Summary
Alarm.com's third quarter of fiscal 2024 showed broad margin expansion on modest top-line growth. Total revenue for the quarter ended September 30, 2024, was $240.5 million, up 8.4% from the prior-year quarter. Operating income rose 105.3% to $33.2 million. Net income attributable to common stockholders increased 87.9% to $36.7 million. Diluted earnings per share came in at $0.67, up 81.1%. Operating margin was 13.8%, up 6.5 percentage points from the prior-year quarter. For the nine months ended September 30, 2024, total revenue was $697.6 million, up 6.4%. Operating income for the same nine-month period was $77.7 million, up 88.8%. Diluted earnings per share for the nine months was $1.73, up 84.0%. Operating margin for the nine months was 11.1%, up 4.9 percentage points.
Cash generation stayed strong. Operating cash flow for the quarter was $77.3 million, up 23.1% from the prior-year quarter. Capital expenditures were $2.8 million, up 43.5%. Deferred revenue was $27.0 million, up 18.3%. For the nine months ended September 30, 2024, operating cash flow was $150.2 million, up 56.3%. Capital expenditures for the nine months were $7.9 million, up 47.0%. Non-GAAP adjusted EBITDA for the quarter increased 20.6% to $50.0 million. Non-GAAP adjusted net income attributable to common stockholders increased 14.9% to $35.2 million, or $0.62 per diluted share. Non-GAAP free cash flow for the nine months was $142.3 million, compared with $90.7 million in the prior-year period. The company also reported a SaaS and license revenue renewal rate of 95% for the twelve months ended September 30, 2024, up from 93%.
For the fourth quarter of 2024, Alarm.com expects SaaS and license revenue of $163.2 million to $163.4 million. For the full year 2024, the company raised its SaaS and license revenue outlook to $628.7 million to $628.9 million. Full-year non-GAAP adjusted EBITDA is guided to $174.0 million to $176.0 million. Full-year non-GAAP adjusted net income attributable to common stockholders is expected to be $125.5 million to $126.5 million, based on an estimated tax rate of 21.0%. On an expected 57.9 million weighted average diluted shares, that translates to $2.25 to $2.27 per diluted share. The fourth-quarter outlook covers only SaaS and license revenue, while the full-year guidance covers adjusted profitability.
Operationally, the company launched OpenEye Cloud Cameras, introduced AI-Deterrence for video monitoring, and released Smart Thermostat HQ. It ended the quarter with 2,055 employees, up from 1,986 a year earlier. The platform processed more than 325 billion data points generated by over 150 million connected devices during 2023. Risks include Macroeconomic Conditions, supply chain disruptions, tariffs, litigation, and reliance on service provider partners. Less than one-third of hardware products are imported from China and could be subject to increased tariffs of up to 25%. The company estimates the increased 2024 Section 174 federal and state cash tax payable at $33.0 million to $38.0 million if the requirement to capitalize and amortize research and development expenditures is not deferred, modified, or repealed. It expects capital expenditure requirements of $1.0 million to $3.0 million over the final three months of fiscal 2024.
In May 2024, Alarm.com issued $500.0 million aggregate principal amount of 2.25% convertible senior notes due June 1, 2029. It used $63.1 million of net proceeds for capped call transactions and $75.0 million to repurchase 1,117,068 shares. No shares were repurchased under the stock repurchase program during the quarter. The remaining authorization under the current program was $100.0 million as of September 30, 2024.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $240.5M | $233.8M | +2.9% | $221.9M | +8.4% |
| Gross profit | $155.7M | $152.5M | +2.1% | $140.4M | +10.9% |
| Gross margin | 64.8% | 65.2% | -0.5 pp | 63.3% | +1.5 pp |
| Research & development | $62.2M | $65.7M | -5.3% | $61.0M | +2.0% |
| Sales & marketing | $27.0M | $27.8M | -3.0% | $23.9M | +13.2% |
| General & administrative | $25.7M | $26.1M | -1.5% | $31.5M | -18.3% |
| Total operating expenses | $122.6M | $126.8M | -3.3% | $124.3M | -1.4% |
| Operating income (loss) | $33.2M | $25.8M | +28.8% | $16.2M | +105.3% |
| Operating margin | 13.8% | 11.0% | +2.8 pp | 7.3% | +6.5 pp |
| Net income (loss) | $36.5M | $32.5M | +12.1% | $19.4M | +88.4% |
| Net margin | 15.2% | 13.9% | +1.3 pp | 8.7% | +6.4 pp |
| Diluted EPS | $0.67 | $0.62 | +$0.05 | $0.37 | +$0.30 |
Risks
The filing emphasizes the Macroeconomic Conditions and says they have caused and may continue to cause significant uncertainty and volatility in global markets, supply chain disruptions, inventory disruptions, and fluctuations in inflation, energy prices and consumer sentiment. MD&A notes prolonged uncertainty could cause further economic slowdown and adversely affect hardware and SaaS and license revenue growth.
The company receives a substantial portion of revenue from a limited number of service provider partners, and the loss of or significant reduction in orders from one or more major partners would decrease revenue and profitability. The risk factor also notes that Vivint moved to its own product and now pays monthly fees that are less on a per customer basis than fees from Alarm.com SaaS solutions.
The company is defending patent lawsuits from EcoFactor, filed January 10, 2022, alleging five U.S. patents are infringed, and from Causam, filed July 22, 2021, alleging smart thermostats infringe four U.S. patents. MD&A reports general and administrative expense decreased 18% in the quarter primarily due to a $6.9 million decrease in legal costs for intellectual property litigation, but these matters remain ongoing and could result in material adverse effects.
Alarm.com sells security and life safety solutions designed to secure subscribers and their properties, and the risk factor says failures due to software defects, carrier outages, network operations center failures, service provider failures or user error could subject it to liability and harm its business. It notes some such failures have happened from time to time.
The markets for connected property, security monitoring, video monitoring and energy management are highly competitive, with named competitors including Amazon, Google Nest, Apple HomeKit, Comcast, and SimpliSafe. Risk text says aggressive tactics such as discounting and bundling competing products at no charge could lower revenue and profitability.
U.S. trade policy with China has imposed import duties of up to 25% on certain Alarm.com products manufactured overseas, and less than one-third of hardware products sold are imported from China. The filing says increased or expanded tariffs may increase cost of hardware revenue and reduce hardware revenue margins in the future.
The company faces risks from security breaches and cyber-attacks on its information and technology networks, including data relating to service provider partners, subscribers and employees. The risk factor notes that acquired businesses and subsidiaries sometimes operate data infrastructure distinct from the Alarm.com operating environment and may have heightened data security vulnerabilities where the technology platform is less mature.
The business operates in a regulated industry subject to consumer protection, licensing, privacy and data security laws, and the risk factor notes past costs to settle alleged Telephone Consumer Protection Act violations. Failure to comply could result in fines, penalties, private actions or revocation of operating permits and licenses.
The company issued $500.0 million aggregate principal amount of 2.25% convertible senior notes due 2029 on May 31, 2024 and has $500.0 million aggregate principal amount of 0% convertible senior notes due 2026. Risk text says the company may not have enough cash to settle conversions or repurchase notes upon a fundamental change, and MD&A says interest expense is expected to increase in 2024 due to the 2029 Notes issuance.
MD&A reports that for the nine months ended September 30, 2024 general and administrative expense included a $4.0 million increase in the provision for credit losses related to a loan previously provided to an affiliated entity of one of the company's distribution partners. Risk factors separately cite collectibility of receivables due from service provider partners and other third parties as a factor affecting quarterly results.
The company grew from 1,404 full-time employees as of December 31, 2020 to 2,055 as of September 30, 2024 and says it does not expect to achieve similar growth rates in future periods. It also warns that failure to manage expansion and infrastructure effectively could strain resources and impact solution quality and financial results.
SaaS KPIs
All quarters →SaaS and license revenue
Non-GAAP free cash flow
Non-GAAP adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from Alarm.com Holdings, Inc.'s SEC filings for Q3 FY2024 (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.