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Item 5. Market for Registrant’s Common Equity

2021-02-25 compared with 2020-02-26 · 10 added, 111 removed, 22 unchanged (85% of the section changed)

8 unchanged sentences

We currently anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and we do not anticipate paying cash dividends in the foreseeable future.

Additionally, our ability to pay dividends on our common stock is limited by restrictions under the terms of the agreements governing our 2017 Facility with Silicon Valley Bank, as amended, as further disclosed under " Sources of Liquidity " in Part II Item 7 .

Additionally, our ability to pay dividends on our common stock was limited by restrictions under the terms of the agreements governing our 2017 Facility with Silicon Valley Bank, as amended, as further disclosed under "Sources of Liquidity" in Part II Item 7.

"Management’s Discussion and Analysis of Financial Condition and Results of Operations." Payment of future cash dividends, if any, will be at the discretion of the board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of current or then-existing debt instruments and other factors the board of directors deems relevant.

1 unchanged sentence

This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act.

The following graph shows a comparison for the period June 26, 2015 (the date our common stock commenced trading on The Nasdaq Global Select Market) through December 31, 2019 of the cumulative total return for (i) our common stock, (ii) the Nasdaq Composite Index and (iii) Standard & Poor's 500 Index, or S&P 500 Index assuming an initial investment of $100 on June 26, 2015 and reinvestment of all dividends.

The following graph shows a comparison for the period from December 31, 2015 through December 31, 2020 of the cumulative total return for (i) our common stock, (ii) the Nasdaq Composite Index and (iii) Standard & Poor's 500 Index, or S&P 500 Index assuming an initial investment of $100 on the last trading day for the fiscal year ended December 31, 2015 and reinvestment of all dividends.

The returns in the graph are not intended to forecast or be indicative of possible future performance of our common stock.

June 26, 2015

December 31, 2015

December 31, 2016

December 31, 2017

December 31, 2018

December 31, 2019

Alarm.com Holdings, Inc.

Nasdaq Composite

Recent Sales of Unregistered Securities

In January 2021, we issued $500.0 million aggregate principal amount of 0% convertible senior notes due January 15, 2026, or the 2026 Notes, in a private offering pursuant to Rule 144A under the Securities Act.

The offer and sale of the 2026 Notes to the initial purchasers for the 2026 Notes was made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.

We relied on this exemption from registration based in part on representations made by the initial purchasers, including that such initial purchasers would only offer, sell or deliver the 2026 Notes to persons whom they reasonably believe to be qualified institutional buyers within the meaning of Rule 144A under the Securities Act.

For more information related to the 2026 Notes, see Note 22 to our consolidated financial statements included in this Annual Report on Form 10-K.

Use of Proceeds

1 unchanged sentence

The following table contains information relating to the repurchases of our common stock made by us in the quarter ended December 31, 2020:

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as a Part of a Publicly Announced Program (1)

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as a Part of a Publicly Announced Program (1)(2)

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program

2 unchanged sentences

December 1 to December 31, 2020 — — — 100,000,000

Total — $ — —

(1) On November 29, 2018, our board of directors authorized a stock repurchase program, under which we are authorized to purchase up to an aggregate of $75.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions, block trades, tender offers and by any combination of the foregoing, in accordance with federal securities laws, during the two-year period ending November 29, 2020.

SELECTED FINANCIAL DATA

The selected consolidated statements of operations data for the years ended December 31, 2019 , 2018 and 2017 and the selected consolidated balance sheet data as of December 31, 2019 and 2018 are derived from our audited consolidated financial statements included elsewhere in this Annual Report.

The selected consolidated statements of operations data for the years ended December 31, 2016 and 2015 and the selected consolidated balance sheet data as of December 31, 2017 , 2016 and 2015 are derived from our audited consolidated financial statements not included in this Annual Report.

Our historical results are not necessarily indicative of the results to be expected in the future.

The selected financial data should be read together with Item 7 .

" Management’s Discussion and Analysis of Financial Condition and Results of Operations " and in conjunction with our consolidated financial statements, related notes, and other financial information included elsewhere in this Annual Report.

The following tables set forth our selected consolidated financial and other data for the years ended and as of December 31, 2019 , 2018 , 2017 , 2016 and 2015 (in thousands, except share and per share data).

Information about prior period acquisitions that may affect the comparability of the selected financial information presented below is included in Item 1.

Information about the $28.0 million expense recorded in general and administrative expense in 2018, which relates to the agreement reached to settle the legal matter alleging violations of the Telephone Consumer Protection Act, or TCPA, and may affect the comparability of the selected financial information presented below, is disclosed in Item 3.

“Legal Proceedings.” Information about the $1.7 million of interest recorded within interest income and the $6.9 million of gain recorded within other income, net , in 2019, which relates to promissory note proceeds received from one of our hardware suppliers and proceeds from an acquired promissory note, and may affect the comparability of the selected financial information presented below, is disclosed in Item 7 .

" Management’s Discussion and Analysis of Financial Condition and Results of Operations ."

Certain previously reported amounts in the consolidated statements of operations for the years ended December 31, 2018, 2017, 2016 and 2015 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 .

Year Ended December 31,

Consolidated Statements of Operations Data:

SaaS and license revenue

Hardware and other revenue

Total revenue

Cost of revenue (1) :

Cost of SaaS and license revenue

Cost of hardware and other revenue

Total cost of revenue

Operating expenses:

Sales and marketing (2)

General and administrative (2)

Research and development (2)

Amortization and depreciation

Total operating expenses

Operating income

Interest expense

Interest income

Other income / (expense), net

Income before income taxes

Provision for / (benefit f rom) income taxes

Dividends paid to participating securities

Net loss attributable to redeemable noncontrolling interest

Net income allocated to participating securities

Net income / (loss) attributable to common stockholders

Year Ended December 31,

Per share information attributable to common stockholders:

Net income / (loss) per share:

Weighted average common shares outstanding:

Cash dividends declared per share

Year Ended December 31,

Other Financial and Operating Data:

SaaS and license revenue renewal rate (3)

Adjusted EBITDA (4)

As of December 31,

Balance sheet and other data:

Cash and cash equivalents

Working capital

Total long-term obligations

Total stockholders' equity

_____________________

(1) Excludes amortization and depreciation shown in operating expenses below.

(2) Includes stock-based compensation expense as follows:

Year Ended December 31,

Stock-based compensation expense data:

Sales and marketing

General and administrative

Research and development

Total stock-based compensation expense

(3) 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 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.

Our SaaS and license revenue renewal rate is expressed as an annualized percentage.

Our service provider partners, who resell our services to our subscribers, have indicated that they typically have three to five-year service contracts with our subscribers.

Our SaaS and license revenue renewal rate is calculated across our entire subscriber base on the Alarm.com platform, including subscribers whose contract with their service provider reached the end of its contractual term during the measurement period, as well as subscribers whose contract with their service provider has not reached the end of its contractual term during the measurement period, and is not intended to estimate the rate at which our subscribers renew their contracts with our service provider partners.

We believe that our SaaS and license revenue renewal rate allows us to measure our ability to retain and grow our SaaS and license revenue and serves as an indicator of the lifetime value of our subscriber base.

(4) We define Adjusted EBITDA as our net income before interest expense, interest income, other income, net , provision for / (benefit from) income taxes , amortization and depreciation expense, stock-based compensation expense, acquisition-related 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.

The non-cash items include amortization and depreciation expense and stock-based compensation expense.

Included in 2015 stock-based compensation expense is $0.8 million related to the repurchase of an employee's stock awards.

We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

Adjusted EBITDA is not a measure calculated in accordance with accounting principles generally accepted in the United States, or GAAP.

See the table below for a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.

We have included Adjusted EBITDA in this report because it is a key measure that our management uses to understand and evaluate our core operating performance and trends, to generate future operating plans, to make strategic decisions regarding the allocation of capital and to make investments in initiatives that are focused on cultivating new markets for our solutions.

We also use certain non-GAAP financial measures, including Adjusted EBITDA, as performance measures under our executive bonus plan.

Further, we believe the exclusion of certain expenses in calculating Adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related expense and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance.

Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP.

Some of these limitations are:

(a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

(b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

not reflect the potentially dilutive impact of equity-based compensation;

(d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;

and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

Because of these and other limitations, you should consider Adjusted EBITDA alongside our other GAAP-based financial performance measures, our net income and our other GAAP financial results.

The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure, for each of the periods indicated (in thousands).

Year Ended December 31,

Adjusted EBITDA:

Interest expense, interest income and other income, net

Provision for / (benefit f rom) income taxes

Amortization and depreciation expense

Stock-based compensation expense

Acquisition-related expense

Litigation expense

Total adjustments

Adjusted EBITDA

(2) On December 3, 2020, our board of directors authorized a stock repurchase program, under which we are authorized to purchase up to an aggregate of $100.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions, block trades, tender offers and by any combination of the foregoing, in accordance with federal securities laws, during the three-year period ending December 3, 2023.

[REMOVED AND RESERVED]

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 5. Market for Registrant’s Common Equity