Document
false0001459200 0001459200 2020-02-25 2020-02-25


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 8-K
 


CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 25, 2020
 
ALARM.COM HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
       
 
 
 
 
 
Delaware
 
001-37461
 
26-4247032
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
    
8281 Greensboro Drive
Suite 100
Tysons
Virginia
 
22102
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (877) 389-4033
  
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, $0.01 par value per share
 
ALRM
 
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 

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Item 2.02 Results of Operations and Financial Condition.

On February 25, 2020, Alarm.com Holdings, Inc. (the “Company”) issued a press release announcing its financial results for the quarter and year ended December 31, 2019. The press release is furnished hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this Current Report, including the exhibit attached hereto, is furnished under Item 2.02 of this report and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(d) Election of New Director

Effective February 21, 2020, the Company appointed Simone Wu to serve on the Board of Directors of the Company (the “Board”) as a Class II director. Ms. Wu will serve for the term expiring at the Company’s upcoming 2020 Annual Meeting of Stockholders or until her earlier death, resignation or removal. Ms. Wu has been appointed to the Audit Committee of the Board.

Ms. Wu, 55, is the Senior Vice President, General Counsel, Corporate Secretary and External Affairs for Choice Hotels International, Inc., a position she has held since 2015, and previously served as the Senior Vice President, General Counsel, Corporate Secretary & Chief Compliance Officer at Choice Hotels from 2012 to 2015. From 2001 to 2012, she held a number of positions of increasing responsibility with XO Communications, including serving as its General Counsel. Ms. Wu earned a B.A. in Political Science from the University of Michigan and a J.D. from Columbia University.

Ms. Wu will be compensated in accordance with the Company’s standard compensation arrangements for non-employee directors, which are described in greater detail in the Company’s definitive proxy statement on Schedule 14A relating to its 2019 Annual Meeting of Stockholders, which was filed with the Securities and Exchange Commission (the “Commission”) on April 26, 2019.

In connection with her appointment, Ms. Wu and the Company entered into an indemnity agreement, a copy of which will be filed with the Commission as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

Ms. Wu was not selected as a director pursuant to any arrangements or understandings with the Company or with any other person, and there are no related party transactions between the Company and Ms. Wu that would require disclosure under Item 404(a) of Regulation S-K.

Item 9.01 Financial Statements and Exhibits.
 
(d)Exhibits
Exhibit No.
  
Description
  
104*
 
Cover Page Interactive Data File (embedded within the Inline XBRL document)
_______________

* Filed herewith.


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
Alarm.com Holdings, Inc.
 
 
 
Date:
February 25, 2020
 
 
 
By:
/s/ Steve Valenzuela
 
 
 
Steve Valenzuela
 
 
 
Chief Financial Officer

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Exhibit 99.1

Alarm.com Reports Fourth Quarter and Full Year 2019 Results

-- Fourth quarter SaaS and license revenue increased 16% year-over-year to $90.1 million --
-- Fourth quarter total revenue increased 26% year-over-year to $140.5 million --
-- Fourth quarter GAAP net income attributable to common stockholders increased to $13.0 million, compared to $7.9 million for the fourth quarter 2018 --
-- Fourth quarter non-GAAP adjusted EBITDA increased 44% year-over-year to $30.0 million, compared to $20.9 million for the fourth quarter 2018 --

TYSONS, VA., February 25, 2020 -- Alarm.com Holdings, Inc. (Nasdaq: ALRM), the leading platform for the intelligently connected property, today reported financial results for its fourth quarter and full year ended December 31, 2019. Alarm.com also provided its financial outlook for SaaS and license revenue for the first quarter of 2020 and guidance for the full year 2020.

“We are pleased to report solid results for the quarter and the year thanks to the performance of our service provider partners and dedication of the Alarm.com team,” said Steve Trundle, President and CEO of Alarm.com. “With our best-in-class platform and strong product pipeline, we are focused on continuing to deliver innovative capabilities for our service provider partners to extend their leadership positions in their markets.”

Fourth Quarter 2019 Financial Results as Compared to Fourth Quarter 2018

•
SaaS and license revenue increased 16% to $90.1 million, compared to $77.8 million. SaaS and license revenue of the Alarm.com and Other segments increased 15% and 34%, respectively.
•
Total revenue increased 26% to $140.5 million, compared to $111.4 million.
•
GAAP net income attributable to common stockholders increased to $13.0 million, or $0.26 per diluted share, compared to $7.9 million or $0.16 per diluted share.
•
Non-GAAP adjusted EBITDA increased to $30.0 million, compared to $20.9 million.
•
Non-GAAP adjusted net income attributable to common stockholders increased to $21.5 million, or $0.43 per diluted share, compared to $14.5 million or $0.29 per diluted share.

Full Year 2019 Financial Results as Compared to Full Year 2018

•
SaaS and license revenue increased 16% to $337.4 million, compared to $291.1 million. SaaS and license revenue of the Alarm.com and Other segments increased 14% and 52%, respectively.
•
Total revenue increased 19% to $502.4 million, compared to $420.5 million.
•
GAAP net income attributable to common stockholders increased to $53.5 million, or $1.06 per diluted share, compared to $21.5 million or $0.43 per diluted share, primarily due to a $28.0 million expense for an agreement entered into in 2018 to settle a putative class action lawsuit related to the Telephone Consumer Protection Act, or TCPA.
•
Non-GAAP adjusted EBITDA increased to $108.3 million, compared to $93.1 million.
•
Non-GAAP adjusted net income attributable to common stockholders increased to $77.2 million, or $1.54 per diluted share, compared to $66.1 million or $1.33 per diluted share.

Balance Sheet and Cash Flow

•
Total cash and cash equivalents were $119.6 million as of December 31, 2019, compared to $146.1 million as of December 31, 2018.
•
For the quarter ended December 31, 2019, cash flows from operations was $23.3 million and free cash flow was $14.6 million, compared to cash flows from operations of $25.7 million and free cash flow of $24.0 million for the quarter ended December 31, 2018.
•
For the year ended December 31, 2019, cash flows from operations was $47.1 million and free cash flow was $27.8 million, compared to cash flows from operations of $60.7 million and free cash flow of $49.7 million for the year ended December 31, 2018. The decrease in cash flows from operations and free cash flows was primarily due to the payments totaling $28.0 million in 2019 to settle the TCPA putative class action lawsuit.

Recent Business Highlights

•
Announced Smart Water Valve + Meter: The Smart Water Valve + Meter expands Alarm.com’s comprehensive whole home water safety solution that helps homes and businesses conserve water use and reduce the risk of damage caused by leaks and moisture. Attached to a property’s main water line, the Smart Water Valve + Meter can identify low- and high-volume water leaks and automatically shut off water flow to help reduce damage. Alarm.com’s whole home water safety solution works with a range of connected devices and sensors to alert property owners about conditions that can lead to frozen and burst pipes, intelligently manage humidity levels and provide notification if a

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sump pump fails. Building36, a division of Alarm.com, designed and developed the Smart Water Valve + Meter for deployment in multiple service provider channels.

•
Connected Car Introduction: Alarm.com’s Connected Car solution provides a rich set of monitoring, awareness and diagnostics for vehicle security and greater peace of mind for families with teens and other higher risk drivers. The new service is enabled by an onboard, plug-in module, a sleek new mobile app interface with detailed vehicle reporting and intelligent notifications that include unexpected movement, high-speed driving, sudden acceleration and hard braking alerts. The fully integrated solution enables Alarm.com’s service provider partners to extend security and safety beyond the home to generate new recurring revenue opportunities.

•
Building36 Expands HVAC Monitoring Service to Lennox iComfort Systems: Building36, a division of Alarm.com, expanded its automation services with the integration of Lennox iComfort line of heating and cooling systems. The integration provides property owners with remote connectivity and enables HVAC contractors to monitor performance and efficiently and proactively address customer needs.

•
Simone Wu Appointed to Board of Directors: Effective February 21, 2020, Simone Wu was appointed to serve as a member of Alarm.com's board of directors. Ms. Wu is the Senior Vice President, General Counsel, Corporate Secretary and External Affairs for Choice Hotels. From 2001 to 2012, she held a number of positions with XO Communications, including General Counsel. Ms. Wu brings broad operational, management and legal experience. She earned a B.A. in Political Science from the University of Michigan and a J.D. from Columbia University.

Financial Outlook

Alarm.com is providing its outlook for SaaS and license revenue for the first quarter of 2020 and its guidance for the full year 2020.

For the first quarter of 2020:

•
SaaS and license revenue is expected to be in the range of $89.9 million to $90.1 million.

For the full year 2020:

•
SaaS and license revenue is expected to be in the range of $382.0 million to $382.5 million.
•
Total revenue is expected to be in the range of $547.0 million to $557.5 million, which includes anticipated hardware and other revenue in the range of $165.0 million to $175.0 million.
•
Non-GAAP adjusted EBITDA is expected to be in the range of $107.0 million to $110.0 million.
•
Non-GAAP adjusted net income attributable to common stockholders is expected to be in the range of $74.9 million to $75.4 million, based on an estimated tax rate of 21.0%.
•
Based on an expected 50.7 million weighted average diluted shares outstanding, non-GAAP adjusted net income attributable to common stockholders is expected to be $1.48 to $1.49 per diluted share.

Conference Call and Webcast Information

Alarm.com will host a conference call to discuss its fourth quarter and full year 2019 financial results and its outlook for the first quarter and full year 2020. A live audio webcast is scheduled to begin at 4:30 p.m. ET on February 25, 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 March 4, 2020 by dialing 855.859.2056 (U.S./Canada) or 404.537.3406 (International) and providing Conference ID: 8658976. 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.

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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.


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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.

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,” “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 first quarter and full year 2020. 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 November 5, 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 Trone
Alarm.com
[email protected]

Media Relations:
Matthew Zartman
Alarm.com
[email protected]

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ALARM.COM HOLDINGS, INC.
Consolidated Statements of Operations
(in thousands, except share and per share data)


 
Three Months Ended 
 December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
 
 
SaaS and license revenue
$
90,062

 
$
77,824

 
$
337,375

 
$
291,072

 
$
236,283

Hardware and other revenue
50,426

 
33,578

 
164,988

 
129,422

 
102,654

Total revenue
140,488

 
111,402

 
502,363

 
420,494

 
338,937

Cost of revenue:
 
 
 
 
 
 
 
 
 
Cost of SaaS and license revenue
12,638

 
11,599

 
50,066

 
44,933

 
35,610

Cost of hardware and other revenue
39,932

 
27,259

 
133,533

 
100,782

 
80,578

Total cost of revenue
52,570

 
38,858

 
183,599

 
145,715

 
116,188

Operating expenses:
 
 
 
 
 
 
 
 
 
Sales and marketing
18,423

 
16,340

 
61,815

 
55,902

 
43,490

General and administrative
18,174

 
17,807

 
69,959

 
95,750

 
55,396

Research and development
30,068

 
24,437

 
114,443

 
89,204

 
72,755

Amortization and depreciation
6,301

 
5,567

 
22,134

 
21,721

 
17,734

Total operating expenses
72,966

 
64,151

 
268,351

 
262,577

 
189,375

Operating income
14,952

 
8,393

 
50,413

 
12,202

 
33,374

Interest expense
(652
)
 
(759
)
 
(2,974
)
 
(2,918
)
 
(2,199
)
Interest income
605

 
830

 
4,922

 
2,272

 
1,031

Other income, net
67

 
52

 
6,535

 
143

 
35

Income before income taxes
14,972

 
8,516

 
58,896

 
11,699

 
32,241

Provision for / (benefit from) income taxes
2,138

 
588

 
5,566

 
(9,825
)
 
2,990

Net income
12,834

 
7,928

 
53,330

 
21,524

 
29,251

Net loss attributable to redeemable noncontrolling interest
201

 
—

 
201

 
—

 
—

Net income allocated to participating securities
—

 
—

 
—

 
(3
)
 
(13
)
Net income attributable to common stockholders
$
13,035

 
$
7,928

 
$
53,531

 
$
21,521

 
$
29,238

 
 
 
 
 
 
 
 
 
 
Per share information attributable to common stockholders:
 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
 
Basic
$
0.27

 
$
0.16

 
$
1.11

 
$
0.45

 
$
0.63

Diluted
$
0.26

 
$
0.16

 
$
1.06

 
$
0.43

 
$
0.59

Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
48,624,834

 
48,045,654

 
48,427,446

 
47,633,739

 
46,682,141

Diluted
50,184,451

 
49,865,890

 
50,273,889

 
49,692,184

 
49,153,948

 
 
 
 
 
 
 
 
 
 
Stock-based compensation expense included in operating expenses:
Three Months Ended 
 December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
 
2017
Sales and marketing
$
690

 
$
341

 
$
2,075

 
$
1,196

 
$
561

General and administrative
1,712

 
1,201

 
6,474

 
4,901

 
2,638

Research and development
3,480

 
2,217

 
12,054

 
7,332

 
4,214

Total stock-based compensation expense
$
5,882

 
$
3,759

 
$
20,603

 
$
13,429

 
$
7,413


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ALARM.COM HOLDINGS, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)


 
December 31,
 
2019
 
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
119,629

 
$
146,061

Accounts receivable, net
76,373

 
49,510

Inventory, net
34,168

 
22,990

Other current assets
13,504

 
9,502

Total current assets
243,674

 
228,063

Property and equipment, net
38,548

 
27,757

Intangible assets, net
103,438

 
79,067

Goodwill
104,963

 
63,591

Deferred tax assets
19,137

 
28,952

Operating lease right-of-use assets
30,523

 
—

Other assets
17,516

 
13,555

Total assets
$
557,799

 
$
440,985

Liabilities, redeemable noncontrolling interest and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable, accrued expenses and other current liabilities
$
48,727

 
$
58,430

Accrued compensation
16,342

 
13,484

Deferred revenue
3,043

 
3,356

Operating lease liabilities
7,683

 
—

Total current liabilities
75,795

 
75,270

Deferred revenue
7,455

 
7,820

Long-term debt
63,000

 
67,000

Operating lease liabilities
37,199

 
—

Other liabilities
7,489

 
13,306

Total liabilities
190,938

 
163,396

Redeemable noncontrolling interest
11,210

 
—

Stockholders’ equity
 
 
 
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding as of December 31, 2019 and December 31, 2018.
—

 
—

Common stock, $0.01 par value, 300,000,000 shares authorized; 48,700,963 and 48,103,038 shares issued; and 48,700,713 and 48,102,081 shares outstanding as of December 31, 2019 and December 31, 2018, respectively.
487

 
481

Additional paid-in capital
365,627

 
341,139

Accumulated deficit
(10,463
)
 
(64,031
)
Total stockholders’ equity
355,651

 
277,589

Total liabilities, redeemable noncontrolling interest and stockholders’ equity
$
557,799

 
$
440,985


6
ALARM.COM HOLDINGS, INC.
Consolidated Statements of Cash Flows
(in thousands)

 
Year Ended December 31,
Cash flows from operating activities:
2019
 
2018
 
2017
Net income
$
53,330

 
$
21,524

 
$
29,251

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
 
 
Provision for doubtful accounts
1,170

 
149

 
453

Reserve for product returns
(123
)
 
273

 
2,055

Provision for notes receivable
(3,272
)
 
3,319

 
—

Amortization on patents and tooling
700

 
900

 
965

Amortization and depreciation
22,134

 
21,721

 
17,734

Amortization of debt issuance costs
108

 
108

 
97

Amortization of operating leases
7,600

 
—

 
—

Deferred income taxes
2,599

 
(11,482
)
 
2,488

Change in fair value of contingent liability
(198
)
 
—

 
—

Undistributed losses from equity investees
—

 
—

 
120

Stock-based compensation
20,603

 
13,429

 
7,413

Gain on notes receivable
(6,931
)
 
—

 
—

Acquired in-process research and development
850

 
—

 
—

Impairment of investment
605

 
—

 
—

Disposal of property and equipment
—

 
1,410

 
828

Changes in operating assets and liabilities (net of business acquisitions):
 
 
 
 
 
Accounts receivable
(22,273
)
 
(9,298
)
 
(1,911
)
Inventory
(6,491
)
 
(8,813
)
 
(3,335
)
Other current and non-current assets
(2,887
)
 
115

 
(2,542
)
Accounts payable, accrued expenses and other current liabilities
(10,980
)
 
30,615

 
3,774

Deferred revenue
(1,567
)
 
(1,502
)
 
(517
)
Operating lease liabilities
(8,268
)
 
—

 
—

Other liabilities
403

 
(1,758
)
 
314

Cash flows from operating activities
47,112

 
60,710

 
57,187

Cash flows used in investing activities:
 
 
 
 
 
Business acquisitions, net of cash acquired
(58,833
)
 
—

 
(154,289
)
Additions to property and equipment
(19,324
)
 
(11,015
)
 
(10,464
)
Purchases of in-process research and development
(850
)
 
—

 
—

Investment in cost and equity method investees
—

 
—

 
(42
)
Issuances or purchases of notes receivable
(26,103
)
 
(1,287
)
 
(8,000
)
Receipt of payment on notes receivable
31,696

 
—

 
4,000

Purchases of patents and patent licenses
—

 
(1,075
)
 
—

Cash flows used in investing activities
(73,414
)
 
(13,377
)
 
(168,795
)
Cash flows (used in) / from financing activities:
 
 
 
 
 
Proceeds from credit facility
—

 
—

 
139,000

Repayments of credit facility
(4,000
)
 
(4,000
)
 
(74,700
)
Payments of debt issuance costs
—

 
—

 
(438
)
Repurchases of common stock
—

 
(1
)
 
(9
)
Issuances of common stock from equity-based plans
3,870

 
6,400

 
3,450

Cash flows (used in) / from financing activities
(130
)
 
2,399

 
67,303

Net (decrease) / increase in cash and cash equivalents
(26,432
)
 
49,732

 
(44,305
)
Cash and cash equivalents at beginning of the period
146,061

 
96,329

 
140,634

Cash and cash equivalents at end of the period
$
119,629

 
$
146,061

 
$
96,329


7
ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures
(in thousands)
(unaudited)


 
Three Months Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
 
2017
Adjusted EBITDA:
 
 
 
 
 
 
 
 
 
Net income
$
12,834

 
$
7,928

 
$
53,330

 
$
21,524

 
$
29,251

Adjustments:
 
 
 
 
 
 
 
 
 
Interest expense, interest income and other income, net
(20
)
 
(123
)
 
(8,483
)
 
503

 
1,133

Provision for / (benefit from) income taxes
2,138

 
588

 
5,566

 
(9,825
)
 
2,990

Amortization and depreciation expense
6,301

 
5,567

 
22,134

 
21,721

 
17,734

Stock-based compensation expense
5,882

 
3,759

 
20,603

 
13,429

 
7,413

Acquisition-related expense
813

 
—

 
2,403

 
—

 
5,895

Litigation expense
2,072

 
3,174

 
12,754

 
45,729

 
7,212

Total adjustments
17,186

 
12,965

 
54,977

 
71,557

 
42,377

Adjusted EBITDA
$
30,020

 
$
20,893

 
$
108,307

 
$
93,081

 
$
71,628

 
 
 
 
 
 
 
 
 
 
Adjusted net income:
 
 
 
 
 
 
 
 
 
Net income, as reported
$
12,834

 
$
7,928

 
$
53,330

 
$
21,524

 
$
29,251

Provision for / (benefit from) income taxes
2,138

 
588

 
5,566

 
(9,825
)
 
2,990

Income before income taxes
14,972

 
8,516

 
58,896

 
11,699

 
32,241

Adjustments:
 
 
 
 
 
 
 
 
 
Less: interest income and other income, net
(672
)
 
(882
)
 
(11,457
)
 
(2,415
)
 
(1,066
)
Amortization expense
3,996

 
3,817

 
14,334

 
15,235

 
12,282

Stock-based compensation expense
5,882

 
3,759

 
20,603

 
13,429

 
7,413

Acquisition-related expense
813

 
—

 
2,403

 
—

 
5,895

Litigation expense
2,072

 
3,174

 
12,754

 
45,729

 
7,212

Non-GAAP adjusted income before income taxes
27,063

 
18,384

 
97,533

 
83,677

 
63,977

Income taxes 1
(5,683
)
 
(3,860
)
 
(20,482
)
 
(17,572
)
 
(18,873
)
Non-GAAP adjusted net income
$
21,380

 
$
14,524

 
$
77,051

 
$
66,105

 
$
45,104


1  Income taxes are calculated using a rate of 21.0% for each of the three and twelve months ended December 31, 2019 and 2018. Income taxes are calculated at the effective tax rate of 29.5% for the year ended December 31, 2017. The effective tax rates in 2019, 2018 and 2017 exclude the income tax effect on the non-GAAP adjustments. The 21.0% rate for the three and twelve months ended December 31, 2019 and 2018 reflects the estimated long-term corporate tax rate.

8
ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures - continued
(in thousands, except share and per share data)
(unaudited)


 
Three Months Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
 
2017
Adjusted net income attributable to common stockholders:
 
 
 
 
 
 
 
 
 
Net income attributable to common stockholders, as reported
$
13,035

 
$
7,928

 
$
53,531

 
$
21,521

 
$
29,238

Provision for / (benefit from) income taxes
2,138

 
588

 
5,566

 
(9,825
)
 
2,990

Income attributable to common stockholders before income taxes
15,173

 
8,516

 
59,097

 
11,696

 
32,228

Adjustments:
 
 
 
 
 
 
 
 
 
Less: interest income and other income, net
(672
)
 
(882
)
 
(11,457
)
 
(2,415
)
 
(1,066
)
Amortization expense
3,996

 
3,817

 
14,334

 
15,235

 
12,282

Stock-based compensation expense
5,882

 
3,759

 
20,603

 
13,429

 
7,413

Acquisition-related expense
813

 
—

 
2,403

 
—

 
5,895

Litigation expense
2,072

 
3,174

 
12,754

 
45,729

 
7,212

Non-GAAP adjusted income attributable to common stockholders before income taxes
27,264


18,384


97,734


83,674


63,964

Income taxes 1
(5,725
)
 
(3,860
)
 
(20,524
)
 
(17,572
)
 
(18,869
)
Non-GAAP adjusted net income attributable to common stockholders
$
21,539


$
14,524


$
77,210


$
66,102


$
45,095


 
Three Months Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
 
2017
Adjusted net income attributable to common stockholders per share:
 
 
 
 
 
 
 
 
 
Net income attributable to common stockholders per share - basic, as reported
$
0.27

 
$
0.16

 
$
1.11

 
$
0.45

 
$
0.63

Provision for / (benefit from) income taxes
0.04

 
0.02

 
0.11

 
(0.20
)
 
0.06

Income attributable to common stockholders before income taxes
0.31

 
0.18

 
1.22

 
0.25

 
0.69

Adjustments:
 
 
 
 
 
 
 
 
 
Less: interest income and other income, net
(0.02
)
 
(0.02
)
 
(0.24
)
 
(0.05
)
 
(0.02
)
Amortization expense
0.09

 
0.08

 
0.30

 
0.32

 
0.26

Stock-based compensation expense
0.12

 
0.08

 
0.42

 
0.28

 
0.16

Acquisition-related expense
0.02

 
—

 
0.05

 
—

 
0.13

Litigation expense
0.04

 
0.06

 
0.26

 
0.96

 
0.15

Non-GAAP adjusted income before income taxes
0.56

 
0.38

 
2.02

 
1.76

 
1.37

Income taxes 1
(0.12
)
 
(0.08
)
 
(0.42
)
 
(0.37
)
 
(0.40
)
Non-GAAP adjusted net income attributable to common stockholders per share - basic
$
0.44

 
$
0.30

 
$
1.59

 
$
1.39

 
$
0.97

 
 
 
 
 
 
 
 
 
 
Non-GAAP adjusted net income attributable to common stockholders per share - diluted
$
0.43

 
$
0.29

 
$
1.54

 
$
1.33

 
$
0.92

 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic, as reported
48,624,834

 
48,045,654

 
48,427,446

 
47,633,739

 
46,682,141

Diluted, as reported
50,184,451

 
49,865,890

 
50,273,889

 
49,692,184

 
49,153,948


1  Income taxes are calculated using a rate of 21.0% for each of the three and twelve months ended December 31, 2019 and 2018. Income taxes are calculated at the effective tax rate of 29.5% for the year ended December 31, 2017. The effective tax rates in 2019, 2018 and 2017 exclude the income tax effect on the non-GAAP adjustments. The 21.0% rate for the three and twelve months ended December 31, 2019 and 2018 reflects the estimated long-term corporate tax rate.

9
ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures - continued
(in thousands)
(unaudited)


 
Three Months Ended December 31,
 
Year Ended December 31,
 
2019
 
2018
 
2019
 
2018
 
2017
Free cash flow:
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
$
23,265

 
$
25,732

 
$
47,112

 
$
60,710

 
$
57,187

Additions to property and equipment
(8,664
)
 
(1,698
)
 
(19,324
)
 
(11,015
)
 
(10,464
)
Non-GAAP free cash flow
$
14,601

 
$
24,034

 
$
27,788

 
$
49,695

 
$
46,723


10