act (OBBBA) is expected to significantly reduce federal income tax cash outlays by reinstating immediate R&D expense deductions and 100% bonus depreciation[171] Results of Operations Q2 2025 total revenue grew 9% YoY, driven by subscriber growth and energy management solutions, with operating income increasing 24.2% despite rising sales and marketing expenses - SaaS and license revenue for the Alarm.com segment increased by $10.2 million in Q2 2025 YoY due to subscriber base growth, while the Other segment's SaaS revenue grew by $3.9 million[213] - Hardware revenue increased by $6.4 million in Q2 2025 YoY, primarily from higher sales volume of video cameras in the Alarm.com segment[213] - Sales and marketing expenses increased by $3.3 million (12%) in Q2 2025 YoY, mainly due to higher personnel costs and marketing expenses to support growth[221] Liquidity and Capital Resources As of June 30, 2025, cash and cash equivalents were $1.02 billion, with working capital decreasing to $630.3 million due to convertible note reclassification and significant investing activities Working Capital Summary (in thousands) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,024,862 | $1,220,701 | | Working capital | $630,300 | $1,292,786 | - Cash flow from operations decreased to $46.8 million in H1 2025 from $72.8 million in H1 2024, primarily due to changes in operating assets and liabilities[259] - The company repurchased 174,400 shares for $10.2 million in the first six months of 2025 under its stock repurchase program[255] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are inflation and foreign exchange rates, though foreign currency risk is immaterial as most transactions are in U.S. dollars - The company's main market risks are identified as inflation and foreign currency exchange rates[270] - Foreign currency risk is considered immaterial as substantially all revenue and expenses are denominated in U.S. dollars[273] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[276] - No material changes to the company's internal control over financial reporting occurred during the second quarter of 2025[277] PART II. OTHER INFORMATION This section provides information on legal proceedings, risk factors, equity security sales, and other disclosures Legal Proceedings The company is involved in multiple legal proceedings, including patent infringement lawsuits by EcoFactor and Causam, and a trade secret misappropriation lawsuit by SkyBell, with uncertain outcomes - The company is defending against patent infringement lawsuits from EcoFactor, Inc. and Causam Enterprises, Inc[279][281] - A new lawsuit was filed on July 3, 2025, by SkyBell Technologies, Inc., alleging misappropriation of trade secrets related to video doorbells[284] Risk Factors The company faces risks including fluctuating quarterly results, inability to sustain growth, liability from solution failures, intense competition, reliance on key partners, and cybersecurity threats - The company's quarterly results are subject to fluctuation and may be negatively affected by macroeconomic conditions[291][296] - A substantial portion of revenue comes from a limited number of service provider partners, and the loss of a major partner could significantly decrease revenue[291][342] - The company faces high competition from large technology companies, broadband providers, and other managed service providers in the connected property market[291][322] - Risks related to the company's security and life safety solutions include potential liability from failures, cybersecurity threats, and data breaches[291][304][332] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 88,000 shares for approximately $5.1 million in Q2 2025 under a $100.0 million stock repurchase program authorized through May 2026 Q2 2025 Stock Repurchase Activity | Period | Total Shares Purchased | Average Price Paid per Share | Value of Shares Remaining for Purchase (in USD) | | :--- | :--- | :--- | :--- | | June 2025 | 88,000 | $58.05 | $89,833,065 | Other Information CFO Kevin Bradley adopted a Rule 10b5-1 trading arrangement in Q2 2025 for the potential sale of up to 2,010 shares of common stock - CFO Kevin Bradley adopted a Rule 10b5-1 trading plan on June 4, 2025, for the sale of up to 2,010 shares[455]