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This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act.
−Removed: These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” “would” or the negative or plural of these words or similar expressions or variations and such forward-looking statements include, but are not limited to, statements with respect to the anticipated impact of the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic on our business, results of operations and financial condition, including on our hardware sales and our SaaS and license revenue growth rate;
+Added: These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” “would” or the negative or plural of these words or similar expressions or variations and such forward-looking statements include, but are not limited to, s tatements with respect to the anticipated impact of the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic on our business, results of operations and financial condition, including on our hardware sales and our SaaS and license revenue growth rate;
our business strategy, plans and objectives for future operations;
−Removed: continued enhancement s of our platform and offerings;
+Added: continued enhan cement s of our platform and offerings;
our future financial and business performance and the potential impact of trade policies and related tariffs on our cost of hardware revenue and hardware revenue margins.
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Our subscribers can seamlessly connect to their property through our family of mobile apps, websites and engagement platforms like voice control through Amazon Echo and Google Home, wearable devices like the Apple Watch and TV applications such as Apple TV and Amazon Fire TV.
−Removed: Highlights of Second Quarter Results
+Added: Highlights of Third Quarter Results
We primarily generate SaaS and license revenue, our largest source of revenue, through our service provider partners who resell our services and pay us monthly fees.
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on a per customer basis.
−Removed: SaaS and license revenue represented 68% and 64% of our revenue during the three and six months ended June 30, 2020, respectively, as compared to 68% and 69% in the same periods in the prior year.
+Added: SaaS and license revenue represented 63% and 64% of our revenue during the three and nine months ended September 30, 2020, respectively, as compared to 66% and 68% in the same periods in the prior year.
We also generate SaaS and license revenue from monthly fees charged to service providers on a per subscriber basis for access to our non-hosted software platform, or Software platform.
The non-hosted software for interactive security, automation and related solutions is typically deployed and operated by the service provider in its own network operations center.
−Removed: Software license revenue represented 7% of our revenue during each of the three and six months ended June 30, 2020, as compared to 9% for the same periods in the prior year.
+Added: Software license revenue represented 6% of our revenue during each of the three and nine months ended September 30, 2020, as compared to 8% and 9% for the same periods in the prior year.
We also generate revenue from the sale of hardware, including video cameras, video recorders, cellular radio modules, thermostats, image sensors and other peripherals, that enables our solutions.
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Our hardware and other revenue also includes our revenue from the sale of perpetual licenses that provide our customers in the commercial market the right to use our video surveillance software for an indefinite period of time in exchange for a one-time license fee.
−Removed: Hardware and other revenue represented 32% and 36% of our revenue during the three and six months ended June 30, 2020, respectively, as compared to 32% and 31% in the same periods in the prior year.
+Added: Hardware and other revenue represented 37% and 36% of our revenue during the three and nine months ended September 30, 2020, respectively, as compared to 34% and 32% in the same periods in the prior year.
We typically expect hardware and other revenue to fluctuate as a percentage of total revenue.
Highlights of our financial performance for the periods covered in this Quarterly Report include:
−Removed: • SaaS and license revenue increased 16% to $95.7 million in the three months ended June 30, 2020 from $82.3 million in the three months ended June 30, 2019.
−Removed: SaaS and license revenue increased 16% to $187.7 million in the six months ended June 30, 2020 from $162.4 million in the six months ended June 30, 2019.
−Removed: Included in SaaS and license revenue was software license revenue, which decreased to $9.8 million in the three months ended June 30, 2020 from $11.0 million in the three months ended June 30, 2019.
−Removed: Software license revenue decreased to $19.5 million in the six months ended June 30, 2020 from $22.0 million in the six months ended June 30, 2019.
−Removed: • Total revenue increased 16% to $141.6 million in the three months ended June 30, 2020 from $121.7 million in the three months ended June 30, 2019.
−Removed: Total revenue increased 25% to $293.6 million in the six months ended June 30, 2020 from $234.0 million in the six months ended June 30, 2019.
−Removed: • Net income increased to $16.6 million in the three months ended June 30, 2020 as compared to $13.8 million in the three months ended June 30, 2019.
−Removed: Net income increased to $25.2 million in the six months ended June 30, 2020 as compared to $22.8 million in the six months ended June 30, 2019.
−Removed: Net income attributable to common stockholders increased to $17.0 million in the three months ended June 30, 2020 as compared to $13.8 million in the three months ended June 30, 2019.
−Removed: Net income attributable to common stockholders increased to $25.8 million in the six months ended June 30, 2020 as compared to $22.8 million in the six months ended June 30, 2019.
−Removed: • Adjusted EBITDA, a non-GAAP measurement of operating performance, increased to $29.2 million in the three months ended June 30, 2020 from $27.7 million in the three months ended June 30, 2019.
−Removed: Adjusted EBITDA increased to $58.4 million in the six months ended June 30, 2020 from $52.0 million in the six months ended June 30, 2019.
−Removed: Please see Non-GAAP Measures below in this section of this Quarterly Report for a discussion of the limitations of Adjusted EBITDA (a non-GAAP measure) and a reconciliation of Adjusted EBITDA to net income, the most comparable measurement in accordance with accounting principles generally accepted in the United States, or GAAP, for the three and six months ended June 30, 2020 and 2019.
+Added: • SaaS and license revenue increased 18% to $100.1 million in the three months ended September 30, 2020 from $84.9 million in the three months ended September 30, 2019.
+Added: SaaS and license revenue increased 16% to $287.8 million in the nine months ended September 30, 2020 from $247.3 million in the nine months ended September 30, 2019.
+Added: Included in SaaS and license revenue was software license revenue, which decreased to $9.5 million in the three months ended September 30, 2020 from $10.8 million in the three months ended September 30, 2019.
+Added: Software license revenue decreased to $29.0 million in the nine months ended September 30, 2020 from $32.8 million in the nine months ended September 30, 2019.
+Added: • Total revenue increased 24% to $158.9 million in the three months ended September 30, 2020 from $127.9 million in the three months ended September 30, 2019.
+Added: Total revenue increased 25% to $452.4 million in the nine months ended September 30, 2020 from $361.9 million in the nine months ended September 30, 2019.
+Added: • Net income increased to $35.8 million in the three months ended September 30, 2020 as compared to $17.7 million in the three months ended September 30, 2019.
+Added: Net income increased to $61.0 million in the nine months ended September 30, 2020 as compared to $40.5 million in the nine months ended September 30, 2019.
+Added: Net income attributable to common stockholders increased to $36.1 million in the three months ended September 30, 2020 as compared to $17.7 million in the three months ended September 30, 2019.
+Added: Net income attributable to common stockholders increased to $61.9 million in the nine months ended September 30, 2020 as compared to $40.5 million in the nine months ended September 30, 2019.
+Added: • Adjusted EBITDA, a non-GAAP measurement of operating performance, increased to $34.5 million in the three months ended September 30, 2020 from $26.3 million in the three months ended September 30, 2019.
+Added: Adjusted EBITDA increased to $92.9 million in the nine months ended September 30, 2020 from $78.3 million in the nine months ended September 30, 2019.
+Added: Please see Non-GAAP Measures below in this section of this Quarterly Report for a discussion of the limitations of Adjusted EBITDA (a non-GAAP measure) and a reconciliation of Adjusted EBITDA to net income, the most comparable measurement in accordance with accounting principles generally accepted in the United States, or GAAP, for the three and nine months ended September 30, 2020 and 2019.
Recent Developments
−Removed: The COVID-19 pandemic has been disrupting and may continue to disrupt our supply chain for an unknown period of time due to its impact on manufacturing, production and global transportation.
−Removed: The COVID-19 pandemic has also been disrupting and may continue to disrupt our sales channels due to restrictions on our service providers’ ability to meet with residential and commercial property owners who use our solutions.
+Added: The COVID-19 pandemic disrupted and may intermittently continue to disrupt our supply chain for an unknown period of time due to its impact on manufacturing, production and global transportation.
+Added: The COVID-19 pandemic also disrupted and may intermittently continue to disrupt our sales channels due to restrictions on our service providers’ ability to meet with residential and commercial property owners who use our solutions.
We have taken precautionary measures intended to help protect our employees, service providers and subscribers, as well as the communities in which we participate, including enabling substantially all of our employees to work remotely.
−Removed: To date, the COVID-19 pandemic has resulted in a global slowdown of economic activity and a recession in the United States and the continued spread of COVID-19 and prolonged uncertainty with respect to COVID-19 could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.
−Removed: While our business and those of our service providers showed some resiliency towards the end of the second quarter of 2020, we expect these events to have a negative impact on our sales and our results of operations, the size and duration of which we are currently unable to predict;
−Removed: however, we do anticipate that for the remainder of 2020 our hardware revenue will be lower as compared to the first half of 2020.
−Removed: If there continues to be a slowdown of economic activity in the future, we anticipate that our SaaS and license revenue growth rate may also be lower in future periods if some consumers or small businesses defer or cancel previously anticipated purchases.
+Added: In addition, the COVID-19 pandemic resulted in a global slowdown of economic activity and a recession in the United States and the economic situation remains fluid as parts of the economy appear to be recovering while others continue to struggle.
+Added: Prolonged uncertainty with respect to COVID-19 could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.
+Added: While our business and those of our service providers showed some resiliency beginning towards the end of the second quarter of 2020 and continuing in the third quarter, if the economy fails to fully recover or there is another shutdown of non-essential businesses due to a resurgence of COVID-19, we anticipate that our SaaS and license revenue growth rate may be lower in future periods if some consumers or small businesses defer or cancel previously anticipated purchases, with a
+Added: corresponding reduction in hardware revenue.
The challenges posed by COVID-19 on our business continue to evolve rapidly and we will continue to evaluate our business and operations in light of future developments.
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We did not receive any proceeds from the sale of shares of common stock by the selling stockholders.
−Removed: We incurred expenses of approximately $0.5 million related to legal, accounting and other fees in connection with the secondary public offering, which are included in general and administrative expense in our condensed consolidated statements of operations and is adjusted for when determining Adjusted EBITDA.
−Removed: Please see Non-GAAP Measures below in this section of this Quarterly Report for a discussion of the limitations of Adjusted EBITDA (a n on-GAAP measure) and a reconciliation of Adjusted EBITDA to net income, the most comparable measurement in accordance with GAAP, for the three and six months ended June 30, 2020 and 2019.
+Added: We incurred expenses of approximately $0.5 million related to legal, accounting and other fees in connection with the secondary public offering during the nine months ended September 30, 2020 , which are included in general and administrative expense in our condensed consolidated statements of operations and are adjusted for when determining Adjusted EBITDA.
+Added: Please see Non-GAAP Measures below in this section of this Quarterly Report for a discussion of the limitations of Adjusted EBITDA (a n on-GAAP measure) and a reconciliation of Adjusted EBITDA to net income, the most comparable measurement in accordance with GAAP, for the three and nine months ended September 30, 2020 and 2019.
Other Business Metrics
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Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
2020 2019 2020 2019
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Twelve Months Ended
+Added: September 30,
SaaS and license revenue renewal rate 94 % 94 %
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Adjusted EBITDA
−Removed: Adjusted EBITDA is a non-GAAP measure that represents our net income before interest expense, interest income, other income, net, (benefit from) / provision for income taxes, amortization and depreciation expense, stock-based compensation expense, secondary offering expense, acquisition-related (benefit) / expense and legal costs and settlement fees incurred in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation.
+Added: Adjusted EBITDA is a non-GAAP measure that represents our net income before interest expense, interest income, other income, net, provision for income taxes, amortization and depreciation expense, stock-based compensation expense, secondary offering expense, acquisition-related (benefit) / expense and legal costs and settlement fees incurred in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation.
We do not consider these items to be indicative of our core operating performance.
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Adjusted EBITDA is not a measure calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
−Removed: Please see Non-GAAP Measures in this section for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measurement, for the three and six months ended June 30, 2020 and 2019.
+Added: Please see Non-GAAP Measures in this section for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measurement, for the three and nine months ended September 30, 2020 and 2019.
SaaS and License Revenue Renewal Rate
Our SaaS and license revenue renewal rate is an operating metric.
−Removed: We measure our SaaS and license revenue renewal rate on a trailing 12-month basis by dividing (a) the total SaaS and license revenue recognized during the trailing 12-month period
−Removed: from our subscribers on our Alarm.com platform who were subscribers on the first day of the period, by (b) total SaaS and license revenue we would have recognized during the period from those same subscribers assuming no terminations, or service level upgrades or downgrades.
+Added: We measure our SaaS and license revenue renewal rate on a trailing 12-month basis by dividing (a) the total SaaS and license revenue recognized during the trailing 12-month period from our subscribers on our Alarm.com platform who were subscribers on the first day of the period, by (b) total SaaS and license revenue we would have recognized during the period from those same subscribers assuming no terminations, or service level upgrades or downgrades.
The SaaS and license revenue renewal rate represents both residential and commercial properties.
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We also generate SaaS and license revenue from the fees paid to us when we license our intellectual property to third parties for use of our patents.
−Removed: In addition, in certain markets our EnergyHub subsidiary sells its demand response service for an
−Removed: annual service fee, with pricing based on the number of subscribers or amount of aggregate electricity demand made available for a utility’s or market’s control.
+Added: In addition, in certain markets our EnergyHub subsidiary sells its demand response service for an annual service fee, with pricing based on the number of subscribers or amount of aggregate electricity demand made available for a utility’s or market’s control.
Software License Revenue .
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The decision whether to charge an activation fee is based in part on the expected number of subscribers to be added by our service provider partners and as a result, many of our largest service provider partners do not pay an activation fee.
−Removed: As a result of the COVID-19 pandemic, governments, public institutions and other organizations in many countries and localities where COVID-19 has been detected have taken certain emergency measures, and may from time to time take additional emergency measures, to combat its spread, including imposing lockdowns, shelter-in-place orders, quarantines, restrictions on travel and gatherings and the extended shutdown non-essential businesses that cannot be conducted remotely.
+Added: As a result of the COVID-19 pandemic, governments, public institutions and other organizations in many countries and localities where COVID-19 has been detected have taken certain emergency measures, and may from time to time take additional emergency measures, to com bat its spread, including imposing lockdowns, shelter-in-place orders, quarantines, restrictions on travel and gatherings and the extended shutdown non-essential businesses that cannot be conducted remotely.
These emergency measures remain in place to varying degrees.
−Removed: We have seen and anticipate we may continue to see some disruption to our hardware supply chain due to the impact of COVID-19 on manufacturing, production and global transportation, as well as to our sales channels due to restrictions on our service providers’ ability to meet with residential and commercial property owners who use our solutions, reluctance of service providers and property owners to meet even where such restrictions have been lifted and general economic conditions.
−Removed: In addition, the COVID-19 pandemic has resulted in a global slowdown of economic activity and a recession in the United States that has and for an unknown period of time will likely continue to decrease demand for a broad variety of goods and services.
+Added: We have seen and anticipate we may continue to see some disruption to our hardware supply chain due to the impact of COVID-19 on manufacturing, production and global transportation, as well as to our sales channels due to restrictions on our service providers’ ability to meet with residential and commercial property owners who use our solutions, reluc tance of service providers and property owners to meet even where such restrictions have been lifted and general economic condition s.
+Added: In addition, the COVID-19 pandemic has resulted in a global slowdown of economic activity and a recession in the United States and the economic situation remains fluid as parts of the economy appear to be recovering while others continue to struggle.
As the future impact on global supply chains from COVID-19 is difficult to predict, the extent to which COVID-19 may negatively affect our hardware revenue is uncertain;
−Removed: however, we do anticipate that for the remainder of 2020 our hardware revenue will be lower as compared to the first half of 2020.
−Removed: If there continues to be a slowdown of economic activity in the future, we anticipate that our SaaS and license revenue growth rate may also be lower in future periods if some consumers or sm all businesses defer or cancel previously anticipated purchases.
+Added: however, if the economy fails to fully recover or there is another shutdown of non-essential businesses due to a resurgence of COVID-19, we anticipate that our SaaS and license revenue growth rate may be lower in future periods if some consumers or small businesses defer or cancel previously anticipated purchases, with a corresponding reduction in hardware revenue.
Cost of Revenue
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Tariffs have subjected certain Alarm.com products manufactured overseas to additional import duties of up to 25%.
−Removed: The amount of the import tariff and the number of products subject to tariffs have changed numerous times based on action by the U.S.
+Added: The amount of the import tariff and the number of products subje ct to tariffs have changed numerous times based on action by the U.S.
administration.
−Removed: Approximately one-fifth to one-half of the finished goods hardware products that we sell to our service provider partners are imported from China and c ould be subject to increased tariffs.
+Added: Approximately one-fifth to one-half of the finis hed goods hardware products that we sell to our service provider partners are imported from China and c ould be subject to increased tariffs.
While the additional import duties resulted in an increase to our cost of hardware revenue, these import duties had a modest impact on hardware revenue margins.
−Removed: We continue to monitor the changes in tariffs.
+Added: We continue to monitor the
+Added: changes in tariffs.
If tariffs are increased or are expanded to apply to more of our products, such actions may increase our cost of hardware revenue and reduce our hardware revenue margins in the future.
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Salaries, bonuses, stock-based compensation, benefits and other personnel related costs are the most significant components of each of these expense categories, excluding amortization and depreciation.
−Removed: We include stock-based compensation expense in connection with the grant of stock options and other forms of equity compensation in the applicable operating expense category bas ed on the respective equity award recipient’s function (sales and marketing, general and administrative or research and development).
−Removed: We grew from 1,005 employees as of June 30, 2019 to 1,317 employees as of June 30, 2020, and we expect to continue to hire new employees to support the projected future growth of our business.
+Added: We include stock-based compensation expense in connection with the grant of stock options and other forms of equity compensation in the applicable operating expense category based on the respective equity award recipient’s function (sales and marketing, general and administrative or research and development).
+Added: We grew from 1,043 employees as of September 30, 2019 to 1,361 employees as of September 30, 2020, and we expect to continue to hire new employees to support the projected future growth of our business.
Sales and Marketing Expense.
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Our sales and marketing teams engage in sales, account management, service provider partner support, advertising, promotion of our products and services and marketing.
−Removed: The number of employees in sales and marketing functions increased from 337 as of June 30, 2019 to 441 as of June 30, 2020.
+Added: The number of employees in sales and marketing functions increased from 340 as of September 30, 2019 to 450 as of September 30, 2020.
We expect to continue to invest in our sales and marketing activities to expand our business both domestically and internationally.
−Removed: We intend to increase the size of our sales force and our service provider partner support team to provide additional support to our existing service provider partne r base to drive their productivity in selling our solutions as well as to enroll new service provider partners in North America and in international markets.
+Added: We intend to increase the size of our sales force and our service provider partner support team to provide additional support to our existing service provider partner base to drive their productivity in selling our solutions as well as to enroll new service provider partners in North America and in international markets.
General and Administrative Expense.
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Additional expenses included in this category are legal costs, including those that are incurred to defend and license our intellectual property, as well as non-personnel costs, such as travel related expenses, rent, subcontracting and professional fees, audit fees, tax services, and insurance expenses.
−Removed: Also included in general and administrative expenses are credit losses and acquisition-related expenses, which consist primarily of legal, accounting and professional service fees directly related to acquisitions, valuation gains or losses on acquisition-related contingent liabilities.
−Removed: The number of employees in general and administrative functions increased from 114 as of June 30, 2019 to 155 as of June 30, 2020.
+Added: Also included in general and administrative expenses are credit losses and acquisition-related expenses, which consist primarily of legal, accounting and professional service fees directly related to acquisitions and valuation gains or losses on acquisition-related contingent liabilities.
+Added: The number of employees in general and administrative functions increased from 121 as of September 30, 2019 to 161 as of September 30, 2020.
Excluding intellectual property litigation and acquisition-related (benefit) / expense, we expect general and administrative costs to increase prospectively as our business grows.
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Also included are non-personnel costs such as consulting and professional fees paid to third-party development resources as well as acquisition costs of IPR&D with no alternative future use.
−Removed: The number of employees in research and development functions increased from 554 as of June 30, 2019 to 721 as of June 30, 2020.
−Removed: Our research and development efforts are focused on innovating new features and enhancing the functionality of our platforms and the solutions we offer to our service pro vider partners and subscribers.
−Removed: We will also continue to invest in efforts to extend our platforms to adjacent markets and internationally to maintain our leadership position in the development of intelligently connected property technology, and continued enhance ment of our Enterprise Tools platform for our service provider partners.
+Added: The number of employees in research and development functions increased from 582 as of September 30, 2019 to 750 as of September 30, 2020.
+Added: Our research and development efforts are focused on innovating new features and enhancing the functionality of our platforms and the solutions we offer to our service provider partners and subscribers.
+Added: We will also continue to invest in efforts to extend our platforms to adjacent markets and internationally to maintain our leadership position in the development of intelligently connected property technology, and continued enhancement of our Enterprise Tools platform for our service provider partners.
Amortization and Depreciation .
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On October 6, 2017, we entered into a $125.0 million senior secured revolving credit facility, or the 2017 Facility, with Silicon Valley Bank, or SVB, as administrative agent, PNC Bank, National Association, as documentation agent, and a syndicate of lenders.
−Removed: The 2017 Facility is available to us to refinance existing debt and for general corporate and working capital purposes as permitted under the terms of the 2017 Facility.
−Removed: Interest expense is expected to increase in 2020 as compared to 2019 due to the $50.0 million borrowed under the 2017
−Removed: Facility as a precautionary measure in order to provide financial flexibility in light of current uncertainty in the financial markets resulting from the COVID-19 pandemic.
+Added: The 2017 Facility is available to us
+Added: to refinance existing debt and for general corporate and working capital purposes as permitted under the terms of the 2017 Facility.
+Added: Interest expense is expected to increase in 2020 as compared to 2019 due to the $50.0 million borrowed under the 2017 Facility as a precautionary measure in order to provide financial flexibility in light of current uncertainty in the financial markets resulting from the COVID-19 pandemic.
Interest Income
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Other Income, Net
−Removed: Other income, net primaril y consists of non-operating and miscellaneous income and expense.
−Removed: (Benefit From) / Provision for Income Taxes
+Added: Other income, net primaril y consists of gains earned on the sale of our investments and gains earned on our notes receivable and conversion of our outstanding notes receivable balance into an equity investment, partially offset by an impairment of one of our investments.
+Added: Provision for Income Taxes
We are subject to U.S.
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During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.
−Removed: As a result, we recognize tax liabilities based on estimate s of whether additional taxes will be due.
+Added: As a result, we recognize tax liabilities based on estimates of whether additional taxes will be due.
Our effective tax rates were different from the statutory rate primarily due to research and development tax credits claimed, tax windfall benefits from employee stock-based payment transactions and foreign derived intangible income deductions, partially offset by the impact of state taxes and non-deductible meal and entertainment expenses.
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The following table sets forth our unaudited selected condensed consolidated statements of operations and data as a percentage of revenue for the periods presented (in thousands).
−Removed: Certain previously reported amounts in the condensed consolidated statements of operations for the three and six months ended June 30, 2019 have been reclassified to conform to our current presentation to reflect interest income as a separate line item, which was previously included in other income, net.
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
2020 2019 2020 2019
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Income before income taxes 42,371 27 20,563 16 66,492 15 43,924 12
−Removed: (Benefit from) / provision for income taxes (2,277) (2) 313 — (1,075) (1) 555 —
+Added: Provision for income taxes 6,546 4 2,873 2 5,471 2 3,428 1
Net income $ 35,825 23 % $ 17,690 14 % $ 61,021 13 % $ 40,496 11 %
3 unchanged sentences
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
2020 2019 2020 2019
6 unchanged sentences
Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
2020 2019 2020 2019
1 unchanged sentence
Cost of SaaS and license revenue as a percentage of SaaS and license revenue 14 % 15 % 14 % 15 %
−Removed: 14 % 15 % 13 % 15 %
Cost of hardware and other revenue as a percentage of hardware and other revenue 80 % 82 % 78 % 82 %
−Removed: 78 % 81 % 77 % 82 %
Total cost of revenue as a percentage of total revenue
39 % 37 % 37 % 36 %
−Removed: Comparison of the Three and Six Months Ended June 30, 2020 to June 30, 2019
+Added: Comparison of the Three and Nine Months Ended September 30, 2020 to September 30, 2019
The following tables in this section set forth our selected condensed consolidated statements of operations (in thousands), data for the percentage change and data as a percentage of revenue for the periods presented.
−Removed: Certain previously reported amounts in the condensed consolidated statements of operations for the three and six months ended June 30, 2019 have been reclassified to conform to our current presentation to reflect interest income as a separate line item, which was previously included in other income, net.
Three Months Ended
−Removed: Change Six Months Ended
+Added: September 30, %
+Added: Change Nine Months Ended
+Added: September 30, %
2020 2019 2020 2019
2 unchanged sentences
Total revenue $ 158,851 $ 127,880 24 % $ 452,427 $ 361,875 25 %
−Removed: T he $20.0 million increase in total revenue for the three months ended June 30, 2020 as compared to the same period in the prior year was primarily the result of a $13.4 million, or 16%, increase in our SaaS and license revenue and a $6.6 million, or 17%, increase in our hardware and other revenue.
−Removed: Our software license revenue included within SaaS and license revenue decreased $1.2 million to $9.8 million during the three months ended June 30, 2020 as compared to $11.0 million during the same period in the prior year, which decrease was primarily the result of the continuing transition of customers from non-hosted software to our cloud based hosted platform.
−Removed: Th e $10.8 million increase in our Alarm.com segment SaaS and license revenue for the three months ended June 30, 2020 was primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2019.
−Removed: The increase in hardwa re and other reven ue for the three months ended June 30, 2020 as compared to the same period in the prior year was from the Alarm.com segment and was due to the increased revenue from our acquisition of 85% of the issued and outstanding capital stock of PC Open Incorporated, a Washington corporation, doing business as OpenEye, on October 21, 2019, as well as an increase in the volume of video cameras sold.
−Removed: The $2.6 million increase in SaaS and license revenue for our Other segment for the three months ended June 30, 2020 as compared to the same period in the prior year was due to an increase in sales of our energy management and demand response solutions and our property management and heating, ventilation and air conditioning, or HVAC, solutions.
−Removed: Hardware and other revenue, net of intersegment eliminations, for the three months ended June 30, 2020 in our Other segment decreased 46%, as compared to the same period in the prior year, primarily due to the timing of sales related to our property management solution.
−Removed: The $59.6 million increase in total revenue for the six months ended June 30, 2020 as compared to the same period in the prior year was primarily the result of a $34.3 million, or 48%, increase in our hardware and other revenue and a $25.3 million, or 16%, increase in our SaaS and license revenue.
−Removed: Our software license revenue included within SaaS and license revenue decreased $2.5 million to $19.5 million during the six months ended June 30, 2020, as compared to $22.0 million during the same period in the prior year, which decrease was primarily the result of the continuing transition of customers from non-hosted software to our cloud based hosted platform.
−Removed: The $22.8 million increase in our Alarm.com segment SaaS and license revenue for the six months ended June 30, 2020 was primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2019.
−Removed: The increase in hardware and other revenue for the six months ended June 30, 2020, as compared to the same period in the prior year was primarily from the Alarm.com segment and was due to an increase in the volume of video cameras sold as the increased revenue from our acquisition of 85% of the issued and outstanding capital stock of OpenEye, on October 21, 2019.
−Removed: The $2.4 million increase in SaaS and license revenue for our Other segment for the six months ended June 30, 2020, as compared to the same period in the prior year was due to an increase in sales of our energy management and demand response solutions and our property management and heating, ventilation and air conditioning, or HVAC, solutions.
−Removed: Hardware and other revenue, net of intersegment eliminations, for the six months ended June 30, 2020 in our
−Removed: Other segment decreased 21%, as compared to the same period in the prior year, primarily due to the timing of sales related to our property management solution.
+Added: T h e $31.0 million increase in total revenue for the three months ended September 30, 2020 as compared to the same period in the prior year was primarily the result of a $15.8 million, or 37%, increase in our hardware and other revenue and a $15.2 million, or 18%, increase in our SaaS and license revenue.
+Added: Our software license revenue included within SaaS and license revenue decreased $1.3 million to $9.5 million during the three months ended September 30, 2020 as compared to $10.8 million during the same period in the prior year, which decreased primarily due to the result of the continuing transition of customers from non-hosted software to our cloud based hosted platform.
+Added: The $12.9 million increase in our Alarm.com segment SaaS and license revenue for the three months ended September 30, 2020 was primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2019.
+Added: The increase in hardware and other revenue for the three months ended September 30, 2020 as compared to the same period in the prior year was from the Alarm.com segment and was due an increase in the volume of video cameras sold as well as the increased revenue from our acquisition of 85% of the issued and outstanding capital stock of PC Open Incorporated, a Washington corporation, doing business as OpenEye, on October 21, 2019.
+Added: The $2.3 million increase in SaaS and license revenue for our Other segment for the three months ended September 30, 2020 as compared to the same period i n the prior year was due to an increase in sales of our energy management and demand response solutions and our property management and heating, ventilation and air conditioning, or HVAC, solutions.
+Added: Hardware and other revenue, net of in tersegment eliminat ions, for the three months ended September 30, 2020 in our Other segment decreased $1.7 million, or 52%, as compared to the same period in the prior year, primarily due to a decrease in sales related to our property management solution.
+Added: The $90.6 million increase in total revenue for the nine months ended September 30, 2020 as compared to the same period in the prior year was primarily the result of a $50.1 million, or 44%, increase in our hardware and other revenue and a $40.5 million, or 16%, increase in our SaaS and license revenue.
+Added: Our software license revenue included within SaaS and license revenue decreased $3.8 million to $29.0 million during the nine months ended September 30, 2020, as compared to $32.8 million during the same period in the prior year, which decreased primarily due to the result of the continuing transition of customers from non-hosted software to our cloud based hosted platform.
+Added: The $35.7 million increase in our Alarm.com segment SaaS and license revenue for the nine months ended September 30, 2020 was primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2019.
+Added: The increase in hardware and other revenue for the nine months ended September 30, 2020, as compared to the same period in the prior year was primarily from the Alarm.com segment and was due to an increase in the volume of video cameras sold, as well as the increased revenue from our acquisition of 85% of the issued and outstanding capital stock of OpenEye, on October 21, 2019.
+Added: The $4.8 million increase in SaaS and license revenue for our Other segment for the nine months ended September 30, 2020, as compared to the same period in the prior year was due to an increase in sales of our energy management and demand response solutions and our property management and HVAC solutions.
+Added: Hardware and other revenue, net of intersegment eliminations, for the nine months ended September 30, 2020 in our Other segment decreased $3.1 million, or 31%, as compared to the same period in the prior year, primarily due to a decrease in sales related to our property management solution.
Cost of Revenue
Three Months Ended
−Removed: Change Six Months Ended
+Added: September 30, %
+Added: Change Nine Months Ended
+Added: September 30, %
2020 2019 2020 2019
6 unchanged sentences
(1) Excludes amortization and depreciation shown in operating expenses.
−Removed: T he $4.4 million increase in cost of revenue for the three months ended June 30, 2020 as compared to the same period in the prior year was the result of a $4.1 million, or 13%, increase in cost of hardware and other revenue and a $0.3 million, or 3%, increase in cost of SaaS and license revenue.
−Removed: Our cost of software license revenue included within cost of SaaS and license revenue was $0.3 million for each of the three months ended June 30, 2020 and 2019.
−Removed: The increase in cost of Alarm.com segment hardware and other revenue related primarily to the increased cost of revenue from our acquisition of 85% of the issued and outstanding capital stock of OpenEye on October 21, 2019 as well as an increase in the number of hardware units shipped during the three months ended June 30, 2020 as compared to the same period in the prior year.
−Removed: Cost of hardware and other revenue as a percentage of hardware and other revenue was 78% for the three months ended June 30, 2020 and 81% for the same period in the prior year.
−Removed: Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 14% for the three months ended June 30, 2020 and 15% for the same period in the prior year.
−Removed: Cost of software license revenue as a percentage of software license revenue was 3% for each of the three months ended June 30, 2020 and 2019.
−Removed: The decrease in cost of hardware and other revenue as a percentage of hardware and other revenue for the three months ended June 30, 2020 as compared to the same period in the prior year is a reflection of the mix of product sales during the periods.
−Removed: The $23.5 million increase in cost of revenue for the six months ended June 30, 2020 as compared to the same period in the prior year was the result of a $23.1 million, or 40%, increase in cost of hardware and other revenue and a $0.3 million, or 1%, increase in cost of SaaS and license revenue.
−Removed: Our cost of software license revenue included within cost of SaaS and license revenue was $0.7 million for each of the six months ended June 30, 2020 and 2019.
−Removed: The increase in cost of Alarm.com segment hardware and other revenue related primarily to an increase in the number of hardware units shipped during the six months ended June 30, 2020 as compared to the same period in the prior year as well as the increased cost of revenue from our acquisition of 85% of the issued and outstanding capital stock of OpenEye on October 21, 2019.
−Removed: Cost of hardware and other revenue as a percentage of hardware and other revenue was 77% for the six months ended June 30, 2020 and 82% for the same period in the prior year.
−Removed: Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 13% for the six months ended June 30, 2020 and 15% for the same period in the prior year.
−Removed: Cost of software license revenue as a percentage of software license revenue was 4% and 3% for the six months ended June 30, 2020 and 2019, respectively.
−Removed: The decrease in cost of hardware and other revenue as a percentage of hardware and other revenue for the six months ended June 30, 2020, as compared to the same period in the prior year is a reflection of the mix of product sales during the periods.
+Added: T he $13.7 million increase in cost of revenue for the three months ended September 30, 2020 as compared to the same period in the prior year was the result of a $11.8 million, or 34%, increase in cost of hardware and other revenue and a $1.9 million, or 15%, increase in cost of SaaS and license revenue.
+Added: Our cost of software license revenue included within cost of SaaS and license revenue was $0.3 million for each of the three months ended September 30, 2020 and 2019.
+Added: The increase in cost of Alarm.com segment hardware and other revenue related primarily to an increase in the number of hardware units shipped during the three months ended September 30, 2020 as compared to the same period in the prior year as well as the increased cost of revenue from our acquisition of 85% of the issued and outstanding capital stock of OpenEye on October 21, 2019.
+Added: Cost of hardware and other revenue as a percentage of hardware and other revenue was 80% for the three months ended September 30, 2020 and 82% for the same period in the prior year.
+Added: Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 14% for the three months ended September 30, 2020 and 15% for the same period in the prior year.
+Added: Cost of software license revenue as a percentage of software license revenue was 3% for each of the three months ended September 30, 2020 and 2019.
+Added: The decrease in cost of hardware and other revenue as a percentage of hardware and other revenue for the three months ended September 30, 2020 as compared to the same period in the prior year is a reflection of the mix of product sales during the periods.
+Added: The $37.1 million increase in cost of revenue for the nine months ended September 30, 2020 as compared to the same period in the prior year was the result of a $34.9 million, or 37%, increase in cost of hardware and other revenue and a $2.2 million, or 6%, increase in cost of SaaS and license revenue.
+Added: Our cost of software license revenue included within cost of SaaS and license revenue was $1.0 million for each of the nine months ended September 30, 2020 and 2019.
+Added: The increase in cost of Alarm.com segment hardware and other revenue related primarily to an increase in the number of hardware units shipped during the nine months ended September 30, 2020 as compared to the same period in the prior year as well as the increased cost of revenue from our acquisition of 85% of the issued and outstanding capital stock of OpenEye on October 21, 2019.
+Added: Cost of hardware and other revenue as a percentage of hardware and other revenue was 78% for the nine months ended September 30, 2020 and 82% for the same period in the prior year.
+Added: Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 14% for the nine months ended September 30, 2020 and 15% for the same period in the prior year.
+Added: Cost of software license revenue as a percentage of software license revenue was 3% for each of the nine months ended September 30, 2020 and 2019.
+Added: The decrease in cost of hardware and other revenue as a percentage of hardware and other revenue for the nine months ended September 30, 2020, as compared to the same period in the prior year is a reflection of the mix of product sales during the periods.
Sales and Marketing Expense
Three Months Ended
−Removed: Change Six Months Ended
+Added: September 30, %
+Added: Change Nine Months Ended
+Added: September 30, %
2020 2019 2020 2019
1 unchanged sentence
% of total revenue 12 % 11 % 12 % 12 %
−Removed: Th e $1.3 million increase in sales and marketing expense for the three months ended June 30, 2020 as compared to the same period in the prior year was primarily due to increases in headcount for our sales team and our service provider partner support team to support our growth.
−Removed: As a result, our personnel and related costs for our Alarm.com segment, including salary, benefits, stock-based compensation and travel expenses, increased by $1.9 million for the three months ended June 30, 2020.
−Removed: Additionally, recruiting costs and costs for external consultants increased by $0.1 million for the three months ended June 30, 2020 for our Alarm.com segment as compared to the same period in the prior year.
−Removed: These increases were partially offset by a $0.8 million decrease in our marketing expense for our Alarm.com segment for the three months ended June 30, 2020 as compared to the same period in the prior year.
−Removed: Sales and marketing expense from our Other segment increased $0.1 million for
−Removed: the three months ended June 30, 2020 as compared to the same period in the prior year, primarily due to increases in headcount for our sales team.
−Removed: Th e $5.1 million increase in sales and marketing expense for the six months ended June 30, 2020 as compared to the same period in the prior year was primarily due to increases in headcount for our sales team and our service provider partner support team to support our growth.
−Removed: As a result, our personnel and related costs for our Alarm.com segment, including salary, benefits, stock-based compensation and travel expenses, increased by $5.5 million for the six months ended June 30, 2020.
−Removed: Additionally, recruiting costs and costs for external consultants increased by $0.2 million for the six months ended June 30, 2020 for our Alarm.com segment as compared to the same period in the prior year.
−Removed: These increases were partially offset by a $1.0 million decrease in our marketing expense for our Alarm.com segment for the six months ended June 30, 2020, as compared to the same period in the prior year.
−Removed: Sales and marketing expense from our Other segment increased $0.4 million for the six months ended June 30, 2020, as compared to the same period in the prior year, primarily due to increases in headcount for our sales team.
−Removed: The number of employees in sales and marketing functions increased from 337 as of June 30, 2019 to 441 as of June 30, 2020.
+Added: The $3.9 million increase in sales and marketing expense for the three months ended September 30, 2020 as compared to the same period in the prior year was primarily due to increases in headcount for our sales team and our service provider partner support team to support our growth.
+Added: As a result, our personnel and related costs for our Alarm.com segment, including salary, benefits, stock-based compensation and travel expenses, increased by $2.2 million for the three months ended September 30, 2020, net of decreased travel expenses of $1.2 million due to the COVID-19 pandemic.
+Added: Additionally, marketing costs increased by $1.2 million for the three months ended September 30, 2020 for our Alarm.com segment as compared to the same period in the prior year due to an increase in advertising.
+Added: Sales and marketing expense from our Other segment increased $0.4 million for the three months ended September 30, 2020 as compared to the same period in the prior year, primarily due to increases in headcount for our sales team.
+Added: The $9.0 million increase in sales and marketing expense for the nine months ended September 30, 2020 as compared to the same period in the prior year was primarily due to increases in headcount for our sales team and our service provider partner support team to support our growth.
+Added: As a result, our personnel and related costs for our Alarm.com segment, including salary, benefits, stock-based compensation and travel expenses, increased by $7.8 million for the nine months ended September 30, 2020, net of decreased travel expenses of $2.6 million due to the COVID-19 pandemic.
+Added: Additionally, costs for external consultants increased by $0.4 million for the nine months ended September 30, 2020 for our Alarm.com segment as compared to the same period in the prior year.
+Added: Sales and marketing expense from our Other segment increased $0.8 million for the nine months ended September 30, 2020, as compared to the same period in the prior year, primarily due to increases in headcount for our sales team.
+Added: The number of employees in sales and marketing functions increased from 340 as of September 30, 2019 to 450 as of September 30, 2020.
General and Administrative Expense
Three Months Ended
−Removed: Change Six Months Ended
+Added: September 30, %
+Added: Change Nine Months Ended
+Added: September 30, %
2020 2019 2020 2019
1 unchanged sentence
% of total revenue 11 % 15 % 12 % 14 %
−Removed: Th e $3.5 million increase in general and administrative expense for the three months ended June 30, 2020 as compared to the same period in the prior year was primarily due to the reversal of a $3.3 million reserve during the three months ended June 30, 2019 which did not occur during the three months ended June 30, 2020, for a promissory note with one of our hardware suppliers within our Alarm.com segment.
−Removed: Additionally, the increase in general and administrative expense was due to the $1.0 million increase in personnel and related costs for our Alarm.com segment due to an increase in employee headcount to support our operational growth and a $0.9 million increase in legal expenses within our Alarm.com segment resulting from intellectual property litigation during the three months ended June 30, 2020 which did not occur during the three months ended June 30, 2019.
−Removed: These increases were partially offset by a $1.7 million decrease to the contingent consideration liability from our acquisition of 85% of the issued and outstanding capital stock of OpenEye on October 21, 2019.
−Removed: T he $5.1 million increase in general and administrative expense for the six months ended June 30, 2020 as compared to the same period in the prior year was primarily due to the reversal of a $3.3 million reserve during the six months ended June 30, 2019 which did not occur during the three months ended June 30, 2020, for a promissory note with one of our hardware suppliers within our Alarm.com segment.
−Removed: Additionally, the increase in general and administrative expense was due to the $1.1 million increase in expense for external consultants for our Alarm.com segment and the $2.7 million increase in personnel and related costs for our Alarm.com segment due to an increase in employee headcount to support our operational growth.
−Removed: These increases were partially offset by a $1.7 million decrease to the contingent consideration liability from our acquisition of 85% of the issued and outstanding capital stock of OpenEye on October 21, 2019 and a $1.1 million decrease in legal expenses within our Alarm.com segment resulting from intellectual property litigation during the six months ended June 30, 2019 which did not occur during the six months ended June 30, 2020.
−Removed: General and administrative expenses from our Other segment increased $0.7 million for the six months ended June 30, 2020 as compared to the same period in the prior year primarily due to an increase in the provision for credit losses.
−Removed: The number of employees in general and administrative functions increased from 114 as of June 30, 2019 to 155 as of June 30, 2020.
+Added: The $1.3 million decrease in general and administrative expense for the three months ended September 30, 2020 as compared to the same period in the prior year was primarily due to a $2.2 million decrease in costs related to an offsite internal strategy and product roadmap conference in 2019 that did not take place in 2020 and a $1.1 million decrease in the provision for credit losses for our Alarm.com segment.
+Added: These decreases were partially offset by a $1.2 million increase in personnel and related costs and an $0.8 million increase in legal expenses within our Alarm.com segment resulting from intellectual property litigation during the three months ended September 30, 2020 which did not occur during the three months ended September 30, 2019.
+Added: Additionally, recruiting costs and costs for external consultants increased by $0.3 million for the three months ended September 30, 2020 for our Alarm.com segment as compared to the same period in the prior year.
+Added: General and administrative expenses from our Other segment decreased $0.4 million for the three months ended September 30, 2020 as compared to the same period in the prior year primarily due to an decrease in the provision for credit losses.
+Added: T he $3.8 million increase in general and administrative expense for the nine months ended September 30, 2020 as compared to the same period in the prior year was primarily due to a $3.9 million increase in personnel and related costs for our Alarm.com segment due to an increase in employee headcount to support our operational growth and the reversal of a $3.3 million reserve for a promissory note with one of our hardware suppliers within our Alarm.com segment during the nine months ended September 30, 2019 which did not occur during the nine months ended September 30, 2020.
+Added: Additionally, costs for external consultants increased by $1.3 million for the nine months ended September 30, 2020 for our Alarm.com segment as compared to the same period in the prior year.
+Added: These increases were partially offset by a $2.4 million decrease to the contingent consideration liability from our acquisition of 85% of the issued and outstanding capital stock of OpenEye on October 21, 2019 within our Alarm.com segment as well as a $2.2 million decrease in costs related to an offsite internal strategy and product roadmap conference incurred during the nine months ended September 30, 2019 which did not occur during the nine months ended September 30, 2020.
+Added: General and administrative expenses from our Other segment increased $0.3 million for the nine months ended September 30, 2020 as compared to the same period in the prior year primarily due to an increase in rent expense.
+Added: The number of employees in general and administrative functions increased from 121 as of September 30, 2019 to 161 as of September 30, 2020.
Research and Development Expense
Three Months Ended
−Removed: Change Six Months Ended
+Added: September 30, %
+Added: Change Nine Months Ended
+Added: September 30, %
2020 2019 2020 2019
1 unchanged sentence
% of total revenue 23 % 23 % 25 % 23 %
−Removed: T he $8.2 million increase in research and development expense for the three months ended June 30, 2020 as compared to the same period in the prior year was primarily due to an increase in headcount of employees in research and development functions.
−Removed: Our personnel and related costs for our Alarm.com segment increased by $7.0 million for the three months ended June 30, 2020 as compared to the same period in the prior year.
−Removed: Additionally, the increase in research and development expense is due to a $0.5 million increase in expenses for external consultants for the three months ended June 30, 2020, as compared to the same period in the prior year.
−Removed: Research and development expense from our Other segment increased $0.5 million for
−Removed: the three months ended June 30, 2020 as compared to the same period in the prior year, primarily due to personnel and related costs, including salary, benefits and stock-based compensation.
−Removed: The $21.5 million increase in research and development expense for the six months ended June 30, 2020 as compared to the same period in the prior year was primarily due to an increase in headcount of employees in research and development functions.
−Removed: Our personnel and related costs for our Alarm.com segment increased by $14.6 million for the six months ended June 30, 2020, as compared to the same period in the prior year and our expenses for external consultants increased by $1.0 million.
−Removed: Additionally, the increase in research and development expense is due to $4.4 million of in-process research and development we acquired in March 2020, which did not occur during the six months ended June 30, 2019.
−Removed: Research and development expense from our Other segment increased $0.9 million for the six months ended June 30, 2020 as compared to the same period in the prior year, primarily due to personnel and related costs, including salary, benefits and stock-based compensation.
−Removed: The number of employees in research and development functions increased from 554 as of June 30, 2019 to 721 as of June 30, 2020.
+Added: The $7.5 million increase in research and development expense for the three months ended September 30, 2020 as compared to the same period in the prior year was primarily due to an increase in headcount of employees in research and development functions.
+Added: Our personnel and related costs for our Alarm.com segment increased by $7.1 million for the three months ended September 30, 2020 as compared to the same period in the prior year.
+Added: Additionally, the increase in research and development expense is due to a $0.5 million increase in expenses for external consultants for the three months ended September 30, 2020, as compared to the same period in the prior year.
+Added: These increases for our Alarm.com segment were partially offset by a $1.0 million decrease in research and development expense due to in-process research and development we acquired during the three months ended September 30, 2019 that did not occur during the three months ended September 30, 2020.
+Added: Research and development expense from our Other segment increased $0.7 million for the three months ended
+Added: September 30, 2020 as compared to the same period in the prior year, primarily due to personnel and related costs, including salary, benefits and stock-based compensation.
+Added: The $28.9 million increase in research and development expense for the nine months ended September 30, 2020 as compared to the same period in the prior year was primarily due to an increase in headcount of employees in research and development functions.
+Added: Our personnel and related costs for our Alarm.com segment increased by $21.7 million for the nine months ended September 30, 2020, as compared to the same period in the prior year and our expenses for external consultants increased by $1.5 million.
+Added: Additionally, the increase in research and development expense is due to $4.4 million of in-process research and development we acquired during the nine months ended September 30, 2020, partially offset by the $1.0 million of in-process research and development we acquired during the nine months ended September 30, 2019.
+Added: Research and development expense from our Other segment increased $1.6 million for the nine months ended September 30, 2020 as compared to the same period in the prior year, primarily due to personnel and related costs, including salary, benefits and stock-based compensation.
+Added: The number of employees in research and development functions increased from 582 as of September 30, 2019 to 750 as of September 30, 2020.
Amortization and Depreciation
Three Months Ended
−Removed: Change Six Months Ended
+Added: September 30, %
+Added: Change Nine Months Ended
+Added: September 30, %
2020 2019 2020 2019
1 unchanged sentence
% of total revenue 4 % 4 % 5 % 5 %
−Removed: Amortization and d epreciation increased $1.6 million and $2.8 million for the three and six months ended June 30, 2020, respectively, as compared to the same periods in the prior year, primarily due to the intangible assets that were acquired in connection with the purchase of 85% of the issued and outstanding capital stock of OpenEye on October 21, 2019.
+Added: Amortization and depreciation increased $1.4 million and $4.2 million for the three and nine months ended September 30, 2020, respectively, as compared to the same periods in the prior year, primarily due to the intangible assets that were acquired in connection with the purchase of 85% of the issued and outstanding capital stock of OpenEye on October 21, 2019.
Interest Expense
Three Months Ended
−Removed: Change Six Months Ended
+Added: September 30, %
+Added: Change Nine Months Ended
+Added: September 30, %
2020 2019 2020 2019
1 unchanged sentence
% of total revenue — % (1) % — % (1) %
−Removed: Interest expense remained relatively consistent for the three and six months ended June 30, 2020, respectively, as compared to the same periods in the prior ye ar.
−Removed: The impact to interest expense for the decrease in the effective interest rate on the 2017 Facility resulting from decreases in the Eurodollar Base Rate, or LIBOR, was partially offset by an increase in the carrying value of the 2017 Facility due to the $50.0 million borrowed on March 25, 2020.
+Added: Interest expense decreased $0.2 million and $0.3 million for the three and nine months ended September 30, 2020, respectively, as compared to the same periods in the prior ye ar pri marily due to the decrease in the effective interest rate on the 2017 Facility resulting from decreases in the Eurodollar Base Rate, or LIBOR.
+Added: These decreases were partially offset by an increase in the carrying value of the 2017 Facility due to the $50.0 million borrowed on March 25, 2020.
Interest Income
Three Months Ended
−Removed: Change Six Months Ended
+Added: September 30, %
+Added: Change Nine Months Ended
+Added: September 30, %
2020 2019 2020 2019
1 unchanged sentence
% of total revenue — % 2 % — % 1 %
−Removed: Interest incom e decreased $0.6 million and $1.0 million for the three and six months ended June 30, 2020, respectively, as compared to the same periods in the prior year, primarily due to a decrease in interest income earned on our cash balance due to a decrease in interest rates as well as decrease in interest income earned on notes receivable .
+Added: Interest incom e decreased $2.6 million and $3.6 million for the three and nine months ended September 30, 2020, respectively, as compa red to the same periods in the prior year, primarily due to a decrease in interest income earned on our notes receivable with one of our hardware suppliers as well as a decrease in interest income earned on our cash balance due to a decrease in interest rates.
Other Income, Net
Three Months Ended
−Removed: Change Six Months Ended
+Added: September 30, %
+Added: Change Nine Months Ended
+Added: September 30, %
2020 2019 2020 2019
1 unchanged sentence
% of total revenue 16 % 5 % 6 % 2 %
−Removed: Other income , net remained relatively consistent for the three and six months ended June 30, 2020 as compared to the same periods in the prior year.
−Removed: (Benefit From) / Provision for Income Taxes
+Added: Other income , net increased $18.4 million for each of the three and nine months ended September 30, 2020 as compared to the same periods in the prior year.
+Added: The increase in other income, net is primarily due to recording a gain on the sale of an investment in one of our platform partners of $24.7 million within our Alarm.com segment during the three and nine months ended September 30, 2020 which did not occur during the same periods in the prior year as well a $0.6 million impairment of one of our investments recorded during the three and nine months ended September 30, 2019 which did not occur during the three and nine months ended September 30, 2020.
+Added: These increases in other income, net, were partially offset by the $6.9 million gain recorded during the three and nine months ended September 30, 2019 related to a promissory note with one of our hardware suppliers within our Alarm.com segment which did not occur during the three and nine months ended September 30, 2020.
+Added: Provision for Income Taxes
Three Months Ended
−Removed: Change Six Months Ended
+Added: September 30, %
+Added: Change Nine Months Ended
+Added: September 30, %
2020 2019 2020 2019
−Removed: (Benefit from) / provision for income taxes $ (2,277) $ 313 (827) % $ (1,075) $ 555 (294) %
+Added: Provision for income taxes $ 6,546 $ 2,873 128 % $ 5,471 $ 3,428 60 %
% of total revenue 4 % 2 % 2 % 1 %
−Removed: The provision for income taxe s decreased $2.6 million and $1.6 million for the three and six months ended June 30, 2020, respectively, as compared to the same periods in the prior year.
−Removed: Our effective tax rates were (15.9)% and (4.5)% for the three and six months ended June 30, 2020, respectively, as compared to 2.2% and 2.4% for the same periods in the prior year.
−Removed: The decrease in the provision for income taxes was primarily related to increases in research and development tax credits claimed for the three and six months ended June 30, 2020 as compared to the same periods in the prior year.
+Added: The provision for income taxes increased $3.7 million and $2.0 million for the three and nine months ended September 30, 2020, respectively, as compared to the same periods in the prior year.
+Added: Our effective tax rates were 15.4% and 8.2% for the three and nine months ended September 30, 2020, respectively, as compared to 14.0% and 7.8% for the same periods in the prior year.
+Added: The increase in the provision for income taxes was primarily du e to higher income before income taxes during the three and nine months ended September 30, 2020 as compared to the same periods in the prior year.
Segment Information
1 unchanged sentence
Alarm.com and Other.
−Removed: Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that contributed 94% of our revenue for each of the three and six months ended June 30, 2020, respectively, as compared to 93% for the same periods in the prior year.
+Added: Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that contributed 94% of our revenue for each of the three and nine months ended September 30, 2020, as compared to 94% and 93%, respectively, for the same periods in the prior year.
Our Other segment is focused on researching, developing and offering residential and commercial automation solutions and energy management products and services in adjacent markets.
The consolidated subsidiaries that make up our Other segment are in the investment stage and have incurred significant operating expenses relative to their revenue.
−Removed: Our Alarm.com segment increased from 925 employees as of June 30, 2019 to 1,218 employees as of June 30, 2020.
−Removed: Our Other segment increased from 80 employees as of June 30, 2019 to 99 employees as of June 30, 2020.
+Added: Our Alarm.com segment increased from 959 employees as of September 30, 2019 to 1,257 employees as of September 30, 2020.
+Added: Our Other segment increased from 84 employees as of September 30, 2019 to 104 employees as of September 30, 2020.
Inter-segment revenue includes sales of hardware between our segments.
1 unchanged sentence
Three Months Ended
+Added: September 30,
SaaS and license revenue Hardware and other revenue
6 unchanged sentences
Total $ 100,126 $ 58,725 $ 79,612 $ 84,924 $ 42,956 $ 68,162
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
SaaS and license revenue Hardware and other revenue
6 unchanged sentences
Total $ 287,780 $ 164,647 $ 241,342 $ 247,313 $ 114,562 $ 195,385
−Removed: Our SaaS and license revenue for the Alarm.com segment included software license revenue of $9.8 million and $19.5 million for the three and six months ended June 30, 2020, respectively, as compared to $11.0 million and $22.0 million for the same periods in the prior year.
−Removed: There was no software license revenue recorded for the Other segment during the three and six months ended June 30, 2020 and 2019.
+Added: Our SaaS and license revenue for the Alarm.com segment included software license revenue of $9.5 million and $29.0 million for the three and nine months ended September 30, 2020, respectively, as compared to $10.8 million and $32.8 million for the same periods in the prior year.
+Added: There was no software license revenue recorded for the Other segment during the three and nine months ended September 30, 2020 and 2019.
Critical Accounting Policies and Significant Judgments and Estimates
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The following table summarizes our cash and cash equivalents, accounts receivable, net and working capital, for the periods indicated (in thousands):
−Removed: June 30, 2020 December 31, 2019
+Added: September 30, 2020 December 31, 2019
Cash and cash equivalents $ 247,176 $ 119,629
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We define working capital as current assets minus current liabilities.
−Removed: Our cash and cash equivalents as of June 30, 2020 are available for working capital purposes.
+Added: Our cash and cash equivalents as of September 30, 2020 are available for working capital purposes.
We do not enter into investments for trading purposes, and our investment policy is to invest any excess cash in short term, highly liquid investments that limit the risk of principal loss;
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Liquidity and Capital Resources
−Removed: As of June 30, 2020, we had $205.8 million in cash and cash equivalents.
+Added: As of September 30, 2020, we had $247.2 million in cash and cash equivalents.
We consider all highly liquid instruments purchased with an original maturity from the date of purchase of three months or less to be cash equivalents.
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We believe our existing cash and cash equivalents, together with our 2017 Facility, and our future cash flows from operating activities will be sufficient to meet our anticipated operating cash needs f or at least the next 12 months.
−Removed: Over the final six months of fiscal year 2020, we expect our capital expenditure requirements to be approximately $6.5 million, primarily related to the continued build out of our leased office space as well as purchases of computer software and equipment.
+Added: Over the final three months of fiscal year 2020, we expect our capital expenditure requirements to be approximately $3.0 million, primarily related to the continued build out of our leased office space as well as purchases of computer software and equipment.
In 2013, we paid $3.5 million in cash to purchase 3,548,820 Series A convertible preferred shares from one of our platform partners.
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The other investor purchased shares of the platform partner’s Series 1 Preferred Stock.
−Removed: As a result of the purchase, our 3,548,820 shares of Series A convertible preferred shares converted into 3,548,820 shares of common stock.
−Removed: On July 31, 2020, the platform partner was sold to an unrelated third party and, as a result of the sale, we are entitled to receive total proceeds of $25.7 million in exchange for our shares of common stock, subject to a holdback of approximately $1.8 million and other adjustments as set forth in t he purchase agreement.
−Removed: Our future working capital and capital expenditure requirements will depe nd on many factors, including the impact of the COVID-19 pandemic on the economy and our operations, the rate of our revenue growth, the amount and timing of our investments in human resources and capital equipment, future acquisitions and investments, and the timing and extent of our
−Removed: introduction of new solutions and platform and solution enhancements.
+Added: As a result of the purchase, our 3,548,820 shares of Series A convertible pr eferred shares converted into 3,548,820 shares of common stock.
+Added: On July 31, 2020, the platform partner was acquired by an unrelated third party and, as a result of the sale, we received proceeds of $25.7 million in exchange for our shares of common stock.
+Added: Our future working capital and capital expenditure requirements will depend on many factors, including the impact of the COVID-19 pandemic on the economy and our operations, the rate of our revenue growth, the amount and timing of our investments in human resources and capital equipment, future acquisitions and investments, and the timing and extent of our introduction of new solutions and platform and solution enhancements.
As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs.
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We have the option to increase the borrowing capacity of the 2017 Facility to $175.0 million with the consent of the lenders.
−Removed: On March 25, 2020, we borrowed $50.0 million under the 2017 Facility as a precautionary measure in order to provide financial flexibility in light of current uncertainty in the financial markets resulting from the COVID-19 pandemic.
−Removed: As of June 30, 2020, $112.0 million was outstanding under the 2017 Facility, no letters of credit were outstanding and $13.0 million remained available for borrowing under the 2017 Facility.
−Removed: The 2017 Facility contains various financial and other covenants that require us to maintain a maxi mum consolidated leverage ratio and a fixed charge coverage ratio, and limit our capacity to incur other indebtedness, liens, make certain payments inc luding dividends, and enter into other transactions without approval of the lenders.
+Added: On March 25, 2020, we borrowed $50.0 million under the 2017 Facility as a precautionary measure in order to provide financial flexibility in light of current unc ertainty in the financial markets resulting from the COVID-19 pandemic.
+Added: As of September 30, 2020, $111.0 million was outstanding under the 2017 Facility, no letters of credit were outstanding and $14.0 million remained available for borrowing under the 2017 Facility.
+Added: The 2017 Facility contains various financial and other covenants that require us to maintain a maximum consolidated leverage ratio and a fixed charge coverage ratio, and limit our capacity to incur other indebtedness, liens, make certain payments inc luding dividends, and enter into other transactions without approval of the lenders.
The 2017 Facility is secured by substantially all of our assets, including our intellectual property.
−Removed: As of June 30, 2020, we were in compliance with all covenants under the 2017 Facility.
+Added: September 30, 2020 , we were in compliance with all covenants under the 2017 Facility.
Our outstanding amounts under the 2017 Facility are due at maturity in October 2022.
−Removed: The 2017 Facility is discussed in more detail below under “Debt Obligations.”
−Removed: We did not declare or pay dividends during the three and six months ended June 30, 2020 and 2019.
+Added: The 2017 Facility is di scussed in more detail below under “Debt Obligations.”
+Added: We did not declare or pay dividends during the three and nine months ended September 30, 2020 and 2019.
We cannot provide any assurance that we will declare or pay cash dividends on our common stock in the future.
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The following table sets forth our cash flows for the periods indicated (in thousands):
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
Cash flows from operating activities $ 66,670 $ 23,847
−Removed: Cash flows used in investing activities (9,306) (18,369)
+Added: Cash flows from / (used in) investing activities 12,236 (5,889)
Cash flows from financing activities 48,641 304
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Cash flows from operating activities have typically been generated from our net income and by changes in our operating assets and liabilities, particularly from accounts receivable and inventory, adjusted for non-cash expense items such as amortization and depreciation, deferred income taxes and stock-based compensation.
−Removed: For the six months ended June 30, 2020, cash flows from operating activities were $48.0 million, compared to $22.9 million for the same period in the prior year.
−Removed: This $25.1 million increase in cash flows from operating activities was due to a $12.0 million increase in cash from operating assets and liabilities, $10.7 million increase in non-cash and other reconciling items and a $2.4 million increase in net income.
−Removed: T he $12.0 million increase in cash from operating assets and liabilities was primarily due to differences in timing of payments of disbursements and collection of receipts, partially offset by a $15.3 million increase in the change in inventory resulting from additional purchased inventory during the six months ended June 30, 2020 that did not occur during the same period in the prior year, which is due in part to the impacts of the COVID-19 pandemic and the uncertainty surrounding the potential disruption to our supply chain.
−Removed: The $10.7 million increase in non-cash and other reconciling items was primarily due to a
−Removed: $3.8 million increase in stock-based compensation resulting from additional grants of stock options and restricted stock units during the six months ended June 30, 2020, $3.3 million cash paid to acquire in-process research and development in March 2020 that was reclassified and presented as cash flows used in investing activities and a $3.4 million increase in the provision for credit losses on accounts receivable and notes receivable.
−Removed: Additionally, the increase in non-cash and other reconciling items was due to a $2.8 million increase in amortization and depreciation expense primarily from intangible assets that were acquired in connection with the purchase of 85% of the issued and outstanding capital stock of OpenEye on October 21, 2019.
+Added: For the nine months ended September 30, 2020, cash flows from operating activities were $66.7 million, compared to $23.8 million for the same period in the prior year.
+Added: This $42.9 million increase in cash flows from operating activities was due to a $27.6 million increase in cash from operating assets and liabilities and a $20.5 million increase in net income, partially offset by a $5.2 million decrease in non-cash and other reconciling items.
+Added: The $27.6 million increase in cash from operating assets and liabilities was primarily due to differences in timing of payments of disbursements and collection of receipts totaling $37.2 million, due in part to the $28.0 million payment made during the nine months ended September 30, 2019 for the agreement reached to settle the legal matter alleging violations of the Telephone Consumer Protection Act that did not occur during the nine months ended September 30, 2020.
+Added: This increase in cash from operating assets and liabilities was partially offset by a $9.2 million change in inventory resulting from additional purchased inventory during the nine months ended September 30, 2020 that did not occur during the same period in the prior year, which is due in part to the impacts of the COVID-19 pandemic and the uncertainty surrounding the potential disruption to our supply chain.
+Added: The $5.2 million decrease in non-cash and other reconciling items was primarily due to a $24.7 million gain on the sale of an investment in one of our platform partners during the nine months ended September 30, 2020 that did not occur during the same period in the prior year, which was reclassified and presented as cash flows from investing activities.
+Added: This decrease in non-cash and other reconciling items was partially offset by a gain of $6.9 million related to a promissory note with one of our hardware suppliers recorded during the nine months ended September 30, 2019 that did not occur during the nine months ended September 30, 2020.
+Added: Additionally, the decrease in non-cash and other reconciling items was also partially offset by a $6.2 million increase in stock-based compensation resulting from additional grants of stock options and restricted stock units during the nine months ended September 30, 2020 and a $4.2 million increase in amortization and depreciation expense primarily from intangible assets that were acquired in connection with the purchase of 85% of the issued and outstanding capital stock of OpenEye on October 21, 2019.
Investing Activities
−Removed: Our investing activities typically include acquisitions, capital expenditures, notes receivable issued to companies with offerings complementary to ours and proceeds from the repayment of those notes receivable.
+Added: Our investing activities typically include acquisitions, capital expenditures, investments, notes receivable issued to companies with offerings complementary to ours and proceeds from the repayment of those notes receivable.
Our capital expenditures have primarily been for general business use, including leasehold improvements as we have expanded our office space to accommodate our growth in headcount, computer equipment used internally and expansion of our network operations centers.
−Removed: For the six months ended June 30, 2020, our cash flows used in investing activities was $9.3 million, as compared to $18.4 million for the same period in the prior year.
−Removed: The $9.1 million decrease in cash flows used in investing activities was primarily due to the $16.4 million paid in March 2019 to a acquire a secured promissory note as well additional funding provided to one of our hardware suppliers under convertible promissory notes during the six months ended June 30, 2019 that did not occur during the six months ended June 30, 2020.
−Removed: This decrease was partially offset by a $3.3 million increase in cash flows used in investing activities to acquire in-process research and development in March 2020 as well as a $5.4 million reduction in repayments of notes receivable during the six months ended June 30, 2020 as compared to the same period in the prior year.
+Added: For the nine months ended September 30, 2020, our cash flows from investing activities was $12.2 million, as compared to cash flows used in investing activities $5.9 million for the same period in the prior year.
+Added: The $18.1 million change in cash flows from investing activities was primarily due to $25.7 million in proceeds received from the sale of an investment in one of our platform partners during the nine months ended September 30, 2020, which did not occur during the nine months ended September 30, 2019, a payment of $22.4 million in 2019 to acquire a promissory note as well as $3.7 million of funding provided to one of our hardware suppliers that did not occur during the nine months ended September 30, 2020.
+Added: These increases in cash flows from investing activities were partially offset by $30.7 million received from one of our hardware suppliers for the amounts due under various promissory notes during the nine months ended September 30, 2019 that did not occur during the nine months ended September 30, 2020.
Financing Activities
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Cash used in financing activities typically includes repurchases of common stock and repayments of debt.
−Removed: For the six month s ended June 30, 2020, cash flows from financing activities was $47.5 million, compared to $0.3 million for the same period in the prior year.
−Removed: The $47.2 million increase in cash flows from financing activities was primarily due to the borrowing of $50.0 million under our 2017 Facility during the six months ended June 30, 2020 which was partially offset by our use of $5.1 million to purchase shares of treasury stock during the six months ended June 30, 2020 that did not occur during the same period in the prior year.
+Added: For the nine months ended September 30, 2020, cash flows from financing activities was $48.6 million, compared to $0.3 million for the same period in the prior year.
+Added: The $48.3 million increase in cash flows from financing activities was primarily due to the borrowing of $50.0 million under our 2017 Facility during the nine months ended September 30, 2020 which was partially offset by our use of $5.1 million to purchase shares of treasury stock during the nine months ended September 30, 2020 that did not occur during the same period in the prior year.
Contractual Obligations
−Removed: As of June 30, 2020, there were no material changes in our contractual obligations and commitments from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report, other than the $50.0 million borrowed under our 2017 Facility in March 2020 and the amendment to the lease for our corporate headquarters executed in March 2020, which includes maturities of lease liabilities as follows:
+Added: As of September 30, 2020, there were no material changes in our contractual obligations and commitments from those disclosed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report, other than the $50.0 million borrowed under our 2017 Facility in March 2020 and the amendment to the lease for our corporate headquarters executed in March 2020, which includes maturities of lease liabilities as follows:
$0.1 million in 2020, $0.6 million in 2021, $0.8 million in 2022, $0.7 million in 2023, $0.5 million in 2024 and $0.8 million in 2025 and beyond.
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On March 25, 2020, we borrowed $50.0 million under the 2017 Facility as a precautionary measure in order to provide financial flexibility in light of current uncertainty in the financial markets resulting from the COVID-19 pandemic.
−Removed: D uring the three and six months ended June 30, 2020, we repaid $1.0 million of the outstanding balance of the 2017 Facility.
−Removed: D uring the three and six months ended June 30, 2019, we repaid $1.0 million and $2.0 million of the outstanding balance of the 2017 Facility, respectively.
−Removed: The outstanding principal balance on the 2017 Facility accrues interest at a rate equal to, at our option, either (1) LIBOR, plus an applicable margin based on our consolidated leverage ratio, or (2) the highest of (a) the Wall Street Journal prime rate,
−Removed: (b) the Federal Funds rate plus 0.50%, or (c) LIBOR plus 1.00% plus an applicable margin based on our consolidated leverage ratio.
−Removed: For each of the three and six months ended June 30, 2020, we elected for the outstanding principal balance to accrue interest at LIBOR plus 1.50%, LIBOR plus 1.75%, LIBOR plus 2.00%, and LIBOR plus 2.50% when our consolidated leverage ratio is less than 1.00:1.00, greater than or equal to 1.00:1.00 but less than 2.00:1.00, greater than or equal to 2.00:1.00 but less than 3.00:1.00 and greater than or equal to 3.00:1.00, respectively.
+Added: During the three and nine months ended September 30, 2020, we repaid $1.0 million and $2.0 million of the outstanding balance of the 2017 Facility, respectively.
+Added: During the three and nine months ended September 30, 2019, we repaid $1.0 million and $3.0 million of the outstanding balance of the 2017 Facility, respectively.
+Added: The outstanding principal balance on the 2017 Facility accrues interest at a rate equal to, at our option, either (1) LIBOR, plus an applicable margin based on our consolidated leverage ratio, or (2) the highest of (a) the Wall Street Journal prime rate, (b) the Federal Funds rate plus 0.50%, or (c) LIBOR plus 1.00% plus an applicable margin based on our consolidated leverage ratio.
+Added: For each of the three and nine months ended September 30, 2020, we elected for the outstanding principal balance to accrue interest at LIBOR plus 1.50%, LIBOR plus 1.75%, LIBOR plus 2.00%, and LIBOR plus 2.50% when our consolidated leverage ratio is less than 1.00:1.00, greater than or equal to 1.00:1.00 but less than 2.00:1.00, greater than or equal to 2.00:1.00 but less than 3.00:1.00 and greater than or equal to 3.00:1.00, respectively.
The 2017 Facility also carries an unused line commitment fee of 0.20%.
−Removed: For the six months ended June 30, 2020, the effective interest rate on the 2017 Facility was 3.42%, as compared to 4.78% for the same period in the prior year.
−Removed: The carrying value of the 2017 Facility was $112.0 million and $63.0 million as of June 30, 2020 and December 31, 2019, respectively.
−Removed: The 2017 Facility includes a variable interest rate that approximates market rates and, as such, we classified the liability as Level 2 within the fair value hierarchy and determined that the carrying amount of the 2017 Facility approximated its fair value as of June 30, 2020 and December 31, 2019.
−Removed: The 2017 Facility contains various financial and other covenants that require us to maintain a maximum consolidated leverage ratio not to exceed 3.25:1.00 and a consolidated fixed charge coverage ratio of at least 1.25:1.00.
−Removed: As of June 30, 2020, we were in compliance with all financial and non-financial covenants and there were no events of default.
+Added: For the nine months ended September 30, 2020, the effective interest rate on the 2017 Facility was 2.92%, as compared to 4.61% for the same period in the prior year.
+Added: The carrying value of the 2017 Facility was $111.0 million and $63.0 million as of September 30, 2020 and December 31, 2019, respectively.
+Added: The 2017 Facility includes a variable interest rate that approximates market rates and, as such, we classified the liability as Level 2 within the fair value hierarchy and determined that the carrying amount of the 2017 Facility approximated its fair value as of September 30, 2020 and December 31, 2019.
+Added: The 2017 Facility contains various financial and other covenants that require us to maintain a maximum consolidated leverage ratio not to exceed 3.25:1.00 and a consolidated fixed
+Added: charge coverage ratio of at least 1.25:1.00.
+Added: As of September 30, 2020, we were in compliance with all financial and non-financial covenants and there were no events of default.
The 2017 Facility also contains customary conditions to borrowings and events of default and contains various negative covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness, incur encumbrances, make certain payments including dividends, make investments or engage in transactions with affiliates without approval of the lenders.
1 unchanged sentence
Non-GAAP Measures
−Removed: We define Adjusted EBITDA as our net income before interest expense, interest income, other income, net, (benefit from) / provision for income taxes, amortization and depreciation, stock-based compensation expense, secondary offering expense, acquisition-related (benefit) / expense and legal costs and settlement fees incurred in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation.
+Added: We define Adjusted EBITDA as our net income before interest expense, interest income, other income, net, provision for income taxes, amortization and depreciation, stock-based compensation expense, secondary offering expense, acquisition-related (benefit) / expense and legal costs and settlement fees incurred in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation.
We do not consider these items to be indicative of our core operating performance.
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Three Months Ended
−Removed: June 30, Six Months Ended
+Added: September 30, Nine Months Ended
+Added: September 30,
2020 2019 2020 2019
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Interest expense, interest income and other income, net (24,315) (8,368) (23,575) (8,463)
−Removed: (Benefit from) / provision for income taxes (2,277) 313 (1,075) 555
+Added: Provision for income taxes 6,546 2,873 5,471 3,428
Amortization and depreciation expense 6,878 5,467 20,023 15,833
6 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.