Summary
Alarm.com's first quarter of fiscal 2022 showed a split picture. Total revenue rose 19.1% to $205.4 million. Operating income fell 40.6% to $8.9 million. Net income attributable to common stockholders was $9.1 million, down 38.8%, and diluted EPS was $0.18, down $0.11. Operating margin compressed to 4.3%, down 4.4 percentage points. The company tied the profit decline mainly to higher shipping costs and inventory component costs for hardware, reflecting global supply chain challenges. Non-GAAP adjusted EBITDA was $29.9 million, compared with $35.6 million. Non-GAAP adjusted net income attributable to common stockholders was $21.3 million, or $0.39 per diluted share, compared with $25.8 million, or $0.50 per diluted share. The revenue increase came even as supply chain pressures persisted. Alarm.com said it provided a high level of products to its service providers to support subscriber additions.
Cash generation weakened in the quarter. Operating cash flow was negative $14.0 million, a decline of $35.2 million from the prior-year quarter. Capital expenditures were $2.2 million, down 46.6%. Non-GAAP free cash flow was negative $16.1 million, compared with $17.2 million. Deferred revenue was $15.6 million, up 14.4%. The company repurchased 354,123 shares for $23.3 million during the quarter. Management said the operating cash flow and free cash flow declines were primarily due to the timing of disbursements and receipt collections and an increase in purchased inventory to reduce supply chain risks. Alarm.com defines non-GAAP free cash flow as cash flows from operating activities less purchases of property and equipment. Hardware margins are expected to increase in 2022 versus the fourth quarter of 2021 and first quarter of 2022 because of price increases implemented on some products.
Operational highlights included new video analytics and false alarm reduction features. OpenEye deployed a video analytics platform optimized for large-scale enterprise commercial customers. The first deployed capability identifies people and reduces false motion events caused by background movement and other image noise. Alarm.com added Perimeter Guard to its commercial video analytics solution, Business Activity Analytics. Perimeter Guard proactively identifies would-be intruders and select cameras can respond with audible alerts and flashing LED lights. The company also launched new Business Activity Analytics groups so subscribers can combine rules across multiple cameras and locations. Alarm.com earned an MVP Award from Security Sales and Integration for Smart Arming with Ambient Insights for Alarm Response. It expanded Smarter Access Control for COVID-19 contact tracing. The SaaS and license revenue renewal rate was 94% for the twelve months ended March 31, 2022, compared with 95% for the twelve months ended March 31, 2021. The company served over 10,900 service providers and had 1,565 employees as of March 31, 2022, up from 1,414 a year earlier. Risks include continued COVID-19 uncertainty, geopolitical tensions, global supply chain uncertainty, tariffs on products imported from China, reliance on suppliers, and the potential for Section 174 to increase cash taxes and reduce operating cash flow in 2022. Litigation expense was $1.1 million in the quarter, down from $5.3 million.
Guidance points to continued growth but carries wide uncertainty. For the second quarter of 2022, SaaS and license revenue is expected to be $126.2 million to $126.4 million. For the full year of 2022, SaaS and license revenue is expected to be $512.7 million to $513.3 million. Total revenue is expected to be $822.7 million to $853.3 million. Non-GAAP adjusted EBITDA is expected to be $149.0 million to $150.0 million. Non-GAAP adjusted net income attributable to common stockholders is expected to be $104.3 million to $105.0 million, or $1.87 to $1.88 per diluted share, based on an estimated tax rate of 21.0% and 55.8 million weighted average diluted shares. The company also guided capital expenditures for the final nine months of 2022 to $29.0 million to $32.0 million. Management framed the outlook around unusual geopolitical uncertainty, continuing COVID-19 pandemic uncertainty, and significant global supply chain uncertainty. The company said actual results may differ materially.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $205.4M | $195.3M | +5.2% | $172.5M | +19.1% |
| Gross profit | $115.3M | $112.9M | +2.2% | $106.7M | +8.1% |
| Gross margin | 56.1% | 57.8% | -1.7 pp | 61.9% | -5.7 pp |
| Research & development | $51.5M | $47.6M | +8.1% | $42.5M | +21.2% |
| Sales & marketing | $23.2M | $24.6M | -5.6% | $19.0M | +22.1% |
| General & administrative | $24.0M | $22.6M | +6.3% | $22.9M | +4.9% |
| Total operating expenses | $106.4M | $102.1M | +4.2% | $91.7M | +16.0% |
| Operating income (loss) | $8.9M | $10.8M | -17.2% | $15.0M | -40.6% |
| Operating margin | 4.3% | 5.5% | -1.2 pp | 8.7% | -4.4 pp |
| Net income (loss) | $8.9M | $8.8M | +0.7% | $14.6M | -38.8% |
| Net margin | 4.3% | 4.5% | -0.2 pp | 8.4% | -4.1 pp |
| Diluted EPS | $0.18 | $0.18 | ±$0.00 | $0.29 | -$0.11 |
Risks
The filing highlights disruption to the hardware supply chain from COVID-19, including limited inventory availability, increased lead times, shipping delays, and global component shortages. MD&A states cost of hardware and other revenue as a percentage of hardware and other revenue was 89% for the three months ended March 31, 2022 versus 78% for the prior-year period, and Q1 2022 operating cash flow was used $14.0 million partly due to an $8.2 million inventory increase to reduce supply chain risks.
The COVID-19 pandemic and related emergency measures may reduce demand, disrupt sales channels, and limit service provider ability to meet property owners. MD&A cites inflation, a U.S. recession, and a fluid economic situation; net income decreased to $8.9 million in Q1 2022 from $14.6 million in Q1 2021, and Adjusted EBITDA decreased to $29.9 million from $35.6 million.
The company receives a substantial portion of revenue from a limited number of service provider partners, and loss of or significant reduction in orders from one or more major partners would decrease revenue and profitability. Total revenue increased 19% to $205.4 million in Q1 2022, but the service provider network remains central to SaaS and license revenue.
Multiple patent lawsuits are pending, including matters involving Vivint, EcoFactor, and Causam, as well as an ITC complaint. Indemnity obligations to service provider partners could require the company to incur substantial costs or refund amounts, and negative outcomes could materially affect cash flows and results.
Beginning in 2022, TCJA Section 174 requires capitalization and amortization of R&D expenditures; MD&A states that if not deferred, modified, or repealed, this would significantly increase cash taxes payable and reduce cash flow from operating activities in 2022. Q1 2022 operating cash flow was used $14.0 million versus generated $21.2 million in Q1 2021.
Russia's military action against Ukraine and related sanctions and export controls could increase costs, disrupt supply chains, reduce sales, and impair capital raising. MD&A flags geopolitical tensions as increasing uncertainty around future results.
The connected property market is highly competitive and includes large technology companies, broadband and security service providers, and point-product makers. Competition may cause price reductions, loss of service provider partners, or reduced demand; SaaS and license revenue increased 15% to $123.2 million in Q1 2022, but software license revenue declined to $7.1 million from $8.7 million due to the cloud transition.
The company has limited visibility into end consumers and relies on third-party service provider information; if the connected property market does not grow as expected or consumers choose point products, growth may be impaired.
The company operates in a regulated industry subject to consumer protection, licensing, TCPA, privacy, tax, tariff, and import/export laws. Failure to comply could result in fines, penalties, revocation of permits, or reduced subscriber acquisition, and proposed SEC climate disclosure rules could add compliance costs.
The 2026 Notes may require cash settlement upon conversion or repurchase upon a fundamental change, and a triggered conditional conversion feature could reduce liquidity or require reclassification of principal as a current liability. Adoption of ASU 2020-06 increased diluted weighted average common shares outstanding by 3,396,950 shares for Q1 2022.
Failure to maintain security of information and technology networks could expose the company to liability, regulatory fines, and loss of subscriber confidence. The filing notes that remote work during the COVID-19 pandemic may make systems more vulnerable to cyber-attacks.
SaaS KPIs
All quarters →SaaS and license revenue
Non-GAAP free cash flow
Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from Alarm.com Holdings, Inc.'s SEC filings for Q1 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.