Summary
Alarm.com reported first quarter 2023 revenue of $209.7 million, up 2.1% from the prior-year quarter. Operating income was $8.8 million, down 1.1%, and operating margin was 4.2%, down 0.1 percentage points. Net income attributable to common stockholders was $14.4 million, up 58.8%, and diluted EPS was $0.28, up $0.10. The press release attributes the profit increase primarily to a $5.0 million increase in interest income. Non-GAAP adjusted EBITDA was $30.6 million, compared with $29.9 million. Non-GAAP adjusted net income attributable to common stockholders was $22.0 million, or $0.41 per diluted share, compared with $21.3 million, or $0.39 per diluted share.
Cash flow improved but remained negative. Operating cash flow was negative $3.5 million, an improvement from the prior-year quarter. Capital expenditures were $2.4 million, up 10.5%. Non-GAAP free cash flow was negative $5.9 million, compared with negative $16.1 million. Deferred revenue was $20.2 million, up 29.5%. Management said the operating cash flow improvement was driven by a $19.7 million increase in cash from operating assets and liabilities and a $5.3 million increase in net income, partially offset by a $14.5 million decrease in non-cash and other reconciling items.
Operational activity centered on international expansion and commercial integrations. Alarm.com acquired EBS, a Poland-based maker of universal smart communicator devices, for $9.8 million in cash on January 18, 2023, after deducting $2.2 million related to holdback provisions. An earn-out of up to $2.5 million is payable if performance targets are met, and it was recorded at a fair value of $2.0 million at the acquisition date. OpenEye launched platform updates, including environmental sensor alerts and Sales Connect, which combines point-of-sale data with video. Shooter Detection Systems announced an integration with Alarm.com for Business that lets service provider partners offer indoor gunshot detection as a SaaS solution. The SaaS and license revenue renewal rate was 93% on a trailing 12-month basis, down from 94%. Total employees grew from 1,565 as of March 31, 2022 to 1,858 as of March 31, 2023.
Guidance points to modest near-term growth and higher full-year profitability. For the second quarter of 2023, SaaS and license revenue is expected to be $137.2 million to $137.4 million. For the full year of 2023, SaaS and license revenue is expected to be $555.9 million to $556.5 million, and total revenue is expected to be $855.9 million to $881.5 million. Non-GAAP adjusted EBITDA is expected to be $120.0 million to $125.0 million. Non-GAAP adjusted net income attributable to common stockholders is expected to be $84.6 million to $87.5 million, or $1.55 to $1.60 per diluted share, based on an estimated tax rate of 21.0% and 54.7 million weighted average diluted shares outstanding. The guidance assumes no contribution from the Vivint license agreement.
The Vivint dispute remains a clear risk. Vivint stopped paying license fees under the Patent Cross License Agreement, and Alarm.com filed for arbitration on October 27, 2022. The company said SaaS and license revenue and total revenue will continue to be lowered by approximately $6.0 million on a quarterly basis, with additional legal fees also affecting earnings and cash flow. Tax policy is another pressure. The company estimated the 2022 Federal and state cash tax increase from Section 174 at $38.1 million, and it paid the additional 2022 Federal cash tax liability in February 2023. The increased 2022 state tax liability was paid in April 2023 in the amount of $7.5 million. Alarm.com estimates the increased 2023 Section 174 Federal and state cash tax payable to be $45.0 million to $50.0 million if the requirement to capitalize and amortize research and development expenditures is not deferred, modified or repealed. Capital expenditure requirements over the final nine months of fiscal year 2023 are expected to be between $5.0 million and $7.0 million. The company also cites macroeconomic conditions, supply chain disruptions, tariffs, interest rates, and inflation as risks.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $209.7M | $208.1M | +0.8% | $205.4M | +2.1% |
| Gross profit | $133.5M | $128.6M | +3.9% | $115.3M | +15.8% |
| Gross margin | 63.7% | 61.8% | +1.9 pp | 56.1% | +7.5 pp |
| Research & development | $61.9M | $57.4M | +7.8% | $51.5M | +20.2% |
| Sales & marketing | $26.6M | $23.6M | +13.1% | $23.2M | +14.9% |
| General & administrative | $28.5M | $25.4M | +12.3% | $24.0M | +18.8% |
| Total operating expenses | $124.7M | $114.1M | +9.3% | $106.4M | +17.2% |
| Operating income (loss) | $8.8M | $14.5M | -39.1% | $8.9M | -1.1% |
| Operating margin | 4.2% | 7.0% | -2.7 pp | 4.3% | -0.1 pp |
| Net income (loss) | $14.2M | $17.8M | -20.1% | $8.9M | +59.6% |
| Net margin | 6.8% | 8.6% | -1.8 pp | 4.3% | +2.4 pp |
| Diluted EPS | $0.28 | $0.33 | -$0.05 | $0.18 | +$0.10 |
Risks
Vivint has stopped paying license fees under its Patent Cross License Agreement, which Alarm.com says is having a material adverse effect; SaaS and license revenue and total revenue will continue to be lowered by approximately $6.0 million on a quarterly basis, plus additional legal fees, and the matter is in arbitration.
ADT represented greater than 15% but not more than 20% of revenue in 2022 and more than 10% of accounts receivable as of December 31, 2022; the amended MSA and patent license may yield lower per-subscriber fees than SaaS solutions, and any loss or reduction in ADT revenue could materially harm results.
Negative Macroeconomic Conditions including inflation, rising interest rates, recession risk and reduced consumer discretionary spending have caused uncertainty and could reduce demand, diminish home construction and renovation, and increase service provider bankruptcies.
The connected property market is highly competitive, with large technology companies like Amazon, Google and Apple and aggressive tactics such as discounting and bundled offerings; increased competition could result in price reductions and loss of market share.
Alarm.com faces patent infringement litigation from EcoFactor and Causam, and a Causam ITC complaint seeking exclusion orders; ongoing litigation is costly and could result in damages, injunctions, or royalty obligations.
U.S. tariffs subject certain Alarm.com products manufactured overseas to additional import duties of up to 25%; approximately one-fifth to one-half of hardware products sold are imported from China and could be subject to increased tariffs, which may increase cost of hardware revenue and reduce hardware revenue margins.
Section 174 requires capitalization and amortization of R&D expenditures; the company estimates increased 2023 federal and state cash tax payable of $45.0 million to $50.0 million if not deferred, modified or repealed, impacting operating cash flow.
Hardware and other revenue decreased 10% to $74.3 million in Q1 2023, primarily due to a $7.6 million decrease from the shutdown of 3G and CDMA wireless networks in 2022, reducing sales of video cameras and cellular radio modules.
Software license revenue decreased to $6.2 million in Q1 2023 from $7.1 million in Q1 2022 as customers transition from the non-hosted Software platform to the cloud-based hosted platform, and is expected to continue to decline over time.
SaaS and license revenue renewal rate decreased to 93% for the twelve months ended March 31, 2023 from 94% for the twelve months ended March 31, 2022.
General and administrative expense increased 19% to $28.5 million in Q1 2023, including a $1.1 million increase in the provision for credit losses for the Alarm.com segment, indicating heightened counterparty risk.
Headcount grew from 1,565 employees as of March 31, 2022 to 1,858 as of March 31, 2023; managing this growth and expanding operations internationally, including the EBS acquisition, places strain on managerial and operational resources.
SaaS KPIs
All quarters →SaaS and license revenue
Non-GAAP free cash flow
Non-GAAP adjusted EBITDA
Non-GAAP Adjusted SaaS and License Revenue Growth Rate
SaaS and License Revenue Growth Rate
Summary, forecast, risks and KPIs are extracted from Alarm.com Holdings, Inc.'s SEC filings for Q1 FY2023 (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.