What changed in this filing

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Item 1. Business

2021-02-25 compared with 2020-02-26 · 92 added, 45 removed, 402 unchanged (25% of the section changed)

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Our service provider partners are free to market and sell our products under their own guidelines at prices to the consumer that they establish independently.

We believe that our network of service providers and the length of our service relationships with residential and commercial property owners, combined with our robust SaaS platforms and approximately 20 years of operating experience, contribute to a compelling business model.

We believe that our network of service providers and the length of our service relationships with residential and commercial property owners, combined with our robust SaaS platforms and over 20 years of operating experience, contribute to a compelling business model.

We have experienced significant growth since our company's inception in 2000.

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We also generated net income attributable to common stockholders of $77.9 million, $53.5 million and $21.5 million in 2020, 2019 and 2018, respectively, as well as Adjusted EBITDA, a non-GAAP metric, of $125.3 million, $108.3 million and $93.1 million in 2020, 2019 and 2018, respectively.

See footnote 4 to the table contained in the section of this Annual Report titled " Selected Financial Data " for a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP.

See the Non-GAAP Measures section of Item 7.

"Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures," for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP, for the years ended December 31, 2020, 2019 and 2018.

Our Solutions and Integrated Platforms

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This market includes the residential and commercial property owners who subscribe to our services, the hardware partners who manufacture devices that integrate with our platforms and the service provider partners who install and maintain our solutions.

Our service provider partners can deploy our interactive security, video monitoring, intelligent automation, energy management and wellness solutions as stand-alone offerings or as combined solutions to address the needs of a broad range of customers.

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.

The Alarm.com platform enables our service provider partners to deploy our interactive security, video monitoring, intelligent automation, energy management and wellness solutions as stand-alone offerings or as combined solutions to address the needs of a broad range of customers.

Subscriber Solutions

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Our solution integrates with central stations used by our service providers to monitor 24 hours a day, seven days a week, and coordinate emergency response as needed.

Subscribers can use our services to control and monitor their security systems, as well as connected security devices including motion sensors, door locks, garage doors, thermostats and video cameras.

Subscribers can seamlessly connect to our services to control and monitor their security systems, as well as connected security devices including motion sensors, door locks, garage doors, thermostats and video cameras, 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.

The capabilities associated with this solution include:

◦ Alarm Transmission.

We transmit alarm signals from monitored properties through our platforms to over 1,000 third-party central monitoring stations staffed 24 hours a day, seven days a week with live operators ready to initiate emergency response.

We transmit alarm signals from monitored properties through our platforms to approximately 1,000 third-party central monitoring stations staffed 24 hours a day, seven days a week with live operators ready to initiate emergency response.

◦ Smart Signal.

Smart Signal is a mobile app feature that gives property owners a faster way to communicate critical information directly to their monitoring station.

With a single button push in the Alarm.com mobile app, users can verify an alarm to help expedite emergency response or quickly cancel a false alarm.

In addition, home or business owners who need emergency assistance can send a one-touch panic signal directly to their monitoring station.

◦ Connected Car.

Our new battery-powered, cellular Connected Car solution extends smart security beyond the home, enabling subscribers to track their vehicle's location, view engine status and analyze fuel efficiency from the Alarm.com mobile app.

Subscribers enjoy peace of mind with real-time driver safety alerts, diagnostic alerts and unexpected activity alerts.

Fully integrated with the Alarm.com platform, Connected Car provides smarter, more responsive alerts and more intelligent automation than standalone solutions.

◦ Always-On Monitoring.

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Notifications for any type of system event are delivered through push notifications, short message service, or SMS, or email, based on the subscriber's preference.

Flex IO is a versatile, completely wireless device that extends awareness across a property and to assets in any location.

The battery-powered device leverages LTE Category M capabilities to create new applications of our technology that existing hub-connected sensors cannot address.

Flex IO can easily install on a backyard gate, detached garage, remote storage unit, or it can be tethered to other assets like a boat, tractor or lawn mower.

Flex IO triggers activity notifications to subscribers as well as video recordings when activity is detected, or an asset is moved.

Our technology intelligently monitors quality of life through a suite of connected sensors and devices, and delivers proactive insights into activities of daily living.

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Subscribers can securely access live video feeds through the web and mobile apps at any time.

Smart Clip Capture .

Our video solutions can automatically record clips based on object or motion detection or system events, such as an alarm, a door opening or someone disarming the security panel.

◦ Video Doorbell:

Our next generation video doorbell uses proprietary video analytics that quickly and accurately detect outside visitors while reducing unwanted alerts, such as those caused by passing vehicle traffic or swaying branches.

A touch-free feature eliminates the need to physically press a doorbell button by immediately activating the doorbell chime when a visitor is detected standing in a designated “doorbell zone.”

◦ Secure Cloud Storage .

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Our commercial video surveillance offering provides leading commercial-grade network cameras to support a wide range of business needs, enabling multi-camera installations with continuous recording, cloud-based storage and mobile access.

Our commercial-grade stream video recorder offers a hybrid solution with local recording, cloud management and off-site storage of critical events and supports up to 16 cameras to give our service provider partners a highly competitive video service for supporting larger video installations in the small and medium sized business market.

Our OpenEye solution supports enterprise-level requirements such as advanced forensic video search, point of sale system integration and customer site mapping, as well as large-scale camera deployments.

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Managed at scale, these voluntary programs can significantly reduce costs for utilities.

In addition to enabling subscribers to participate in these programs through our energy management solution, our EnergyHub subsidiary aggregates a diverse set of smart thermostats, connected water heaters, batteries and electric vehicles, enabling utilities to leverage these devices as an enterprise-grade, grid resource through EnergyHub's SaaS platform.

In addition to enabling subscribers to participate in these programs through our energy management solution, our EnergyHub subsidiary

aggregates a diverse set of smart thermostats, connected water heaters, batteries and electric vehicles, enabling utilities to leverage these devices as an enterprise-grade, grid resource through EnergyHub's SaaS platform.

Commercial Solutions

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Quick notifications keep business owners in the know about individuals entering or exiting the back office, the supply room, or any other specific rooms or doors.

◦ Temperature Monitoring.

Our new temperature monitoring solution provides monitoring 24 hours a day, seven days a week, real-time alerts and historical temperature reporting to support the temperature control needs of restaurants, grocery stores, pharmacies and other single-system and multi-location commercial customers.

Business owners receive alerts for out-of-range temperatures so they can quickly prevent unsafe conditions, reduce spoilage and repair malfunctioning equipment.

◦ Multi-site Management and Access Control.

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Alarm.com’s solutions are cloud-based, so no additional IT resources are needed.

Our OpenEye enterprise commercial video management solution complements the Alarm.com for Business platform and extends our market to address the unique requirements of large commercial and national account customers such as universities, banks, national retail chains and property management companies.

universities, banks, national retail chains and property management companies.

OpenEye offers Video Surveillance as a Service, or VSaaS, as well as cameras, recorders and other peripherals designed for video applications.

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OpenEye’s user interface is optimized for guard or command stations and other settings where video from multiple cameras is viewed and searched simultaneously on secure workstations or video walls.

Shooter Detection Systems expands our capabilities in the overall small and midsize business and commercial markets, and specifically for large commercial and enterprise customers, by providing an indoor gunshot detection solution to help alert employees and the public against active shooter threats.

The solution uses a dual-mode detection technology that combines acoustic sensors with specialized infrared flash detectors, in tandem with fully proprietary gunshot detection software algorithms to maximize detection without driving false positives.

Service Provider Solutions

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These features help to increase accuracy of installations, decrease time spent on-site and reduce support calls and return visits, which saves subscribers and service providers money while increasing subscriber satisfaction.

▪ On-Site Wrap Up.

The On-Site Wrap Up feature within the MobileTech application helps technicians keep track of and record the tasks they are required to complete and empowers security providers who want a set of standard actions completed during customer visits.

On-Site Wrap Up helps Alarm.com’s service provider partners ensure that their field technicians deliver consistent, high-quality service that reduces support costs and customer attrition.

The On My Way feature within the MobileTech application modernizes the management of service appointments and customer expectations.

It uses technicians’ mobile devices to provide useful navigation to service and installation appointments, sends more accurate arrival time email notifications to customers and helps service providers gauge the efficiency of their workforce.

• Smart Gateway.

The Smart Gateway allows service provider partners to create a private and secure Wi-Fi network infrastructure specifically for a subscriber's property that is dedicated to Alarm.com video cameras.

It is designed to streamline camera installation and reduce common support issues caused by a subscriber's unmanaged Wi-Fi network, and to enable Alarm.com's service provider partners to more efficiently deploy video cameras and services with better connectivity and maximized wireless spectrum for performance.

is designed to streamline camera installation and reduce common support issues caused by a subscriber's unmanaged Wi-Fi network, and to enable Alarm.com's service provider partners to more efficiently deploy video cameras and services with better connectivity and maximized wireless spectrum for performance.

◦ Business Management.

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Business Intelligence provides key operational metrics related to account plan adoption, attrition and service quality to help service provider partners grow their business and improve customer retention.

Customer Relationship Management (CRM):

Our SecurityTrax offering enhances our platforms with a cloud-based CRM and enterprise resource planning solution.

Expressly developed for security service providers, SecurityTrax automates business processes across the entire customer lifecycle for more efficient customer management and support operations.

• Video Health Reports:

Video Health Reports give Alarm.com’s service provider partners and their commercial video customers a monthly snapshot of the condition of video cameras and stream video recorders.

System summaries and device-by-device information provide awareness of potential issues to ensure continuous, uninterrupted video coverage, reduce maintenance and support calls, and eliminate the need for manual checks by the customer.

◦ Sales, Marketing & Training.

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We have developed a highly scalable data analytics engine to deliver unique features and capabilities based on insights derived from this growing set of data.

For example, learning detailed activity patterns in a property enables our platforms to proactively alert the subscriber about unexpected events.

For example, learning detailed activity patterns in a property enables our

platforms to proactively alert the subscriber about unexpected events.

Our platforms continue to learn and adapt to become more personalized over time.

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Device hardware is deeply integrated into our platforms to provide a more cohesive experience than stand-alone products deliver.

For example, in 2019, we launched:

Smart Gateway, a private and secure Wi-Fi network infrastructure;

an HVAC monitoring service and the integration of a range of new security control panels.

For example, in 2020, we released Flex IO, a versatile, completely wireless device that extends awareness across a property and to assets in any location by leveraging LTE Category M capabilities to create new applications of our technology that existing hub-connected sensors cannot address.

Our platforms also support various broadly adopted communications protocols commonly used in many automation devices, including Z-Wave, Wi-Fi and cellular.

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◦ Continue to invest in our platforms.

As a pioneer in connected home and business solutions, we have made significant investments in building our platforms over the last 20 years.

As a pioneer in connected home and business solutions, we have made significant investments in building our platforms for over 20 years.

We intend to continue to invest heavily to add additional innovative offerings and broaden our suite of solutions.

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We are investing in international expansion because we believe there is a significant global market opportunity for our products and services.

Today, our products are currently localized and available in approximately 40 countries outside of North America, including Australia, Belgium, Brazil, Chile, Columbia, Iceland, Ireland, Netherlands, New Zealand, Norway, South Africa, Sweden and Turkey.

Today, our products are currently localized and available in over 40 countries outside of North America, including Argentina, Australia, Belgium, Brazil, Chile, Colombia, Iceland, Ireland, Netherlands, New Zealand, Norway, Switzerland and Turkey.

We intend to continue to grow our number of international subscribers by strengthening our presence in existing markets and expanding to additional markets.

Expand into the small and medium business market segment.

◦ Expand into the commercial market segment.

We believe there is significant opportunity to expand our products and services to small and medium businesses, ranging from single-site to multi-location enterprises.

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We believe there is an opportunity to significantly increase the adoption of our solutions as more residential and commercial property owners adopt intelligently connected property solutions and as the major technology trends of mobile access, the IoT, big data and cloud technology continue to create opportunities to connect people with their properties in new ways.

According to research data published by IHS Markit in 2019, the global installed base for smart home devices reached 684 million in 2018 and will exceed 4 billion in 2023.

During this period, IHS Markit also forecasts strong growth for professional service provider channels as consumers look toward more services and a do-it-for-me approach, compared with purely do-it-yourself.

We believe that the trends highlight a significant opportunity for market participants, including Alarm.com and our service provider partners.

According to research data published by Strategy Analytics in 2020, the global installed base for smart home devices will grow at a 24.5% compound annual growth rate from 2020 to 2025.

We believe that this trend highlights a significant opportunity for market participants, including Alarm.com and our service provider partners.

Our Technology

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• The management of message transmissions to our cloud platforms for further processing.

A versatile, completely wireless device that extends awareness across a property and to assets in any location.

It can easily install on a backyard gate, detached garage, remote storage unit, or it can be tethered to other assets like a boat, tractor or lawn mower, and triggers activity notifications to subscribers as well as video recordings when activity is detected, or an asset is moved.

◦ Image Sensor .

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The MobileTech app assists in proper wiring and installation and Remote Toolkit enables remote access to the thermostat settings for easy troubleshooting and support.

◦ Smart Water Valve + Meter.

Our Smart Water Valve + Meter is an innovative addition to the Alarm.com Water Management solution, identifying low and high-volume water leaks and constantly monitoring overall water use and current usage rates in homes and businesses.

Deep integration with the Alarm.com platform leverages intelligence and insights to help reduce the risk of losses from water emergencies, while also improving water conservation efforts.

Research and Development

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Our research and development of new products and services is a multidisciplinary effort across our product management, program management, software engineering, device engineering, quality engineering, configuration management and network operations teams.

As of December 31, 2019 , we had 621 employees engaged in research and development functions.

Service Provider Network

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We also believe that the combination of our solutions and our service provider partners’ expertise is the most effective way to drive mass market adoption of the intelligently connected property.

The traditional security and home automation market is highly fragmented with approximately 15,000 security dealers nationally.

The traditional security and home automation market is highly fragmented with approximately 15,000 security service providers nationally.

According to the February 2020 Barnes Buchanan Conference Report, the top 5 dealers represented approximately 34% of all industry recurring monthly revenue in 2020.

The distribution of revenue among our service provider partners is reflective of the industry overall.

Monitronics International, Inc., rebranded and now doing business as Brinks Home Security, represented greater than 10% but not more than 15% of our revenue in 2017.

ADT LLC represented greater than 15% but not more than 20% of our revenue in 2018, 2019 and 2020.

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We believe our sales and marketing approach enables us to expand our breadth of service providers, provide highly customized services and scale quickly.

As of December 31, 2019 , we had 391 employees engaged in sales and marketing functions.

Service Provider Support

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We expect competition to continue from existing competitors as well as potential new market entrants in the interactive security, video monitoring, intelligent automation and energy management markets.

Our current competitors include providers of other technology platforms for the connected property with interactive security, including Alula (formed following the merger of ipDatatel, LLC and Resolution Products, LLC), Avigilon Corporation, Brivo Inc., Digital Monitoring Products Inc., Eagle Eye Networks Inc., Honeywell International Inc., Resideo Technologies Inc., Telular Corporation (acquired by AMETEK, Inc.), SecureNet Technologies, LLC, United Technologies Corporation, and Verkada Inc., which sell solutions to service providers, cable operators, technology retailers and other residential and commercial automation providers.

We also compete with interactive, monitored security solutions sold directly to subscribers by firms like Scout and SimpliSafe.

and Comcast, and providers of point products, including Google Inc.'s Nest Labs, Inc.

which offers the Nest Secure security system as well as a smart thermostat, the Nest Protect smart smoke detector and video cameras.

Our current competitors include providers of other technology platforms for the connected property with interactive security, including Alula (formed following the merger of ipDatatel, LLC and Resolution Products, LLC), Avigilon Corporation, Brivo Inc., Digital Monitoring Products Inc., Eagle Eye Networks Inc., Honeywell International Inc., Resideo Technologies Inc., SecureNet Technologies, LLC, Telular Corporation (acquired by AMETEK, Inc.), United Technologies Corporation, and Verkada Inc., which sell solutions to service providers, cable operators, technology retailers and other residential and commercial automation providers.

We also compete with interactive, monitored security solutions sold directly to subscribers and may also be sold through our partners, including companies like Abode Systems, Inc., Arlo Technologies, Inc., Cove Smart, LLC, Scout Security, Inc.

and SimpliSafe, Inc.

In addition, our service provider partners compete with security solutions sold directly to subscribers, as well as managed service providers, such as cable television, telephone and broadband companies like AT&T Inc., Comcast Cable Communications, LLC and Rogers Communications, Inc., and providers of point products, including Google Inc.'s Nest Labs, Inc.

Amazon.com offers Amazon Home Services security packages with bundled equipment and professional installation, and Amazon Key, a security camera and smart lock integration feature.

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Arlo Technologies, Inc.

and Wyze Labs, Inc.

offers connected video cameras, a connected video doorbell, and smart security devices.

offers a feature that allows some manufacturers’ connected devices and accessories to be controlled through its HomeKit service available in Apple’s iOS operating system.

offers a feature that allows some manufacturers’ connected devices and accessories, including video cameras and doorbells, to be controlled through its HomeKit service available in Apple’s iOS operating system.

Additionally, Canary and other companies offer all in one video monitoring and awareness devices.

In addition, we may compete with other large technology companies that offer control capabilities among their products, applications and services, and have ongoing development efforts to address the broader connected home market.

In addition, we may compete

with other large and small technology companies that offer control capabilities among their products, applications and services, and have ongoing development efforts to address the broader connected home market.

Many of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing, distribution and other resources than we have.

We expect to encounter new competitors as we enter new markets as well as increased competition, both domestically and internationally, from other established and emerging residential and commercial security monitoring, video monitoring and automation, wellness, and energy management companies as well as large technology companies.

We expect to encounter new competitors as we enter new markets as well as increased competition, both domestically and internationally, from other established and emerging home automation, security monitoring, video monitoring and automation, wellness, and energy management companies as well as large technology companies.

In addition, there may be new technologies that are introduced that reduce demand for our solutions or make them obsolete.

Our current and potential competitors may also establish cooperative relationships among themselves or with third parties and rapidly acquire significant market share, or they may acquire third-party technology or solution providers that we partner with and choose not to offer those solutions on our platforms.

Our current and potential competitors may also establish cooperative relationships among themselves or with third parties and rapidly acquire significant market share.

Increased competition could also result in price reductions and loss of market share, any of which could result in lower revenue and negatively affect our ability to grow our business.

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To accomplish these objectives, we rely on a combination of patent, trademark, copyright and trade secret laws in the United States and other jurisdictions, as well as license agreements, confidentiality agreements and other contractual protections.

As of December 31, 2019 , we owned 265 issued United States utility patents, one issued United States design patent, seven issued Canadian patents and three issued Australian patents and these patents are scheduled to expire between 2021 and 2038.

As of December 31, 2020, we owned 423 issued United States utility patents, one issued United States design patent, eight issued Canadian patents and five issued Australian patents and these patents are scheduled to expire between 2021 and 2039.

We continue to broaden our intellectual property portfolio and file patent applications and as of December 31, 2020, we had 261 pending utility patent applications and 44 provisional patent applications filed in the United States.

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We have brought infringement claims against third parties in the past and may do so in the future to defend our intellectual property position.

In addition, from time to time, we may face claims by third parties that we infringe upon or misappropriate their intellectual property rights, and we may be found to be infringing upon or to have misappropriated such rights.

In addition, from time to time, we

may face claims by third parties that we infringe upon or misappropriate their intellectual property rights, and we may be found to be infringing upon or to have misappropriated such rights.

In the future, we, or our service providers or subscribers, may be the subject of legal proceedings alleging that our solutions or underlying technology infringe or violate the intellectual property rights of others.

As of December 31, 2019 , we had 1,160 full-time employees.

Our Human Capital Resources

As of December 31, 2020, we had 1,404 full-time employees, including 461 in sales and marketing, 780 in research and development and 163 in a general and administrative capacity.

As of December 31, 2020, we had 1,290 employees in our Alarm.com segment and 114 employees in our Other segment.

We also engage consultants and temporary employees from time to time.

None of our employees are covered by collective bargaining agreements and we consider our relations with our employees to be good.

We recognize that attracting, motivating and retaining talent at all levels is critical to continuing our success.

By improving employee retention and engagement, we also improve our ability to support our service provider partners and protect the long-term interests of our stockholders.

We invest in our employees through high-quality benefits and various health and wellness initiatives and offer competitive compensation packages, ensuring fairness in internal compensation practices.

To further engage and incentivize our workforce, we offer a wide range of programs and avenues for support, motivation, and professional recognition.

We utilize both instructor-led training and online learning to provide custom training courses to ensure our sales and services teams stay up-to-date on our products and service offerings.

For our talent pipeline development, we work closely with individual departments to provide training and hands-on support for managers and leaders, to assess talent, identify development opportunities and discuss succession planning.

In addition, we regularly conduct employee surveys to gauge employee engagement and identify areas of focus.

Government Regulations

Our business, operations and service provider partners are subject to various U.S.

federal, state and local consumer protection laws, licensing regulation and other laws and regulations, and to similar laws and regulations in the other countries in which we operate.

Compliance with these laws, rules, and regulations has not had a material effect upon our capital expenditures, results of operations or competitive position.

Nevertheless, compliance with existing or future governmental regulations, including, but not limited to, those pertaining to global trade, business acquisitions, consumer protection, and taxes, could have a material impact on our business in subsequent periods.

Refer to “Item 1A.

Risk Factors” for a discussion of these potential impacts.

Corporate Information

We were founded in 2000 as a business unit within MicroStrategy Incorporated.

We were incorporated in 2003 under the name Alarm.com Incorporated as a majority-owned subsidiary of MicroStrategy.

MicroStrategy sold all its interests in Alarm.com Incorporated in 2009 and we established Alarm.com Holdings, Inc.

in connection with the sale transaction.

Our principal executive offices are located at 8281 Greensboro Drive, Suite 100, Tysons, Virginia 22102.

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OpenEye provides cloud-managed video surveillance solutions for the enterprise commercial market.

In September 2019, we acquired certain assets from an unrelated third party.

In March of 2020, we acquired certain additional assets from two separate unrelated parties.

Substantially all of the assets acquired in September 2019 and March 2020 consisted of in-process research and development, or IPR&D.

We believe the acquisitions of the IPR&D will further our commitment to make significant investments in innovative research and development in the intelligently connected property market to broaden our suite of solutions as well as strengthen our smart intercom capability.

On December 14, 2020, we acquired 100% of the issued and outstanding ownership interest units of Shooter Detection Systems, LLC , or SDS.

SDS is a provider of an indoor gunshot detection solution that helps alert employees and the public against active shooter threats.

Available Information

Our website is located at www.alarm.com and our investor relations website is located at http://investors.alarm.com.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available free of charge on our investor relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC.

Act, are available free of charge on our investor relations website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or the SEC.

The SEC maintains an internet site that contains reports, proxy and information statements and other information.

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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.

What changed 10-K

Item 1. Business