Summary
Alarm.com's second quarter of 2023 produced total revenue of $223.9 million, up 5.2% from the prior-year quarter. SaaS and license revenue rose 8.5% to $140.4 million. Excluding Vivint license revenue from the prior-year quarter, non-GAAP adjusted SaaS and license revenue growth was 13.3%. GAAP net income attributable to common stockholders rose 45.7% to $15.8 million, and diluted EPS rose 42.9% to $0.30. Operating income rose 42.5% to $16.2 million. Operating margin was 7.2%, up 1.9 percentage points from the prior-year quarter. Deferred revenue ended the quarter at $21.5 million, up 24.5% from the prior-year quarter.
Cash generation was the standout. Operating cash flow for the quarter was $36.8 million, up 40.3% from the prior-year quarter. Capital expenditures were $1.0 million, down 95.9%, largely because the prior-year quarter included a $21.5 million purchase of developable land near the company's Tysons, Virginia headquarters. Non-GAAP free cash flow was $35.8 million, compared with $2.1 million a year earlier. Through the first six months of 2023, revenue was $433.6 million, up 3.7%, operating cash flow was $33.3 million, up 171.4%, and capital expenditures were $3.4 million, down 87.1%. The company repurchased 134,255 shares at an average price of $50.11 for $6.7 million.
Non-GAAP profitability was roughly level. Non-GAAP adjusted EBITDA was $36.4 million, compared with $37.1 million in the prior-year quarter. Non-GAAP adjusted net income attributable to common stockholders was $26.6 million, or $0.49 per diluted share, compared with $26.9 million, or $0.49 per diluted share. GAAP results got a lift from a $6.4 million increase in interest income. The tax rate moved as well: the provision for income taxes was $6.5 million in the quarter, against $0.8 million a year earlier.
Management guided third quarter 2023 SaaS and license revenue to $141.4 million to $141.6 million and full year 2023 SaaS and license revenue to $562.3 million to $562.7 million. The guidance assumes no contribution from the Vivint license agreement. Full year 2023 non-GAAP adjusted EBITDA guidance is $128.0 million to $131.0 million, and non-GAAP adjusted net income attributable to common stockholders is $92.2 million to $94.2 million, or $1.69 to $1.73 per diluted share, based on an estimated tax rate of 21.0% and 54.6 million weighted average diluted shares. Management also said it expects hardware revenue margins in 2023 to approximate the margins seen in the third and fourth quarters of 2022.
Operations kept moving. Alarm.com added AI-driven alarm-event context for monitoring station partners, launched the battery-free 750 video doorbell, and took awards for its Cell Connector access control product and its service and support programs. It also paid $5.5 million in cash for Vintra assets, with $7.1 million of consideration allocated to developed technology. Those gains come with real risks. Vivint stopped paying license fees, and the arbitration is expected to hold down SaaS and license revenue and total revenue by about $6.0 million each quarter, plus added legal fees. Macroeconomic conditions, supply chain disruption, inflation and tariffs of up to 25% on hardware, with one-fifth to one-half of hardware imported from China, could squeeze margins. The company estimates an extra 2023 Section 174 federal and state cash tax bill of $45.0 million to $50.0 million if the requirement to capitalize and amortize research and development expenditures is not deferred, modified or repealed. Headcount grew to 1,909 as of June 30, 2023 from 1,606 a year earlier, and the trailing 12-month SaaS and license revenue renewal rate slipped to 93% from 94%.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $223.9M | $209.7M | +6.8% | $212.8M | +5.2% |
| Gross profit | $137.5M | $133.5M | +3.0% | $125.5M | +9.6% |
| Gross margin | 61.4% | 63.7% | -2.3 pp | 59.0% | +2.5 pp |
| Research & development | $60.9M | $61.9M | -1.6% | $54.2M | +12.5% |
| Sales & marketing | $23.8M | $26.6M | -10.8% | $22.9M | +3.7% |
| General & administrative | $28.8M | $28.5M | +1.1% | $29.3M | -1.7% |
| Total operating expenses | $121.3M | $124.7M | -2.7% | $114.2M | +6.3% |
| Operating income (loss) | $16.2M | $8.8M | +83.2% | $11.3M | +42.5% |
| Operating margin | 7.2% | 4.2% | +3.0 pp | 5.3% | +1.9 pp |
| Net income (loss) | $15.6M | $14.2M | +9.9% | $10.8M | +44.0% |
| Net margin | 7.0% | 6.8% | +0.2 pp | 5.1% | +1.9 pp |
| Diluted EPS | $0.30 | $0.28 | +$0.02 | $0.21 | +$0.09 |
Risks
Vivint stopped paying license fees under the Patent Cross License Agreement, and the dispute is in arbitration. Alarm.com states this is having a material adverse effect on business, financial condition and results of operations, and MD&A says SaaS and license revenue and total revenue will continue to be lowered by approximately $6.0 million on a quarterly basis, with operating cash flow also lowered by that amount plus additional legal fees.
MD&A discloses that Section 174 now requires capitalizing and amortizing R&D expenditures. Alarm.com paid a $38.1 million additional 2022 Federal cash tax liability in February 2023 and a $7.5 million increased 2022 state tax liability in April 2023, and estimates 2023 Federal and state cash tax payable of $45.0 million to $50.0 million if the requirement is not deferred, modified or repealed, affecting operating cash flow.
Risk factors and MD&A highlight Macroeconomic Conditions including inflation, rising interest rates, recession risk, and housing and mortgage market weakness that could cause consumer discretionary spending to decline and diminish service provider demand. MD&A also warns that prolonged uncertainty could cause further economic slowdown or other unpredictable events that could adversely affect business, results of operations or financial condition.
Risk factors note tariffs of up to 25% on certain overseas-manufactured products, with approximately one-fifth to one-half of hardware products imported from China, and warn that increased tariffs could raise cost of hardware revenue and reduce hardware revenue margins. MD&A reports hardware and other revenue decreased 5% to $157.8 million for the six months ended June 30, 2023 from $165.6 million for the six months ended June 30, 2022, partly due to lower video camera and cellular radio module volumes after 3G and CDMA network shutdowns.
The SaaS and license revenue renewal rate was 93% for the twelve months ended June 30, 2023, compared with 94% for the twelve months ended June 30, 2022. Risk factors also state that substantially all revenue is generated through service provider partners and that the inability of service provider partners to attract additional subscribers or retain current subscribers could adversely affect operating results.
Risk factors emphasize highly competitive markets with large technology companies, broadband and security service providers, and point-product vendors such as Amazon Ring, Google Nest, and Apple HomeKit. Competitors may sell at a discount or bundle similar products at no charge, which could result in price reductions, loss of service provider partners, and lower revenue.
Risk factors disclose ongoing patent litigation with Vivint, EcoFactor and Causam, including a Causam complaint with the U.S. International Trade Commission, and warn that a negative outcome could have a material adverse effect on business, financial condition, cash flows and results of operations. MD&A notes non-ordinary course intellectual property litigation costs and expects additional legal fees related to the Vivint Patent Cross License Agreement dispute.
The 2026 Notes are $500.0 million aggregate principal amount of 0% convertible senior notes due January 15, 2026. Risk factors state that if the conditional conversion feature is triggered or holders require repurchase upon a fundamental change, Alarm.com may not have enough available cash or be able to obtain financing, which could adversely affect liquidity and financial condition, and conversion could dilute stockholders or depress the common stock price.
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
Non-GAAP Adjusted SaaS and License Revenue
Summary, forecast, risks and KPIs are extracted from Alarm.com Holdings, Inc.'s SEC filings for Q2 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.