Summary
Alarm.com closed fiscal 2023 with fourth-quarter revenue of $226.2 million, up 8.7% from $208.1 million in the prior-year quarter. Full-year revenue reached $881.7 million, up 4.6% from $842.6 million. Operating income was $25.7 million for the quarter, up 77.4% from $14.5 million, and operating margin was 11.4%, up from 7.0%. For the full year, operating income was $66.8 million, up 30.9% from $51.0 million, and operating margin was 7.6%, up from 6.1%. Net income for the quarter was $31.3 million, up 73.1% from $18.1 million. Diluted earnings per share was $0.58 for the quarter, up from $0.34, and $1.53 for the full year, up from $1.07.
Cash generation was strong. Operating cash flow was $39.9 million for the quarter, up 15.8% from $34.4 million, and $136.0 million for the full year, up 139.0% from $56.9 million. Non-GAAP free cash flow, which subtracts capital expenditures, was $37.7 million for the quarter compared with $33.9 million, and $128.4 million for the full year compared with $28.3 million. Capital expenditures were $2.17 million for the quarter, up 289.9% from $0.56 million, and $7.52 million for the full year, down 73.8% from $28.64 million. Deferred revenue was $22.9 million, up 24.8% from $18.3 million a year earlier. The company repurchased 487,918 shares of common stock during 2023 at an average price of $55.95 for $27.3 million.
Non-GAAP profitability also improved. Adjusted EBITDA was $45.6 million for the quarter compared with $39.0 million, and $154.0 million for the full year compared with $146.8 million. Non-GAAP adjusted net income attributable to common stockholders was $33.9 million, or $0.62 per diluted share, compared with $28.7 million, or $0.53 per diluted share. For the full year, non-GAAP adjusted net income attributable to common stockholders was $113.2 million, or $2.07 per diluted share, compared with $106.9 million, or $1.95 per diluted share.
Operationally, Alarm.com introduced Property Actions for its Alarm Response Software, letting monitoring station partners unlock doors and turn on lights during an alarm event. It also launched Vacation Watch, a video analytics rule that lets subscribers schedule video monitoring start and end times. EnergyHub and Ontario's Independent Electricity System Operator launched the Save on Energy Peak Perks program, which enrolled more than 100,000 homes in its first six months and became Canada's largest residential virtual power plant. The company also settled all outstanding litigation with Vivint and entered a long-term intellectual property license agreement. The absence of Vivint license fees, which began in the fourth quarter of 2022, weighed on SaaS and license revenue and total revenue through December 31, 2023. Alarm.com's platform processed more than 325 billion data points from over 150 million connected devices during 2023. The SaaS and license revenue renewal rate was 94% for 2023, 2022 and 2021. Headcount grew to 1,989 employees as of December 31, 2023 from 1,733 as of January 1, 2023.
Management's guidance points to continued growth. For the first quarter of 2024, SaaS and license revenue is expected to be $148.6 million to $148.8 million. For the full year 2024, SaaS and license revenue is expected to be $622.5 million to $623.5 million. Total revenue is expected to be $912.5 million to $933.5 million. Non-GAAP adjusted EBITDA is expected to be $160.0 million to $164.0 million. Non-GAAP adjusted net income attributable to common stockholders is expected to be $116.0 million to $118.1 million, based on an estimated tax rate of 21.0%, or $2.10 to $2.14 per diluted share based on an expected 55.2 million weighted average diluted shares outstanding.
The outlook comes with familiar risks. Macroeconomic Conditions, including supply chain disruptions, interest rates and inflation, remain uncertain. The company also cites geopolitical upheaval, such as Russia's incursion into Ukraine and the war between Israel and Hamas. Tariffs on products imported from China have subjected some Alarm.com hardware to additional import duties of up to 25%, and roughly one-fifth to one-half of the hardware products sold to service providers are imported from China. The business depends on its network of service provider partners and key suppliers, and it faces increased competition and evolving technologies. A tax change is another call on cash: Section 174 requires research and development expenditures to be capitalized and amortized. The company calculated the 2023 federal and state cash tax increase from Section 174 at $43.5 million, which it expects to pay in April 2024 if the requirement is not deferred, modified or repealed, and it estimates the increased 2024 Section 174 federal and state cash tax payable at $35.0 million to $40.0 million. Capital expenditure requirements over the next 12 months are expected to be between $4.5 million and $6.5 million. Alarm.com also expects hardware revenue margins in 2024 to approximate the hardware revenue margins experienced during 2023.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $226.2M | $221.9M | +2.0% | $208.1M | +8.7% |
| Gross profit | $145.0M | $140.4M | +3.3% | $128.6M | +12.8% |
| Gross margin | 64.1% | 63.3% | +0.8 pp | 61.8% | +2.3 pp |
| Research & development | $61.3M | $61.0M | +0.4% | $57.4M | +6.7% |
| Sales & marketing | $25.9M | $23.9M | +8.7% | $23.6M | +10.1% |
| General & administrative | $24.2M | $31.5M | -23.1% | $25.4M | -4.7% |
| Total operating expenses | $119.3M | $124.3M | -4.0% | $114.1M | +4.6% |
| Operating income (loss) | $25.7M | $16.2M | +58.8% | $14.5M | +77.4% |
| Operating margin | 11.3% | 7.3% | +4.1 pp | 7.0% | +4.4 pp |
| Net income (loss) | $31.2M | $19.4M | +61.1% | $17.8M | +75.2% |
| Net margin | 13.8% | 8.7% | +5.1 pp | 8.6% | +5.2 pp |
| Diluted EPS | $0.57 | $0.37 | +$0.20 | $0.33 | +$0.24 |
Risks
Our 10 largest service provider partners or distributors accounted for 50% of revenue in 2023, and ADT represented greater than 15% but not more than 20% of revenue in 2023 and more than 10% of accounts receivable as of December 31, 2023. The loss of or reduction in orders from ADT or other major partners could materially reduce revenue and profitability.
Vivint stopped paying license fees under the Patent Cross License Agreement, which reduced revenue through December 31, 2023, and the December 21, 2023 settlement and long-term IP license may not fully replace lost high-margin SaaS revenue.
Management highlighted continued significant volatility from Macroeconomic Conditions, including supply chain and inventory disruptions, inflation, energy prices and consumer sentiment, and risk factors note that downturns could reduce demand and increase service provider bankruptcies. A prolonged economic slowdown could adversely affect revenue, results of operations and cash flows.
Total revenue increased 4.6% year to date to $881.7 million in 2023, and risk factors state we do not expect to achieve similar growth rates in future periods. MD&A highlights continued investment in sales and marketing and research and development, which may pressure margins.
The connected property, security, video and energy management markets are highly competitive, with large technology companies such as Amazon, Google and Apple and aggressive tactics such as discounting or bundled offerings. Failure to compete effectively could reduce sales and profitability.
We are subject to FTC, FCC, TCPA, state privacy and licensing laws, and have incurred costs to settle alleged TCPA violations. Changes in laws or regulations could increase compliance costs, reduce subscriber acquisition opportunities or result in fines and enforcement actions.
We face patent infringement lawsuits, including from EcoFactor and Causam, and litigation outcomes are unpredictable and could require significant management time, costly licenses or damages. A negative outcome could materially harm our business, financial condition, cash flows and results of operations.
U.S. tariffs have subjected certain products manufactured overseas to import duties of up to 25%, and approximately one-fifth to one-half of hardware products sold are imported from China and could be subject to increased tariffs. Increased or expanded tariffs could increase cost of hardware revenue and reduce hardware revenue margins.
We rely on hardware vendors to manufacture high-quality products and supply sufficient components, and risk factors note supply chain disruptions or shortages. MD&A notes prior-year inventory purchases to reduce supply chain risk benefited 2023 operating cash flow.
We collect and retain personal information, and cyber-attacks continue to increase; the hybrid return to office plan may make us more vulnerable. A significant breach could result in fines, litigation, reputational harm and loss of subscribers.
We have convertible senior notes due January 15, 2026, and may not have enough cash or financing to settle conversions or repurchase notes upon a fundamental change. A default could materially harm liquidity and financial condition.
SaaS KPIs
All quarters →SaaS and license revenue
Non-GAAP free cash flow
Non-GAAP adjusted EBITDA
Non-GAAP Adjusted SaaS and License Revenue
Summary, forecast, risks and KPIs are extracted from Alarm.com Holdings, Inc.'s SEC filings for Q4 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.