Summary
Alarm.com posted third quarter 2023 total revenue of $221.9 million, up 2.6% from $216.1 million in the prior-year quarter. Operating income was $16.2 million, down 0.9% from $16.3 million. Operating margin slipped to 7.3% from 7.5%. Net income attributable to common stockholders rose 6.5% to $19.5 million from $18.3 million, and diluted earnings per share increased to $0.37 from $0.35. For the first nine months of 2023, total revenue reached $655.4 million, up 3.3% from the prior-year period. Year-to-date operating income was $41.1 million, up 12.5%, and year-to-date operating margin improved to 6.3% from 5.8%. Year-to-date diluted earnings per share rose to $0.94 from $0.73.
Cash generation was a standout. Third quarter operating cash flow was $62.8 million, up from $10.2 million a year earlier. For the nine months ended September 30, 2023, operating cash flow was $96.1 million versus $22.5 million in the same period of 2022. Non-GAAP free cash flow, which subtracts purchases of property and equipment, was $60.9 million in the quarter and $90.7 million year to date, compared with $8.4 million and negative $5.6 million in the prior-year periods. Capital expenditures were $2.0 million in the third quarter, up from $1.8 million, while year-to-date capital expenditures fell 81.0% to $5.3 million from $28.1 million. Deferred revenue stood at $22.8 million, up 23.9% from $18.4 million a year earlier. Non-GAAP adjusted EBITDA was $41.4 million in the quarter, up from $40.8 million, and $108.4 million year to date, up from $107.9 million.
Operationally, Alarm.com kept adding features to its platform. The company upgraded its mobile app with an activity feed and easier access to live video and clips. EnergyHub virtual power plants helped utilities manage peak demand during a hot summer; utility clients called 38% more demand response events than in 2022 and shifted 68 Gigawatt hours of energy usage out of peak times. Alarm.com also launched an in-app property panic feature for video-only subscribers. The service provider network exceeded 11,000 partners as of December 31, 2022. Headcount grew from 1,699 employees as of September 30, 2022 to 1,986 as of September 30, 2023, with research and development staff rising to 1,116. The trailing twelve-month SaaS and license revenue renewal rate was 93%, down from 94% a year earlier.
Guidance points to continued growth. For the fourth quarter of 2023, management expects SaaS and license revenue of $146.0 million to $146.2 million. For the full year 2023, SaaS and license revenue is guided to $566.9 million to $567.1 million, and total revenue is expected to be $878.9 million to $881.1 million. Non-GAAP adjusted EBITDA is forecast at $143.0 million to $144.0 million. Non-GAAP adjusted net income attributable to common stockholders is expected to be $103.5 million to $105.0 million, based on an estimated tax rate of 21.0%, or $1.90 to $1.92 per diluted share on an expected 54.6 million weighted average diluted shares outstanding.
The main legal overhang remains Vivint. Vivint stopped paying license fees under the Patent Cross License Agreement, and Alarm.com filed a demand for arbitration on October 27, 2022. The company says the refusal will continue to lower SaaS and license revenue and total revenue by roughly $6.0 million per quarter and also increase legal fees. Other risks include macroeconomic uncertainty, supply chain disruptions, tariffs of up to 25% on certain products imported from China, and the impact of higher interest rates and inflation. The company estimates the increased 2023 Section 174 federal and state cash tax payable at $40.0 million to $45.0 million if the capitalization and amortization requirement is not changed. Over the final three months of 2023, capital expenditure requirements are expected to be $1.0 million to $2.0 million. During the nine months ended September 30, 2023, Alarm.com repurchased 239,540 shares at an average price of $53.66 for $12.9 million.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $221.9M | $223.9M | -0.9% | $216.1M | +2.6% |
| Gross profit | $140.4M | $137.5M | +2.1% | $130.6M | +7.6% |
| Gross margin | 63.3% | 61.4% | +1.9 pp | 60.4% | +2.9 pp |
| Research & development | $61.0M | $60.9M | +0.2% | $55.6M | +9.8% |
| Sales & marketing | $23.9M | $23.8M | +0.4% | $23.1M | +3.5% |
| General & administrative | $31.5M | $28.8M | +9.2% | $28.0M | +12.3% |
| Total operating expenses | $124.3M | $121.3M | +2.4% | $114.2M | +8.8% |
| Operating income (loss) | $16.2M | $16.2M | +0.1% | $16.3M | -0.9% |
| Operating margin | 7.3% | 7.2% | +0.1 pp | 7.5% | -0.3 pp |
| Net income (loss) | $19.4M | $15.6M | +24.0% | $18.3M | +5.6% |
| Net margin | 8.7% | 7.0% | +1.8 pp | 8.5% | +0.2 pp |
| Diluted EPS | $0.37 | $0.30 | +$0.07 | $0.35 | +$0.02 |
Risks
Vivint stopped paying license fees under the Patent Cross License Agreement, reducing SaaS and license revenue and total revenue by approximately $6.0 million quarterly, plus additional legal fees. Ongoing arbitration creates uncertainty and could materially adversely affect results.
Substantial portion of revenue from a limited number of service provider partners; loss or significant reduction in orders from major partners such as Vivint or ADT would decrease revenue and profitability.
Macroeconomic Conditions including inflation, rising interest rates, and economic uncertainty may reduce consumer discretionary spending, diminish home building and renovation projects, and increase service provider bankruptcies, harming revenue and cash flows.
Intense competition from large technology companies like Google Nest, Amazon Ring, and Apple HomeKit, as well as managed service providers, could lead to price reductions and loss of market share.
Section 174 requires capitalization and amortization of R&D expenditures, resulting in estimated increased 2023 Federal and state cash tax payable of $40.0 to $45.0 million if not deferred, modified or repealed, impacting operating cash flow.
Tariffs on Chinese imports subject certain Alarm.com products to additional import duties up to 25%; increased tariffs or expanded product coverage could reduce hardware revenue margins.
Ongoing intellectual property lawsuits from EcoFactor, Causam, and ITC, plus indemnity obligations to service provider partners, could result in substantial costs, damages, and diversion of management attention.
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 Q3 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.