Summary
Alarm.com reported second quarter revenue of $188.9 million, up 33.3% from $141.6 million a year earlier. Revenue for the first six months of 2021 was $361.4 million, up 23.1% from $293.6 million. The growth came with a mix shift. Hardware and other revenue represented 40% of total revenue in the quarter, up from 32% in the prior-year quarter, while SaaS and license revenue's share fell to 60% from 68%. That shift pressured profitability. Operating margin was 8.9% in the quarter, down from 10.6%. For the six months, operating margin was 8.8%, up from 8.5%.
Quarterly operating income rose 11.5% to $16.7 million from $15.0 million. Six-month operating income was $31.7 million, up 27.6% from $24.9 million. Net income attributable to common stockholders fell 13.2% to $14.7 million from $17.0 million. Diluted earnings per share were $0.28, down from $0.34. On a year-to-date basis, diluted earnings per share were $0.57, up from $0.51. Non-GAAP adjusted EBITDA increased 30.1% to $38.0 million from $29.2 million. Non-GAAP adjusted net income attributable to common stockholders was $27.7 million, or $0.54 per diluted share, compared with $20.6 million, or $0.41 per diluted share. For the six months, adjusted EBITDA was $73.6 million, up from $58.4 million. The company continued to invest in research and development, sales and marketing, and general and administrative functions, and it ended the quarter with 1,421 employees, up from 1,317 a year earlier.
Operating cash flow was $24.1 million in the quarter, down 31.5% from $35.1 million. For the six months, operating cash flow was $45.3 million, down 5.7% from $48.0 million. Capital expenditures were $3.3 million in the quarter, down 2.5% from $3.4 million, and $7.4 million for the six months, up 3.7% from $7.1 million. Non-GAAP free cash flow was $20.8 million in the quarter, compared with $31.8 million a year earlier, and $37.9 million for the six months, compared with $40.9 million. Deferred revenue was $15.0 million, up 30.2% from $11.5 million. In January 2021, the company issued $500.0 million of 0% convertible senior notes due 2026 and received net proceeds of $484.3 million. It used part of the proceeds to repay $110.0 million outstanding under its 2017 facility.
The SaaS and license revenue renewal rate was 95% for the twelve months ended June 30, 2021, up from 94% a year earlier. Alarm.com provided guidance for the third quarter and full year of 2021. For the third quarter, SaaS and license revenue is expected to be $114.9 million to $115.1 million. For the full year, SaaS and license revenue is expected to be $452.3 million to $452.8 million. Total revenue is expected to be $707.3 million to $717.8 million. Non-GAAP adjusted EBITDA is expected to be $133.0 million to $134.5 million. Non-GAAP adjusted net income attributable to common stockholders is expected to be $93.0 million to $93.7 million, or $1.77 to $1.79 per diluted share, based on an estimated tax rate of 21.0% and 52.4 million weighted average diluted shares.
Risks remain. The COVID-19 pandemic continues to disrupt supply chains and sales channels, and the emergence of variants could cause further shutdowns. Tariffs on hardware imported from China can reach 25%, and one-fifth to one-half of the company's hardware products come from China. Higher tariffs could increase the cost of hardware revenue and reduce hardware margins. The company also faces ongoing intellectual property litigation and competition. Its results depend on its service provider network to attract and retain subscribers. Management highlighted new offerings, including Ambient Insights for Alarm Response, Flex IO, and the Smart Water Valve plus Meter solution, as it tries to sustain growth.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $188.9M | $172.5M | +9.5% | $141.6M | +33.3% |
| Gross profit | $111.5M | $106.7M | +4.5% | $92.6M | +20.4% |
| Gross margin | 59.0% | 61.9% | -2.9 pp | 65.4% | -6.4 pp |
| Research & development | $43.5M | $42.5M | +2.4% | $36.6M | +18.7% |
| Sales & marketing | $20.5M | $19.0M | +8.1% | $16.9M | +21.3% |
| General & administrative | $23.3M | $22.9M | +1.7% | $17.4M | +34.0% |
| Total operating expenses | $94.8M | $91.7M | +3.3% | $77.6M | +22.1% |
| Operating income (loss) | $16.7M | $15.0M | +11.5% | $15.0M | +11.5% |
| Operating margin | 8.9% | 8.7% | +0.2 pp | 10.6% | -1.7 pp |
| Net income (loss) | $14.7M | $14.6M | +1.3% | $17.0M | -13.2% |
| Net margin | 7.8% | 8.4% | -0.6 pp | 12.0% | -4.2 pp |
| Diluted EPS | $0.28 | $0.29 | -$0.01 | $0.34 | -$0.06 |
Risks
COVID-19 continues to disrupt global supply chains and service provider sales channels. MD&A states that if the economy fails to fully recover or new shutdowns occur, SaaS and license revenue growth rate may be lower with a corresponding reduction in hardware revenue.
The pandemic has caused and may continue to cause limited inventory availability, increased lead times and shipping delays. The filing also warns service providers may be unable to source control panels and peripherals, which could reduce demand for Alarm.com products.
Alarm.com receives a substantial portion of revenue from a limited number of service provider partners. The loss of, or significant reduction in orders from, one or more major service provider partners would decrease revenue and profitability.
The connected property markets are highly competitive, including large technology companies, broadband and security service providers and point-product vendors. Competitors may sell at a discount, bundle similar products at no charge or assert intellectual property rights, which could reduce revenue and profitability.
Pending intellectual property suits include Vivint, two EcoFactor cases, a Causam district court case and a Causam ITC complaint. G&A legal expenses increased $3.1 million in the six months ended June 30, 2021 due to intellectual property litigation.
The $500.0 million 0% convertible senior notes due 2026 may require cash settlement or repurchase, and conversion may dilute stockholders. Interest expense increased $3.3 million for the three months and $6.0 million for the six months ended June 30, 2021, primarily due to amortization of debt discount and issuance costs.
U.S. tariffs have subjected certain Alarm.com products to import duties up to 25%, and about one-fifth to one-half of hardware products are imported from China and could be subject. Higher or broader tariffs could increase cost of hardware revenue and reduce hardware revenue margins.
Revenue increased from $293.6 million for the six months ended June 30, 2020 to $361.4 million for the six months ended June 30, 2021, but the company does not expect similar growth rates in future periods. Failure to manage expansion and maintain expected revenue growth could harm financial results and the stock price.
Full-time employees increased from 1,317 at June 30, 2020 to 1,421 at June 30, 2021. The filing warns that failure to manage growth, preserve corporate culture and recruit software engineers and sales personnel could impair execution and results.
The business and its service provider partners face FTC and FCC telemarketing rules, state privacy and licensing laws and foreign regulations. Past TCPA settlement costs and future restrictions could reduce subscriber acquisition opportunities and increase compliance expenditures.
Alarm.com pursues acquisitions and recently acquired SDS and an OpenEye majority stake. Inability to consummate or integrate acquired technologies, assets or businesses may harm financial results.
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 Q2 FY2021 (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.