What changed in this filing

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Item 1A. Risk Factors

2021-05-04 compared with 2020-11-05 · 202 added, 129 removed, 733 unchanged (31% of the section changed)

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Any of the following risks could have a material adverse effect on our business, financial condition, results of operations and prospects and cause the trading price of our common stock to decline.

Summary of Risks Affecting Our Business

The following summary highlights some of the risks you should consider with respect to our business and prospects.

This summary is not complete and the risks included in the summary below are not the only risks we face.

You should review and consider carefully the risks and uncertainties described later in this “Risk Factors” section, which includes a more complete discussion of the risks summarized below as well as a discussion of other risks related to our business and an investment in our common stock, as well as our other public filings with the SEC.

Any of the following risks could have a material adverse effect on our business, financial condition, results of operations and prospects and cause the trading price of our common stock to decline:

• Our quarterly results of operations have fluctuated and are likely to continue to fluctuate and may be negatively affected by the COVID-19 pandemic, the precautions we have taken in response to the pandemic, the disruption to global supply chains and any negative general economic conditions.

• Our actual operating results may differ significantly from any guidance provided.

If our actual results of operations fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.

• We may not sustain our growth rate and we may not be able to manage any future growth effectively.

• We sell security and life safety solutions and if these solutions fail for any reason, we could be subject to liability and our business, reputation and results of operations could suffer.

• Failure to maintain the security of our information and technology networks, including information relating to our service provider partners, subscribers and employees, could expose us to liability and adversely affect us.

• The markets in which we participate are highly competitive and many companies, including large technology companies, broadband and security service providers and other managed service providers, are actively targeting the home automation, security monitoring, video monitoring and energy management markets.

• We rely on our service provider network to acquire additional subscribers, and the inability of our service providers to attract additional subscribers or retain their current subscribers could adversely affect our operating results.

• We receive a substantial portion of our revenue from a limited number of service provider partners, and the loss of, or a significant reduction in, orders from one or more of our major service provider partners would result in decreased revenue and profitability.

• We have relatively limited visibility regarding the consumers that ultimately purchase our solutions, and we often rely on information from third-party service providers to help us manage our business.

We operate in an evolving connected home market.

If the connected property market does not grow as we expect or if a significant number of our target consumers choose to adopt point products that control discrete functions rather than our connected property solutions, we may not be able to achieve sustained growth or our business may decline.

• We benefit from integration of our solutions with third-party platform providers.

If developers of third-party platform providers choose not to partner with us, or are acquired by our competitors, our integrated solutions platform, business and results of operations may be harmed.

• Our strategy includes pursuing acquisitions, and our potential inability to successfully consummate acquisitions or integrate newly-acquired technologies, assets or businesses may harm our financial results.

• If we are unable to adapt to technological change, including maintaining compatibility with a wide range of devices, as well as changes in access to wireless networks through which we provide our wireless alarm, notification and intelligent automation services, our ability to remain competitive could be impaired and we may need to incur significant capital expenditures to update our technology.

• We operate in a regulated industry and our business, operations and service provider partners are subject to various foreign, U.S.

federal, state and local laws and regulations, including relating to consumer protection, licensing, Internet and data privacy, tax, tariff, import/export restrictions or other trade barriers.

Failure to comply with applicable laws and regulations could harm our business and we may incur significant expenditures related to compliance efforts.

• We are involved from time to time in legal proceedings where a negative outcome could result in a material adverse effect on our business, financial condition, cash flows and results of operations.

• An assertion by a third party that we are infringing its intellectual property could subject us to costly and time-consuming litigation or expensive licenses that could harm our business and results of operations.

Risks Related to Our Business and Industry

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These emergency measures remain in place to varying degrees.

While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, it has and may continue to disrupt our hardware supply chain as well as cause disruptions to and restrictions on our service providers’ ability to travel and to meet with residential and commercial property owners who use our solutions, cancellations or postponement of certain events, or temporary closures of our facilities or the facilities of our service providers or suppliers.

The COVID-19 pandemic has also resulted in significant disruption of global financial markets, which may reduce our ability to access capital and which could negatively affect our liquidity in the future.

While vaccines have been approved for use in the United States and in many other countries, supplies of the vaccine remain limited and it remains difficult to assess or predict the ultimate duration and economic impact of the COVID-19 pandemic.

To date, the COVID-19 pandemic has, and it may continue to, disrupt our hardware supply chain, including limited inventory availability, increased lead times, and shipping delays, as well as cause disruptions to and restrictions on our service providers’ ability to travel and to meet with residential and commercial property owners who use our solutions, cancellations or postponement of certain events, or temporary closures of our facilities or the facilities of our service providers or suppliers.

Further, given global supply chain shortages, our service providers may be unable to source other hardware required for installation, such as security control panels and related peripherals, which could result in reduced demand for our products and services.

See “We depend on our suppliers, and the loss of any key supplier could materially and adversely affect our business, financial condition, cash flows and results of operations” below.

The COVID-19 pandemic has also resulted in significant volatility in global financial markets, which may reduce our ability to access capital and which could negatively affect our liquidity in the future.

This economic and financial uncertainty may also negatively impact pricing for our platform or cause customers to reduce or postpone purchasing our solutions, which may, in turn, negatively affect our revenue, cash flows, results of operations and financial condition.

The increased uncertainty and disruption to global markets may also negatively impact our growth opportunities whether organically or through acquisitions.

The increased uncertainty and volatility in global markets may also negatively impact our growth opportunities whether organically or through acquisitions.

Because our service provider partners have indicated that they typically have three to five-year service contracts with residential and commercial property owners who use our solutions, any such adverse effects may not be fully reflected in our results of operation until future periods.

The uncertainty caused by and the unprecedented nature of the current COVID-19 pandemic make the potential impact of the pandemic difficult to predict and the extent to which it may negatively aff ect our industry, our supply of hardware products, our business operations or our operating results is uncertain.

Weak global economic conditions, additional business disruptions or closures and spikes or surges in COVID-19 infection, also may exacerbate th e impact of the pandemic.

The uncertainty caused by and the unprecedented nature of the current COVID-19 pandemic makes the potential impact of the pandemic difficult to predict and the extent to which it may negatively affect our industry, our supply of hardware products, our business operations or our operating results is uncertain.

Weak global economic conditions, additional business disruptions or closures and spikes or surges in COVID-19 infection, also may exacerbate the impact of the pandemic.

Further, we do not yet know the full effects of the COVID-19 pandemic on our suppliers and service providers.

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.

The ultimate impact to our results will depend to a large extent on currently unknowable developments, including the length of time the disruption and uncertainty caused by COVID-19 will continue, which will, in turn, depend on, among other things, the actions taken by authorities and other entities to contain COVID-19 or treat its impact, including the impact of any re-opening plans, additional closures and spikes or surges in COVID-19 infection, and individuals’ and companies’ risk tolerance regarding health matters going forward, all of which are beyond our control.

These potential impacts, while uncertain, could harm our business and adversely affect our operating results.

However, if the economy fails to fully recover or there are additional shutdowns of non-essential businesses due to a resurgence of COVID-19, our SaaS and license revenue growth rate may be lower in future periods, with a corresponding reduction in hardware revenue, if some consumers or small businesses defer or cancel previously anticipated purchases.

The ultimate impact to our results will depend to a large extent on currently unknowable developments, including the length of time the disruption and uncertainty caused by COVID-19 will continue, which will, in turn, depend on, among other things, the actions taken by authorities and other entities to effect a widespread roll-out of the available vaccines or otherwise contain COVID-19 or treat its impact, including the impact of any re-opening plans, additional closures and spikes or surges in COVID-19 infection, the emergence and severity of any COVID-19 variants and individuals’ and companies’ risk tolerance regarding health matters going forward, all of which are beyond our control.

Accordingly, these potential impacts, while uncertain, could harm our business and adversely affect our operating results.

In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described in this “Risk Factors” section which may materially and adversely affect our business and results of operations.

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Accordingly, any guidance with respect to our projected financial performance is necessarily only an estimate of what management believes is realizable as of the date the guidance is given.

Actual results will vary from the guidance and the

variations may be material.

Actual results will vary from the guidance and the variations may be material.

Investors should also recognize that the reliability of any forecasted financial data will diminish the farther in the future that the data is forecasted.

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We have taken certain precautions due to the COVID-19 pandemic that could harm our business.

In light of the uncertain and rapidly evolving situation relating to the spread of COVID-19 and shelter-in-place orders in many of the locations we have offices or other facilities, we have taken temporary precautionary measures intended to help minimize the risk of COVID-19 to our em ployees, service providers and su bscribers, as well as the communities in which we participate.

In light of the uncertain and rapidly evolving situation relating to the spread of COVID-19 and shelter-in-place orders in many of the locations we have offices or other facilities, we have taken temporary precautionary measures intended to help minimize the risk of COVID-19 to our employees, service providers and subscribers, as well as the communities in which we participate.

These precautionary measures could negatively impact our business.

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• our ability to increase, retain and incentivize the service provider partners that market, sell, install and support our platforms and solutions;

• the ability of our hardware vendors to continue to manufacture high-quality products and to supply sufficient products to meet our demands;

• the ability of our hardware vendors to continue to manufacture high-quality products and to supply sufficient components and products to meet our demands;

• the timing and success of introductions of new solutions, products or upgrades by us or our competitors and the entrance of new competitors;

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• competition, including entry into the industry by new competitors and new offerings by existing competitors;

• issues related to introductions of new or improved products such as shortages of prior generation products or short-term decreased demand for next generation products;

• issues related to introductions of new or improved products such as supply chain disruptions or shortages of prior generation products or short-term decreased demand for next generation products;

• perceived or actual problems with the security, privacy, integrity, reliability, quality or compatibility of our solutions, including those related to security breaches in our systems, our subscribers’ systems, unscheduled downtime, or outages;

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• changes in the payment terms for our platforms and solutions;

• collectibility of receivables due from service provider partners and other third parties;

• collectability of receivables due from service provider partners and other third parties;

• the strength of regional, national and global economies;

• the impact of natural disasters such as earthquakes, hurricanes, fires, power outages, floods, epidemics, pandemics, including COVID-19, and other catastrophic events or man-made problems such as terrorism or global or regional economic, political and social conditions.

Fluctuations in our quarterly operating results may be particularly pronounced in the current economic environment due to the uncertainty caused by and the unprecedented nature of th e current COVID-19 pandemic.

Due to the foregoing factors and the other risks discussed in this Quarterly Report on Form 10-Q, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance.

You should not consider our recent revenue and Adjusted EBITDA growth or results of one quarter as indicative of our future performance.

S ee the Non-GAAP Measures section of Item 2.

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

See the Non-GAAP Measures section of Item 2.

"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 comparable GAAP measurement, for the three months ended March 31, 2021 and 2020.

Downturns in general economic and market conditions and reductions in spending may reduce demand for our platforms and solutions, which could harm our revenue, results of operations and cash flows.

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We sell security and life safety solutions, which are designed to secure the safety of our subscribers and their residences or commercial properties.

If these solutions fail for any reason, including due to defects in our software, a carrier outage, a failure of our network operations centers, a failure on the part of one of our service provider partners or user error, which have happened from time to time, we could be subject to liability for such failures and our business could suffer.

If these solutions fail for any reason, including due to defects in our software, a carrier outage, a failure of our network operations centers, a failure on the part of one of our service provider partners or user error, some of which have happened from time to time, we could be subject to liability for such failures and our business could suffer.

Our platforms and solutions may contain undetected defects in the software, infrastructure, third-party components or processes.

In addition, due to the COVID-19 pandemic, we have enabled substantially all of our employees to work remotely which may make us more vulnerable to cyber-attacks and may create operational or other challenges, any of which could harm

our systems or our business.

Although we have taken precautionary measures to prepare for these threats and challenges, there is no guarantee that our precautions will fully protect our systems.

We continue to monitor the situation and may adjust our current policies as more information and guidance become available.

We continue to monitor the situation and may adjust our

current policies as more information and guidance become available.

If our platforms or solutions suffer from defects, we could experience harm to our branded reputation, claims by our subscribers or service provider partners or lost revenue during the period required to address the cause of the defects.

We may find defects in new, acquired or upgraded solutions, resulting in loss of, or delay in, market acceptance of our platforms and solutions, which could harm our business, financial condition, cash flows or results of operations.

We have found and may find defects in new, acquired or upgraded solutions, resulting in loss of, or delay in, market acceptance of our platforms and solutions, which could harm our business, financial condition, cash flows or results of operations.

Since solutions that enable our platforms are installed by our service provider partners, if they do not install or maintain such solutions correctly, our platforms and solutions may not function properly.

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A significant natural disaster, such as an earthquake, hurricane, fire, flood, or a public health pandemic, such as COVID-19, or a significant power outage could harm our business, financial condition, cash flows and results of operations.

The impact of climate change may increase these risks due to changes in weather patterns, such as increases in storm intensity, sea-level rise, melting of permafrost and temperature extremes in areas where we conduct our business.

Natural disasters could affect our hardware vendors, our wireless carriers or our network operations centers.

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In addition, terrorist acts or acts of war could cause disruptions in our business or the business of our hardware vendors, service providers, subscribers or the economy as a whole.

More generally, these geopolitical, social and economic conditions could result in increased volatility in worldwide financial markets and economies that could harm our sales.

More generally, these and other geopolitical, social and economic conditions could result in increased volatility in worldwide financial markets and economies that could harm our sales.

Given our concentration of sales during the second and third quarters, any disruption in the business of our hardware vendors, service provider partners or subscribers that impacts sales during the second or third quarter of each year could have a greater impact on our annual results.

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We have experienced significant growth and also have substantially expanded our operations in a short period of time.

Our revenue increased from $261.1 million in 2016 to $502.4 million in 2019 and increased from $361.9 million for the nine months ended September 30, 2019 to $452.4 million for the nine months ended September 30, 2020.

Our revenue increased from $338.9 million in 2017 to $618.0 million in 2020 and increased from $151.9 million for the three months ended March 31, 2020 to $172.5 million for the three months ended March 31, 2021.

We do not expect to achieve similar growth rates in future periods.

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If we fail to manage the expansion of our operations and infrastructure effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.

We increased our number of full-time employees from 607 as of December 31, 2016 to 1,361 as of September 30, 2020.

We increased our number of full-time employees from 784 as of December 31, 2017 to 1,414 as of March 31, 2021.

Our growth has placed, and may continue to place, a significant strain on our managerial, administrative, operational, financial and other resources.

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From time to time, we are involved in legal proceedings where a negative outcome, including an adverse litigation judgment or settlement, could expose us to monetary damages or limit our ability to operate our business, resulting in a material adverse effect on our business, financial condition, cash flows and results of operations.

We are involved and have been involved in the past in legal proceedings from time to time.

We are involved and have been involved in the past in legal proceedings from time to time, including claims directly against us or claims against certain of our service provider partners where we have agreed to indemnify those service provider partners.

For example, on June 2, 2015, Vivint filed a lawsuit against us alleging that our technology directly and indirectly infringes six patents purchased by Vivint.

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EcoFactor is seeking permanent injunctions, enhanced damages and attorney's fees.

On July 13, 2016, Applied Capital, Inc., or Applied Capital, filed a lawsuit against ADT, alleging that ADT’s sales of ADT Pulse directly and indirectly infringe two patents purchased by Applied Capital.

Applied Capital is seeking damages and attorney’s fees.

We are indemnifying ADT in this matter.

See the section of this Quarterly Report titled "Legal Proceedings" for additional information regarding each of these matters and the other legal proceedings we are involved in.

We may not be able to accurately assess the risks related to any of these suits, and we m ay be unable to accurately assess our level of exposure as the results of any litigation, investigations and other legal proceedings are inherently unpredictable and expensive.

We may not be able to accurately assess the risks related to any of these suits, and we may be unable to accurately assess our level of exposure as the results of any litigation, investigations and other legal proceedings are inherently unpredictable and expensive.

Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, damage our reputation, require significant amounts of management time and divert significant resource.

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The FTC and the Federal Communications Commission have issued regulations that place restrictions on, among other things, unsolicited automated telephone calls to residential and wireless telephone subscribers by means of automatic telephone dialing systems and the use of prerecorded or artificial voice messages.

If our service provider partners were to take actions in violation of these

regulations, such as telemarketing to individuals on the "Do Not Call" registry or using automatic telephone dialing systems and prerecorded or artificial voice messages, we could be subject to fines, penalties, private actions or enforcement actions by government regulators.

If our service provider partners were to take actions in violation of these regulations, such as telemarketing to individuals on the "Do Not Call" registry or using automatic telephone dialing systems and prerecorded or artificial voice messages, we could be subject to fines, penalties, private actions or enforcement actions by government regulators.

Although we have taken steps to insulate ourselves from any such wrongful conduct by our service provider partners, and to contractually require our service provider partners to comply with these laws and regulations, we have in the past incurred costs to settle alleged violations of the Telephone Consumer Protection Act, or TCPA, and no assurance can be given that we will not be exposed to future liability as result of our service provider partners’ conduct.

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states could place restrictions on how we and our service provider partners use personal information and market to consumers in those states.

Other laws and regulations, including consumer protection laws, laws and regulations governing advertising and sales practices, as well as privacy and data security laws and regulations apply in the other countries in which we operate.

See “Evolving government and industry regulation and changes in applicable laws relating to the Internet and data privacy may increase our expenditures related to compliance efforts or otherwise limit the solutions we can offer, which may harm our business and adversely affect our financial condition” below.

Changes in laws or regulations could require us to change the way we operate, which could increase costs or otherwise disrupt operations.

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In addition, while the COVID-19 pandemic continues, consumers may prefer to purchase products that they can install themselves.

If there are continuing restrictions on our service providers’ ability to meet with residential and commercial property owners in person, our ability to compete will depend on our ability to make our products available for remote installation or to make certain of our products easily installable by consumers rather than solely by our service providers.

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.

If there are continuing restrictions on our service providers’

ability to meet with residential and commercial property owners in person, our ability to compete will depend on our ability to make our products available for remote installation or to make certain of our products easily installable by consumers rather than solely by our service providers.

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.

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federal and state authorities, foreign data privacy authorities in the European Union, or the EU, Canada, and other countries, and/or private claims by companies or individuals.

If a malfunction or

security breach results in a wider or sustained disruption, it could have a material adverse effect on our reputation, business, financial condition, cash flows or results of operations.

If a malfunction or security breach results in a wider or sustained disruption, it could have a material adverse effect on our reputation, business, financial condition, cash flows or results of operations.

Failure to maintain the security of our information and technology networks, including information relating to our service provider partners, subscribers and employees, could adversely affect us.

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Substantially all of our revenue is generated through the sales of our platforms and solutions by our service provider partners, who incorporate our solutions in certain of the products and packages they sell to their customers, and our service provider partners are responsible for subscriber acquisition, as well as providing customer service and technical support for our platforms and solutions to the subscribers.

We provide our service provider partners with specific training and programs to assist them in selling and providing support for our platforms and solutions, but we cannot assure that these steps will be effective.

In addition, we rely on our service provider partners to sell our platforms and solutions into new markets in the intelligent and connected property space.

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Recruiting and retaining qualified service provider partners and training them in our technology and solutions requires significant time and resources and has been made more challenging by the shelter-in-place orders and travel restrictions which were, and may from time to time be, implemented in many locations to combat the COVID-19 pandemic, which orders and restrictions to varying degrees remain in place.

If we fail to maintain existing service provider partners or develop relationships with new service provider partners, our revenue and operating results would be adversely affected.

If we fail to maintain our relationships with existing service provider partners or develop relationships with new service provider partners, our revenue and operating results would be adversely affected.

In addition, to execute on our strategy to expand our sales internationally, we must develop, manage and grow relationships with service provider partners that sell into these markets.

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Therefore, we receive less revenue on a per customer basis from Vivint compared to our SaaS subscriber base, which may result in a lower revenue growth rate.

Similarly, we recently entered into a patent license agreement with ADT pursuant to which we granted a license to use certain Alarm.com intellectual property following the termination or expiration of the initial term of our master service agreement with ADT.

Under the terms of the license, beginning in 2023, ADT will pay us a monthly royalty for each subscriber to its branded residential interactive security, automation and video service offerings that is covered by any of our licensed patents and not supported on our platforms.

We must also work to expand our network of service provider partners to ensure that we have sufficient geographic coverage and technical expertise to address new markets and technologies.

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While we have developed a network of over 10,000 service provider partners to sell, install and support our platforms and solutions, we receive a substantial portion of our revenue from a limited number of channel partners and significant customers.

During the years ended December 31, 2019, 2018 and 2017, our 10 largest revenue service provider partners accounted for 52%, 57% and 60% of our revenue.

ADT LLC represented greater than 15% but not more than 20% of our revenue in 2017, 2018 and 2019.

ADT LLC also represented more than 10% of accounts receivable as of December 31, 2019.

Brinks Home Security, along with certain of its domestic subsidiaries, filed voluntary petitions for relief, as well as a joint partial prepackaged plan of reorganization, or the Plan, with the United States Bankruptcy Court for the Southern District of

Texas as of June 30, 2019.

We were listed as an unsecured creditor with an unimpaired trade claim in the Plan.

On September 3, 2019, Brinks Home Security disclosed it had emerged from the bankruptcy proceedings after completing a reorganization and obtaining new debt financing.

We expect to continue to receive payments in the ordinary course of business;

however, if Brinks Home Security is unable to meet its payment obligations to us, our revenue and profitability may be adversely affected.

During the years ended December 31, 2020, 2019 and 2018, our 10 largest revenue service provider partners accounted for 48%, 52% and 57% of our revenue, respectively.

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

ADT also represented more than 10% of accounts receivable as of December 31, 2020.

We recently amended our master service agreement with ADT, or MSA, to extend the initial term through January 1, 2023 and to provide for the integration of certain third party products into the ADT Command and Control software platform which we operate.

In connection with the amendment to the MSA, we agreed to provide ADT a license to use certain Alarm.com intellectual property following the termination or expiration of the initial term of the MSA for which ADT will pay us a monthly royalty for each subscriber to its ADT branded residential interactive security, automation and video service offerings that is covered by any of our licensed patents and not enabled by one of our software platforms.

We cannot assure you that we will be able to meet the conditions set forth in the amended agreement.

If our MSA with ADT expires or terminates, we would continue to generate revenue from each subscriber that is already installed on one of our platforms for the life of that subscriber account but the number of such subscribers would likely decline over time.

While we would generate revenue from ADT subscribers not on our platform using service offerings covered by any of our licensed patents from the per subscriber royalty fee charged to ADT under the patent license, these monthly fees will be less on a per subscriber basis than fees we receive from our SaaS solutions.

In addition, even if ADT continues to use other services that we offer, we cannot assure you that the revenue from ADT or new accounts added by ADT will reach or exceed historical levels in any future period.

We may not be able to offset any unanticipated decline in revenue from ADT with revenues from new customers or other existing customers.

Any negative developments in ADT’s business, or any significant decrease in revenue from or loss of ADT as a customer could materially and adversely harm our business, financial condition, cash flows and results of operations.

We anticipate that we will continue to be dependent upon a limited number of service provider partners for a significant portion of our revenue for the foreseeable future and, in some cases, a portion of our revenue attributable to individual service provider partners may increase in the future.

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In March 2017, we acquired certain assets related to the Connect business unit of Icontrol Networks, Inc., or Icontrol, and all of the outstanding equity interests of the two subsidiaries through which Icontrol conducted its Piper business, which we refer to in this report as the Acquisition.

Historically, ADT LLC, or ADT, has accounted for substantially all of the revenue of the Connect business unit.

Historically, ADT has accounted for, and continues to account for, substantially all of the revenue of the Connect business unit.

In connection with the Acquisition we amended our master service agreement with ADT to cover services provided with respect to the non-hosted software platform, or Software platform.

We recently further amended the master service agreement, or MSA, to extend the initial term through January 1, 2023, to provide for the integration of certain third party products into the ADT Command and Control software platform which we operate and to provide ADT a license to use certain Alarm.com intellectual property following the termination or expiration of the initial term of the MSA pursuant to which ADT will pay us a monthly royalty for each subscriber to its ADT branded residential interactive security, automation and video service offerings that is covered by any of our licensed patents and not enabled by one of our software platforms.

We cannot assure you that we will be able to meet the conditions set forth in the amended agreement or that ADT will use the Software platform or other services we offer for its new customers or keep existing customers on the Software platform.

In addition, even if ADT continues to use the Software platform or other services that we offer, we cannot assure you that the revenue from ADT or new accounts added by ADT will reach or exceed historical levels in any future period.

We may not be able to offset any unanticipated decline in revenue from ADT with revenues from new customers or other existing customers.

We cannot assure you that ADT will use the Software platform for its new customers or keep existing customers on the Software platform.

In addition, even if ADT continues to use the Software platform, we cannot assure you that the revenue from ADT or new accounts added by ADT will reach or exceed historical levels of revenue for the Connect business unit in any future period.

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If we do not receive consumer information on a timely or accurate basis, or if we do not properly interpret this information, our ability to quickly react to market changes and effectively manage our business may be harmed.

Consumers may choose to adopt point products that provide control of discrete functions rather than adopting our connected property platforms.

Consumers may choose to adopt point products that provide control of discrete functions rather than adopting our connected property solutions.

If we are unable to increase market awareness of the benefits of our unified solutions, our revenue may not continue to grow, or it may decline.

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As a result, we may not be able to accurately predict future trends in renewals and the resulting churn.

Subscribers may choose not to renew their contracts

for many reasons, including the belief that our service is not required for their needs or is otherwise not cost-effective, a desire to reduce discretionary spending, or a belief that our competitors’ services provide better value.

Subscribers may choose not to renew their contracts for many reasons, including the belief that our service is not required for their needs or is otherwise not cost-effective, a desire to reduce discretionary spending, or a belief that our competitors’ services provide better value.

Additionally, our subscribers may not renew for reasons entirely out of our control, such as moving a residence or the dissolution of their business, which is particularly common for small to mid-sized businesses.

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Further, if third-party solution providers that we partner with or that we would benefit from partnering with are acquired by our competitors, they may choose not to offer their solutions on our platforms, which could adversely affect our business, financial condition, cash flows and results of operations.

We rely on wireless carriers to provide access to wireless networks through which we provide our wireless alarm, notification and intelligent automation services, and any interruption of such access and any significant costs related to such interruption could materially and adversely impact our business, financial condition, cash flows, results of operation and reputation.

We rely on wireless carriers to provide access to wireless networks for machine-to-machine data transmissions, which are an integral part of our services.

Our wireless carriers may suspend wireless service to expand, maintain or improve their networks, or may discontinue or sunset older wireless networks as new technology evolves.

For example, certain cellular carriers have announced their intention to shut down their 3G and CDMA wireless networks by the end of 2022 which may require our subscribers to upgrade to alternative and potentially more expensive, technologies.

For example, certain cellular carriers have announced their intention to shut down their 3G and CDMA wireless networks in 2022 which may require our subscribers to upgrade to alternative and potentially more expensive technologies.

See “The technology we employ may become obsolete, and we may need to incur significant capital expenditures to update our technology” below.

Any suspension or other interruption of services would adversely affect our ability to provide our services to our service provider partners and subscribers and may adversely affect our reputation.

In addition, the inability to provide uninterrupted services, maintain our existing contracts with our wireless carriers or enter into new contracts with such wireless carriers could have a material adverse effect on our business, financial condition, cash flows and results of operations.

Further, wireless carriers from time to time suffer service outages which range from local to national in scale during which security control panels may be unable to transmit life safety signals to emergency responders.

Any such wireless carrier service disruptions could materially and adversely impact our ability to provide services to our service provider partners and subscribers and result in significant costs, which could

materially and adversely impact our business, results of operations and reputation.

In addition, product changes by wireless carriers, price increases or changes to existing contract terms or termination of our agreements could also have a material and adverse impact on our business, financial condition, cash flows and results of operations.

If we are unable to adapt to technological change, including maintaining compatibility with a wide range of devices, our ability to remain competitive could be impaired.

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For example, certain cellular carriers have announced their intention to shut down their 3G and CDMA wireless networks by the end of 2022.

We intend to work with our service providers to develop a transition plan over the next three years to convert or upgrade the equipment of end user accounts reliant upon 3G or CDMA networks, and we expect to incur incremental costs over the next three years related to the planned 3G and CDMA network shutdown.

We intend to work with our service providers to develop a transition plan over the next three years to convert or upgrade the equipment of end user accounts reliant upon 3G or CDMA networks, and we expect to incur incremental costs over the next two years related to the planned 3G and CDMA network shutdown.

If our service providers are not able to convert or upgrade the equipment of their customers who are currently using 3G or CDMA network technology, then those accounts may be terminated with us when such networks are no longer available.

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We depend on our suppliers, and the loss of any key supplier could materially and adversely affect our business, financial condition, cash flows and results of operations.

Our hardware products depend on the quality of components that we procure from third-party suppliers.

Our hardware products depend on the availability and quality of components that we procure from third-party suppliers.

Reliance on suppliers, as well as industry supply conditions, generally involves several risks, including the possibility of defective parts, which can adversely affect the reliability and reputation of our platforms and solutions, and a shortage of components and reduced control over delivery schedules and increases in component costs, which can adversely affect our profitability.

These supply chain risks are heightened in the current environment where evolving travel restrictions and shelter-in-place orders due to the COVID-19 pandemic have and may continue to adversely affect production of and the timing of delivery of components.

We have several large hardware suppliers from which we procure hardware on a purchase order basis, including one supplier that supplied products and components, which generated 16% of our hardware and other revenue for the nine months ended September 30, 2020.

If these suppliers are unable to continue to provide a timely and reliable supply, we could experience interruptions in delivery of our platforms and solutions to our service provider partners, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.

If we were required to find alternative sources of supply, qualification of alternative suppliers and the establishment of reliable supplies could result in delays and a possible loss of sales, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.

These supply chain risks are heightened in the current environment where continuing travel restrictions and shelter-in-place orders as well as limitations on factory capacity and delays in shipping times due to the COVID-19 pandemic have and may continue to adversely affect production of and the timing of delivery of components.

Shortages of essential components of our products or significantly increased lead times for obtaining such components may lead to delays in our production, and we may be unable to fulfill orders for our hardware products on a timely basis or at all.

Even if we are able to procure components from alternative sources, we may be required to pay more for them, which could adversely affect our profitability.

We are working with our suppliers to secure components and materials to account for longer lead times and limited availability, but we cannot assure you that our efforts will be successful or that demand for our hardware products will continue at the same level.

In addition, global transportation disruptions have led to slower shipping times generally, while reductions in passenger air travel have also led to reduced capacity and increased costs for air freight shipments, which may continue to adversely affect the timing and cost of delivery of components, materials and products.

Any of these disruptions to our inventory and supply chain could have a material adverse effect on our business, financial condition, cash flows and results of operations.

We have several large hardware suppliers from which we procure hardware on a purchase order basis, including one supplier that supplied products and components which generated 14% of our hardware and other revenue for the three months ended March 31, 2021.

From time to time we provide advance payments or loans to our vendors to, for example, secure procurement of long lead time parts or to provide bridge financing to ensure continuity of operations.

We provided such advance payments and loan financing that was repaid in 2019 to one of our key hardware suppliers, whose products generated between 15% and 25% of our hardware and other revenue over the last twelve months.

See Note 8 to our condense d consolidated financial statements for more information regarding this matter.

required to find alternative sources of supply, qualification of alternative suppliers and the establishment of reliable supplies could result in delays and a possible loss of sales, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.

Growth of our business will depend on market awareness and a strong brand, and any failure to develop, maintain, protect and enhance our brand would hurt our ability to retain or attract subscribers.

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If the connected property market does not grow as we expect, or if we cannot expand our platforms and solutions to meet the demands of this market, our revenue may decline, fail to grow or fail to grow at an accelerated rate, and we may incur operating losses.

The market for solutions that bring objects and systems not typically connected to the Internet, such as home automation, security monitoring, video monitoring, energy management and wellness solutions, into an Internet-like structure is in an early stage of development, and it is uncertain how rapidly or how consistently this market will develop and the degree to which our platforms and solutions will be accepted into the markets in which we operate.

The market for solutions that bring objects and systems not typically connected to the Internet, such as home automation, security monitoring, video monitoring, energy management and wellness solutions, into an Internet-like structure is still developing, and it is uncertain how rapidly or how consistently this market will continue to develop and the degree to which our platforms and solutions will be accepted into the markets in which we operate.

Some consumers may be reluctant or unwilling to use our platforms and solutions for a number of reasons, including satisfaction with traditional solutions, concerns about additional costs, concerns about data privacy and lack of awareness of the benefits of our platforms and solutions.

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Risks of liability from our operations are significant.

The nature of the solutions we provide, including our interactive security solutions, potentially exposes us to greater risks of liability for data privacy and security, employee acts or omissions, or technology or system failure than may be inherent in other businesses.

The nature of the solutions we provide, including our interactive security solutions, and new technologies we may acquire, such as in our recent acquisition of Shooter Detection Systems, LLC, potentially exposes us to greater risks of liability for data privacy and security, employee acts or omissions, or technology or system failure than may be inherent in other businesses.

Substantially all of our service provider partner agreements contain provisions limiting our liability to service provider partners and our subscribers in an attempt to reduce this risk.

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We believe part of our growth will continue to be driven by acquisitions of other companies or their technologies, assets and businesses.

On March 8, 2017, we acquired Icontrol's Connect and Piper business units, and on October 21, 2019, we acquired 85% of the issued and outstanding shares of capital stock of PC Open Incorporated, doing business as OpenEye.

We have acquired other businesses in the past.

For example, on October 21, 2019, we acquired 85% of the issued and outstanding shares of capital stock of PC Open Incorporated, doing business as OpenEye, and on December 14, 2020, we acquired Shooter Detection Systems, LLC.

We hav e acquired other businesses in the past.

For example, we acquired the assets of HiValley Technology Inc.

in March 2015, and we acquired certain assets of ObjectVideo, Inc.

in January 2017.

in March 2015, assets of ObjectVideo, Inc.

in January 2017 and Icontrol's Connect and Piper business units in March 2017.

These acquisitions and any other acquisitions we may complete in the future will give rise to certain risks, including:

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The CCPA governs the collection, sale and use of California residents’ personal information, and significantly impacts businesses’ handling of personal information and privacy policies and procedures.

The CCPA, as well as data privacy laws that have been proposed in other states, may limit our ability to use, process and store certain data, which may decrease adoption of our platforms and solutions, affect our relationships with service provider partners and our suppliers, increase our costs for compliance, and harm our business, financial condition, cash flows and results of operations.

Specifically, the CCPA may subject us to regulatory fines by the State of California, individual claims, and increased commercial liabilities.

In addition, the California Privacy Rights Act of 2020, or CPRA, has received enough signatures to qualify as a November 2020 ballot initiative in California.

If the CPRA is approved by California voters, the CPRA would, among other things, amend the CCPA by creating additional privacy rights for California consumers and additional obligations on businesses, which could

subject us to additional compliance costs as well as potential fines, individual claims and commercial liabilities.

If approved, it is expected that the CPRA would take effect on January 1, 2023, and enforcement would begin on July 1, 2023.

The CCPA, as well as data privacy laws that have been adopted or proposed in other states, may limit our ability to use, process and store certain data, which may decrease adoption of our platforms and solutions, affect our relationships with service provider partners and our suppliers, increase our costs for compliance, and harm our business, financial condition, cash flows and results of operations.

Specifically, the CCPA may subject us to regulatory fines by the State of California, individual claims, class actions, and increased commercial liabilities.

In addition, the California Privacy Rights Act of 2020, or CPRA, was approved by California voters and will be effective as of January 1, 2023.

The CPRA will, among other things, amend the CCPA by creating additional privacy rights for California consumers and additional obligations on businesses, which could subject us to additional compliance costs as well as potential fines, individual claims, class actions and commercial liabilities.

European data protection laws, including the General Data Protection Regulation, or GDPR, generally restrict the transfer of personal data from Europe, including the European Economic Area, or EEA, UK and Switzerland, to the United States and most other countries unless the parties to the transfer have implemented specific safeguards to protect the transferred personal data.

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We have historically relied on both the EU-U.S.

Privacy Shield and SCCs for transferring personal data from the EEA, and as a result of the CJEU ruling, we will need to transition any data transfers covered under the EU-U.S.

Privacy Shield to be covered under SCCs or rely on another data transfer mechanism.

Our transition from the EU-U.S.

Privacy Shield for certain data transfers to relying on the use of SCCs for applicable data transfers or implementing another valid data transfer mechanism may slow down our contracting process and increase our legal and compliance costs (including an increase in exposure to substantial fines under EEA data protection laws as well as injunctions against processing or transferring personal data from the EEA), which could adversely affect our cash flows and financial condition.

Privacy Shield and SCCs for transferring personal data from the EEA, and as a result of the CJEU ruling, we are transitioning any data transfers covered under the EU-U.S.

Privacy Shield to be covered under SCCs.

In November 2020, the European Commission released a draft version of revised SCCs.

After receiving public comments, the European Commission is currently working to adopt a final version of the revised SCCs.

Once final, we will have one year to implement the revised SCCs with all of our customers from the EEA.

Moreover, we will need to determine whether UK regulators will also require us to adopt the revised SCCs with our customers in the UK.

Our transition from relying on the EU-U.S.

Privacy Shield to relying on the SCCs for certain data transfers, future requirements to implement new versions of the SCCs or potential requirements to implement another valid data transfer mechanism may slow down our contracting process and increase our legal and compliance costs (including an increase in exposure to substantial fines under EEA data protection laws as well as injunctions against processing or transferring personal data from the EEA), which could adversely affect our cash flows and financial condition.

SCCs with additional safeguards and obligations put in place by EEA data protection authorities or customers may impose new restrictions on our business and could affect our operations in the EEA.

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Prior to May 25, 2018, we updated our existing privacy and data security measures to comply with GDPR.

As guidance on compliance with GDPR from the EU data protection authorities evolves over time, our privacy or data security measures may be deemed or perceived to be in noncompliance with current or future laws and regulations, which may subject us to litigation, regulatory investigations or other liabilities and could limit the products and services we can offer in certain jurisdictions.

liabilities and could limit the products and services we can offer in certain jurisdictions.

Further, in the event of a breach of personal information that we hold, we may be subject to governmental fines, individual claims, remediation expenses and/or harm to our reputation.

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We have implemented additional privacy and security policies and procedures, as well as administrative, physical and technical safeguards to enable our solution to be HIPAA-compliant.

Additionally, HIPAA compliance has required us to put in place certain agreements with contracting partners and to

appoint a Privacy Officer and Security Officer.

Additionally, HIPAA compliance has required us to put in place certain agreements with contracting partners and to appoint a Privacy Officer and Security Officer.

If our privacy and security policies or other safeguards for PHI are deemed to be in noncompliance by the United States Department of Health and Human Services, or HHS, we may be subject to litigation, regulatory investigations or other liabilities.

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Ongoing compliance efforts may take substantial time and require the assistance of external resources, such as attorneys, information technology, and/or other consultants and advisors.

We rely on the performance of our senior mana gement and highly skilled personnel, and if we are unable to attract, retain and motivate well-qualified employees, our business and results of operations could be harmed.

We rely on the performance of our senior management and highly skilled personnel, and if we are unable to attract, retain and motivate well-qualified employees, our business and results of operations could be harmed.

We believe our success has depended, and continues to depend, on the efforts and talents of senior management and key personnel, including Stephen Trundle, our Chief Executive Officer, and our senior information technology managers.

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If we do not succeed in disputing it, we could face substantial liability.

See "We have indemnity obligations to certain of our service provider partners for certain expenses and liabilities resulting from intellectual property infringement claims regarding our platforms and solutions, which could force us to incur substantial costs" below for details on indemnity obligations resulting from intellectual property.

We may be subject to significant additional liabilities as a result of the Acquisition for which we will not be indemnified.

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Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business and our prospects.

The incurrence of debt may impact our financial position and subject us to additional financial and operating restrictions.

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.

Upon entry into the 2017 Facility, we borrowed $72.0 million, which was used to repay the previously outstanding balance under our previous credit facility.

On November 30, 2018, we amended the 2017 Facility to incorporate the parameters that must be met for us to repurchase our outstanding common stock under the stock repurchase program authorized by our board of directors on November 29, 2018.

On January 20, 2021, we issued $500.0 million aggregate principal amount of 0% convertible senior notes due January 15, 2026 in a private placement to qualified institutional buyers, or the 2026 Notes.

We received proceeds from the issuance of the 2026 Notes of $484.3 million, net of $15.7 million of transaction fees and other debt issuance costs.

We used some of the proceeds to repay the $110.0 million outstanding principal balance under our 2017 Facility and also used some of the proceeds to pay accrued interest, fees and expenses related to the 2017 Facility.

We terminated the 2017 Facility effective January 20, 2021.

We intend to invest a portion of the proceeds in a portfolio of securities and other investments and although we plan to follow an established investment policy and seek to minimize the credit risk associated with investments by limiting exposure to any one issuer depending on credit quality, we cannot give assurances that the assets in our investment portfolio will not lose value, become impaired or suffer from illiquidity.

Our overall leverage and certain obligations contained in the related documentation could adversely affect our financial health and business and future operations by, among other things:

• making it more difficult to satisfy our obligations, including under the terms of the 2026 Notes;

• limiting our ability to refinance our debt on terms acceptable to us or at all;

• limiting our flexibility to plan for and adjust to changing business and market conditions and increasing our vulnerability to general adverse economic and industry conditions;

• limiting our ability to use our available cash flow to fund future acquisitions, working capital, business activities, and other general corporate requirements;

• limiting our ability to obtain additional financing for working capital, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity.

Any of the foregoing could have a material adverse effect on our business, financial condition, cash flows or results of operations.

We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.

In the future, we may require additional capital to respond to business opportunities, challenges, acquisitions or unforeseen circumstances and may determine to engage in equity or debt financings or enter into credit facilities for other reasons.

For example, on March 25, 2020, we borrowed $50.0 million under the 2017 Facility as a precautionary measure to provide financial flexibility in light of current uncertainty in the financial markets resulting from the COVID-19 pandemic.

As a result, our current availability under the 2017 Facility is only $14.0 million.

For example, on January 20, 2021, we issued the 2026 Notes.

We received proceeds from the issuance of the 2026 Notes of $484.3 million, net of $15.7 million of transaction fees and other debt issuance costs.

We may require additional capital to respond to the significant uncertainty arising from the COVID-19 pandemic and we may not be able to timely secure additional debt or equity financing on favorable terms or at all.

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If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be limited.

See “Risks Related to our Outstanding Convertible Senior Notes” below for further details on risks related to the 2026 Notes.

Goodwill and other identifiable intangible assets represent a significant portion of our total assets, and we may never realize the full value of our intangible assets.

As of September 30, 2020, we h ad $197.0 million of goo dwill and identifiable intangible assets.

As of March 31, 2021, we had $211.8 million of goodwill and identifiable intangible assets.

Goodwill and other identifiable intangible assets are recorded at fair value on the date of acquisition.

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Comprehensive tax reform bills could adversely affect our business and financial condition.

government has enacted comprehensive tax legislation that includes significant changes to the taxation of business entities.

These changes include, among others, (i) a permanent reduction to the corporate income tax rate, (ii) a partial limitation on the deductibility of business interest expense, (iii) a shift of the U.S.

government enacted the Tax Cuts and Jobs Act, or the Tax Act, into law on December 22, 2017.

The 2017 Tax Act included significant changes to the taxation of business entities.

These changes included, among others, (i) a permanent reduction to the corporate income tax rate, (ii) a partial limitation on the deductibility of business interest expense, (iii) a shift of the U.S.

taxation of multinational corporations from a tax on worldwide income to a territorial system (along with certain rules designed to prevent erosion of the U.S.

income tax base) and (iv) a one-time tax on accumulated offshore earnings held in cash and illiquid assets, with the latter taxed at a lower rate.

Notwithstanding the reduction in the corporate income tax rate, the overall impact of this tax reform is uncertain, and our business and financial condition could be adversely affected.

income tax base) and (iv) a base erosion and anti-abuse tax on base erosion payments if the federal group has sufficient gross receipts.

Future changes in tax laws, including as a result of changes proposed by the new Presidential administration, or tax rulings could also materially affect our effective tax rate.

In particular, the reduction in the corporate income tax rate resulting from the 2017 Tax Act could be reduced or rescinded by future tax law changes.

The overall impact of any potential tax reform is uncertain, and our business and financial condition could be adversely affected.

We may be subject to additional tax liabilities, which would harm our results of operations.

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Certain jurisdictions in which we do not collect sales, use, value added or other taxes on our sales may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect such taxes in the future.

Additionally, longstanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are subject to potential evolution.

An outgrowth of the original Base Erosion and Profit Shifting project is a project undertaken by the more than 130 member countries of the expanded Organization for Economic Cooperation and Development Inclusive Framework focused on "Addressing the Challenges of the Digitalization of the Economy." The breadth of this project is likely to impact all multinational businesses by potentially redefining jurisdictional taxation rights.

Significant judgment is required in determining our worldwide provision for income taxes.

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Anti-corruption laws are interpreted broadly and prohibit our company from authorizing, offering, or providing directly or indirectly improper payments or benefits to recipients in the public or private-sector.

Certain laws could also prohibit us from soliciting or accepting bribes or kickbacks.

Certain laws also prohibit us from soliciting or accepting bribes or kickbacks.

Our company has direct government interactions and in several cases uses third-party representatives, including dealers, for regulatory compliance, sales and other purposes in a variety of countries.

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We face many risks associated with our international business operations and our plans to expand internationally, which could harm our business, financial condition, cash flows and results of operations.

We anticipate that our efforts to operate a nd continue to expand our business internationally will entail additional costs and risks as we establish our international offerings and develop relationships with service provider partners to market, sell, install, and support our platforms, solutions and brand in other countries.

Revenue in countries outside of North America accounted for 3% of our total revenue for each of the nine months ended September 30, 2020 and 2019.

We have limited experience in selling our platforms and solutions in international markets out side of North America or in conforming to the local cultures, standards, or policies necessary to successfully compete in those markets, and we may be required to invest significant resources in order to do so.

We anticipate that our efforts to operate and continue to expand our business internationally will entail additional costs and risks as we establish our international offerings and develop relationships with service provider partners to market, sell, install, and support our platforms, solutions and brand in other countries.

Revenue in countries outside of North America accounted for 4% and 2% of our total revenue for the three months ended March 31, 2021 and 2020, respectively.

We have limited experience in selling our platforms and solutions in international markets outside of North America or in conforming to the local cultures, standards, or policies necessary to successfully compete in those markets, and we may be required to invest significant resources in order to do so.

We may not succeed in these efforts or achieve our consumer acquisition, service provider expansion or other goals.

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Our revenue from new foreign markets may not exceed the costs of establishing, marketing, and maintaining our international offerings.

In addition, the current instability in the eurozone and parts of Asia could have many adverse consequences on our international expansion.

In addition, current global instability could have many adverse consequences on our international expansion.

These could include sovereign default, liquidity and capital pressures on financial institutions in other parts of the world including the eurozone, reducing the availability of credit and increasing the risk of financial sector failures and the risk of one or more eurozone member states leaving the euro, resulting in the possibility of capital and exchange controls and uncertainty about the impact of contracts and currency exchange rates.

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• difficulties in managing and staffing international operations;

• increased costs due to new or potential tariffs, penalties, trade restrictions and other trade barriers;

• increased costs due to new or potential tariffs, penalties, trade restrictions and other trade barriers, which may increase our cost of hardware revenue and reduce our hardware revenue margins in the future;

• fluctuations in currency exchange rates or restrictions on foreign currency;

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We are addressing the risks related to these imposed and announced tariffs, which have affected, or have the potential to affect, at least some of our imports from China.

Between one-fifth to one-half of the fi nished goods hardware products that we sell to our customers are imported from China and could be subject to increased tariffs.

Between one-fifth to one-half of the finished goods hardware products that we sell to our customers are imported from China and could be subject to increased tariffs.

Other Alarm.com finished goods hardware products that are not manufactured in China may contain subcomponents made in China that could also be subject to increased tariffs.

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Any of these factors could have a material adverse effect on our business, financial condition and results of operations.

The incurrence of debt may impact our financial position and subject us to additional financial and operating restrictions.

Upon entry into the 2017 Facility, we borrowed $72.0 million, which was used to repay the previously outstanding balance under our previous credit facility.

On November 30, 2018, we amend ed the 2017 Facility to incorporate the parameters that must be met for us to repurchase our outstanding common stock under the stock repurchase program authorized by our board of directors on November 29, 2018.

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.

The outstanding balance of the 2017 Facility was $111.0 million as of September 30, 2020 .

Our overall leverage and certain covenants and obligations contained in the related documentation could adversely affect our financial health and business and future operations by, among other things:

• making it more difficult to satisfy our obligations, including under the terms of the 2017 Facility;

• limiting our ability to refinance our debt on terms acceptable to us or at all;

• limiting our flexibility to plan for and adjust to changing business and market conditions and increasing our vulnerability to general adverse economic and industry conditions;

• limiting our ability to use our available cash flow to fund future acquisitions, working capital, business activities, and other general corporate requirements;

• limiting our ability to obtain additional financing for working capital, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity.

Furthermore, substantially all of our assets, including our intellectual property, secure the 2017 Facility.

If an event of default under the credit agreement occurs and is continuing, SVB may request the acceleration of the related debt and foreclose on the underlying security interests.

In addition, our 2017 Facility restricts our ability to make dividend payments and requires us to maintain certain leverage ratios, which may restrict our ability to invest in future growth.

Any of the foregoing could have a material adverse effect on our business, financial condition, cash flows or results of operations.

The LIBOR calculation method may change and LIBOR is expected to be phased out after 2021.

Our 2017 Facility permits interest on the outstanding principal balance to be calculated based on LIBOR, plus an applicable margin based on our consolidated leverage ratio.

On July 27, 2017, the U.K.

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See Note 2 to our condensed consolidated financial statements for additional information about the impact of this accounting standard and other new accounting pronouncements.

Implementation of new accounting standards could have a significant effect on our financial results, and any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

Implementation of new accounting standards could have a significant effect on our financial results, and any difficulties in implementing these pronouncements

could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

Our accounting is becoming more complex, and relies upon estimates or judgments relating to our critical accounting policies.

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If securities analysts or investors regard these announcements as negative, the market price of our common stock may decline.

liabilities they may incur as a result of our infringement of any third party intellectual property.

We might not prevail in any intellectual property infringement litigation given the complex technical issues and inherent uncertainties in such litigation and our service provider partner contracts may require us to indemnify them against certain liabilities they may incur as a result of our infringement or alleged infringement of any third party intellectual property.

Defending such claims, regardless of their merit, could be time-consuming and distracting to management, result in costly litigation or settlement, cause development delays or require us to enter into royalty or licensing agreements.

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We expect that some of our service provider partners may seek indemnification from us in connection with infringement claims brought against them.

For example, on July 13, 2016, Applied Capital, Inc., or Applied Capital, filed a lawsuit against ADT, alleging that ADT’s sales of ADT Pulse directly and indirectly infringe two patents purchased by Applied Capital.

Applied Capital is seeking damages and attorney’s fees.

We are indemnifying ADT in this matter.

In addition, we may elect to indemnify service provider partners where we have no contractual obligation to indemnify them and we will evaluate each such request on a case-by-case basis.

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If we do not succeed in disputing it, we could face substantial liability.

See the section of this Quarterly Report titled "Legal Proceedings" for additional information.

See the section of this Quarterly Report titled "Legal Proceedings" for additional information regarding this matter and the other legal proceedings we are involved in.

The use of open source software in our platforms and solutions may expose us to additional risks and harm our intellectual property.

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The market price of our common stock may be highly volatile and may fluctuate substantially as a result of a variety of factors, some of which are related in complex ways.

Since shares of our common stock were sold in our initial public offering in June 2015 at a price of $14.00 per share, our stock price has ranged from an intraday low of $10.26 to an intraday high of $74.66 through September 30, 2020.

The market price of our common stock may decline regardless of our operating performance, resulting in the potential for substantial losses for our stockholders, and may fluctuate significantly in response to numerous factors, many of which are beyond our control, including the factors listed below and other factors described in this "Risk Factors" section:

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Accordingly, these shares may be able to be sold freely in the public market upon issuance as permitted by any applicable vesting requirements.

See “Conversion of the 2026 Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock” below for further details on the risks related to the dilutive impact of the 2026 Notes.

We are obligated to develop and maintain a system of effective internal controls over financial reporting.

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We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes.

Any determination to pay dividends in the future will be at the discretion of our board of directors and subject to the restrictions on paying dividends in our 2017 Facility and any future indebtedness.

Any determination to pay dividends in the future will be at the discretion of our board of directors and may be subject to any restrictions on paying dividends in any future indebtedness.

Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

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The forum selection clause in our amended and restated certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Risks Related to our Outstanding Convertible Senior Notes

We may not have the ability to raise the funds necessary to settle cash conversions of the 2026 Notes or to repurchase the 2026 Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the 2026 Notes.

On January 20, 2021, we issued the 2026 Notes.

The terms of the 2026 Notes are governed by an Indenture, or the Indenture, by and between Alarm.com Holdings, Inc.

Bank National Association, as trustee.

The 2026 Notes are senior unsecured obligations that do not bear regular interest and the principal amount of the 2026 Notes will not accrete.

The 2026 Notes may bear special interest under specified circumstances related to our failure to comply with our reporting obligations under the Indenture.

Special interest, if any, will be payable semiannually in arrears on January 15 and July 15 of each year, beginning on July 15, 2021.

We received proceeds from the issuance of the 2026 Notes of $484.3 million, net of $15.7 million of transaction fees and other debt issuance costs.

Holders of the 2026 Notes will have the right, subject to certain conditions and limited exceptions, to require us to repurchase all or a portion of their notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid special interest, if any, as defined in the Indenture.

In addition, upon conversion of the 2026 Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the 2026 Notes being converted as defined in the Indenture.

However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of 2026 Notes surrendered therefor or pay cash with respect to 2026 Notes being converted.

In addition, our ability to repurchase the 2026 Notes or to pay cash upon conversions of the 2026 Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness.

Our failure to repurchase the 2026 Notes at a time when the repurchase is required by the Indenture or to pay any cash payable on future conversions of the 2026 Notes as required by the Indenture would constitute a default under the Indenture.

A default under the Indenture governing the 2026 Notes or the fundamental change itself could also lead to a default under agreements governing our future indebtedness.

If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the 2026 Notes or make cash payments upon conversions thereof.

The conditional conversion feature of the 2026 Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the 2026 Notes is triggered, holders of 2026 Notes will be entitled to convert the 2026 Notes at any time during specified periods at their option.

If one or more holders elect to convert their 2026 Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

In addition, even if holders do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Conversion of the 2026 Notes may dilute the ownership interest of our stockholders or may otherwise depress the price of our common stock.

The conversion of some or all of the 2026 Notes may dilute the ownership interests of our stockholders.

Upon conversion of the 2026 Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock.

If we elect to settle our conversion obligation in shares of our common stock or a combination of cash and shares of our common stock, any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

In addition, the existence of the 2026 Notes may encourage short selling by market participants because the conversion of the 2026 Notes could be used to satisfy short positions, or anticipated conversion of the 2026 Notes into shares of our common stock could depress the price of our common stock.

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-Q

Item 1A. Risk Factors