What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 216 added, 176 removed, 891 unchanged (31% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

17 unchanged sentences

Income before income taxes 15,081 42,371 39,470 66,492

Benefit from income taxes ( 1,738 ) ( 2,277 ) ( 4,651 ) ( 1,075 )

Provision for / (benefit from) income taxes 1,787 6,546 ( 2,864 ) 5,471

Net income 13,294 35,825 42,334 61,021

14 unchanged sentences

(in thousands, except share and per share data)

September 30,

2021 December 31,

32 unchanged sentences

Preferred stock, $ 0.001 par value, 10,000,000 shares authorized;

no shares issued and outstanding as of June 30, 2021 and December 31, 2020

no shares issued and outstanding as of September 30, 2021 and December 31, 2020

Common stock, $ 0.01 par value, 300,000,000 shares authorized;

50,174,272 and 49,630,773 shares issued;

and 49,893,700 and 49,483,620 shares outstanding as of June 30, 2021 and December 31, 2020, respectively

and 50,027,119 and 49,483,620 shares outstanding as of September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 492,135 405,831

Treasury stock, at cost;

147,153 shares as of June 30, 2021 and December 31, 2020

147,153 shares as of September 30, 2021 and December 31, 2020

( 5,149 ) ( 5,149 )

6 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

1 unchanged sentence

Adjustments to reconcile net income to net cash from operating activities:

Provision for credit losses on accounts receivable 150 965

Recovery of credit losses on accounts receivable ( 238 ) ( 237 )

Reserve for product returns 1,628 1,491

Recovery of credit losses on notes receivable ( 10 ) ( 368 )

Provision for excess and obsolete inventory 374 1,178

Amortization on patents and tooling 947 604

6 unchanged sentences

Acquired in-process research and development — 3,297

Gain on sale of investment — ( 24,737 )

Loss on early extinguishment of debt 185 —

8 unchanged sentences

Cash flows from operating activities 83,194 66,670

Cash flows used in investing activities:

Cash flows (used in) / from investing activities:

Additions to property and equipment ( 8,939 ) ( 10,677 )

Purchases of in-process research and development — ( 3,297 )

Issuances of notes receivable — ( 600 )

Receipt of payments on notes receivable 42 2,023

Purchase of investment in unconsolidated entity ( 5,000 ) —

Proceeds from sale of investment — 25,687

Purchases of patents and patent licenses — ( 900 )

Cash flows used in investing activities ( 12,376 ) ( 9,306 )

Cash flows (used in) / from investing activities ( 13,897 ) 12,236

Cash flows from financing activities:

29 unchanged sentences

Balance as of June 30, 2021 11,372 — — 50,041 500 481,937 147 ( 5,149 ) 96,149 573,437

Common stock issued in connection with equity-based plans — — — 133 1 1,541 — — — 1,542

Stock-based compensation expense — — — — — 9,418 — — — 9,418

Accretion adjustments of redeemable noncontrolling interest to redemption value 761 — — — — ( 761 ) — — — ( 761 )

Net income / (loss) attributable to common stockholders ( 244 ) — — — — — — — 13,538 13,538

Balance as of September 30, 2021 $ 11,889 — $ — 50,174 $ 501 $ 492,135 147 $ ( 5,149 ) $ 109,687 $ 597,174

See accompanying notes to the condensed consolidated financial statements.

16 unchanged sentences

Balance as of June 30, 2020 10,716 — — 49,071 491 383,388 147 ( 5,149 ) 14,523 393,253

Common stock issued in connection with equity-based plans — — — 185 2 2,183 — — — 2,185

Stock-based compensation expense — — — — — 7,448 — — — 7,448

Accretion adjustments of redeemable noncontrolling interest to redemption value 254 — — — — ( 254 ) — — — ( 254 )

Net income / (loss) attributable to common stockholders ( 259 ) — — — — — — — 36,084 36,084

Balance as of September 30, 2020 $ 10,711 — $ — 49,256 $ 493 $ 392,765 147 $ ( 5,149 ) $ 50,607 $ 438,716

See accompanying notes to the condensed consolidated financial statements.

19 unchanged sentences

In addition, the COVID-19 pandemic resulted in a global slowdown of economic activity and a recession in the United States and the economic situation remains fluid as parts of the economy appear to be recovering while others continue to struggle.

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

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2021, which is increasingly true in periods of extreme uncertainty, such as the uncertainty caused by the COVID-19 pandemic.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2021, which is increasingly true in periods of extreme uncertainty, such as the uncertainty caused by the COVID-19 pandemic.

Prolonged uncertainty with respect to COVID-19 could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.

6 unchanged sentences

Comprehensive Income

Our comprehensive income for the three and six months ended June 30, 2021 and 2020 was equal to our net income disclosed in the condensed consolidated statements of operations.

Our comprehensive income for the three and nine months ended September 30, 2021 and 2020 was equal to our net income disclosed in the condensed consolidated statements of operations.

ALARM.COM HOLDINGS, INC.

1 unchanged sentence

Significant Accounting Policies

Other than those disclosed herein, there have been no other material changes to our significant accounting policies during the three and six months ended June 30, 2021 from those disclosed in our Annual Report.

Other than those disclosed herein, there have been no other material changes to our significant accounting policies during the three and nine months ended September 30, 2021 from those disclosed in our Annual Report.

Convertible Senior Notes

3 unchanged sentences

The carrying amount of the equity component representing the conversion option is determined by deducting the fair value of the liability component from the par value of the notes as a whole.

This difference represents a debt discount that is amortized to interest expense using the effective interest method over the term of the notes.

This difference between the aggregate principal amount and the liability component represents a debt discount that is amortized to interest expense using the effective interest method over the term of the notes.

The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

2 unchanged sentences

Transaction costs attributable to the equity component are netted with the equity component of the notes in additional paid-in capital in the condensed consolidated balance sheets.

See Note 12 for the carrying amount and estimated fair value of our convertible senior notes as of June 30, 2021.

See Note 12 for the carrying amount and estimated fair value of our convertible senior notes as of September 30, 2021.

Recent Accounting Pronouncements

On December 18, 2019, the FASB issued ASU 2019-12, " Income Taxes (Topic 740):

On December 18, 2019, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2019-12, " Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, " which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

16 unchanged sentences

The guidance allows for either full retrospective adoption or modified retrospective adoption.

We are currently assessing the impact this pronouncement may have on our consolidated financial statements when we adopt the pronouncement on January 1, 2022.

While we are still in the process of determining the impact of this guidance when we adopt the pronouncement on January 1, 2022, we anticipate that the new guidance will have a material impact on our consolidated financial statements and disclosures.

We currently expect to record a material reclassification from equity to debt, as well as a reduction in interest expense upon adoption, due to eliminating the amortization of the debt discount.

Additionally, this guidance is expected to increase our diluted weighted average common shares outstanding and impact our earnings per share upon adoption.

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

On October 28, 2021, the FASB issued ASU 2021-08, " Business Combinations (Topic 606):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ," which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 as if it had originated the contracts.

Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements, if the acquiree prepared financial statements in accordance with GAAP.

The amendment in this update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted, including adoption in an interim period.

The guidance should be applied prospectively to business combinations occurring on or after the effective date of the amendment in this update.

We are currently assessing the impact this pronouncement may have on our consolidated financial statements.

Revenue from Contracts with Customers

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We record a reserve against revenue for hardware returns based on historical returns.

For the twelve months ended June 30, 2021 and 2020, our reserve against revenue for hardware returns was 1 %.

For the twelve months ended September 30, 2021 and 2020, our reserve against revenue for hardware returns was approximately 1 %.

We evaluate our hardware reserve on a quarterly basis or if there is an indication of significant changes in return experience.

14 unchanged sentences

The portion of these activation fees included in current and long-term deferred revenue as of our balance sheet date represents the amounts that will be recognized ratably as revenue over the following twelve months , or longer as appropriate, until the ten-year expected term is complete.

The balance of deferred revenue for activation fees was $ 6.5 million and $ 7.0 million as of June 30, 2021 and December 31, 2020, respectively, which combines current and long-term balances.

The balance of deferred revenue for activation fees was $ 6.3 million and $ 7.0 million as of September 30, 2021 and December 31, 2020, respectively, which combines current and long-term balances.

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

SaaS and license revenue associated with our contracts is invoiced and revenue is recognized at an amount that corresponds directly with the value of the performance completed to date.

3 unchanged sentences

At contract inception, we assess the goods and services promised in our contracts with customers and identify a performance obligation for each distinct promise to transfer a good or service, or bundle of goods or services.

To identify the performance obligations, we consider all of the goods or services promised in the contract, whether explicitly stated or implied

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

based on customary business practices.

To identify the performance obligations, we consider all of the goods or services promised in the contract, whether explicitly stated or implied based on customary business practices.

We record a contract asset when we satisfy a performance obligation by transferring a promised good or service.

16 unchanged sentences

Impairment exists if the carrying amount of the asset recognized from contract costs exceeds the remaining amount of consideration we expect to receive in exchange for providing the goods and services to which such asset r elat es, less the costs that relate directly to providing those good and services and that have not been recognized as an expense.

We did no t record an impairment loss on our contract assets during the three and six months ended June 30, 2021 and 2020.

We did no t record an impairment loss on our contract assets during the three and nine months ended September 30, 2021 and 2020.

The changes in our contract assets are as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

7 unchanged sentences

Changes in deferred revenue are due to our performance under the contract as well as to cash received from new contracts for which services have not been provided.

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

The changes in our contract liabilities are as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

3 unchanged sentences

End of period balance $ 16,077 $ 12,872 $ 16,077 $ 12,872

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

The revenue recognized from amounts included in contract liabilities primarily relates to prepayment contracts with customers as well as payments of activation fees.

1 unchanged sentence

The components of accounts receivable, net are as follows (in thousands):

September 30,

2021 December 31,

3 unchanged sentences

Accounts receivable, net $ 90,624 $ 83,326

For the three and six months ended June 30, 2021, we recorded a provision for credit losses of $ 0.1 million and $ 0.2 million on our accounts receivable, respectively.

For the three months ended June 30, 2020, we recorded a reduction to the provision for credit losses of $ 0.9 million on our accounts receivable.

For the six months ended June 30, 2020, we recorded a provision for credit losses of $ 1.0 million on our accounts receivable.

For the three and six months ended June 30, 2021, we recorded a reserve for product returns of $ 0.5 million and $ 1.1 million, respectively, as compared to $ 0.7 million and $ 1.0 million for the same periods in the prior year.

For the three and nine months ended September 30, 2021, we recorded a reduction to the provision for credit losses of $ 0.4 million and $ 0.2 million on our accounts receivable, respectively.

For the three and nine months ended September 30, 2020, we recorded a reduction to the provision for credit losses of $ 1.2 million and $ 0.2 million on our accounts receivable, respectively.

For the three and nine months ended September 30, 2021, we recorded a reserve for product returns of $ 0.5 million and $ 1.6 million, respectively, as compared to $ 0.5 million and $ 1.5 million for the same periods in the prior year.

Historically, we have not experienced write-offs for uncollectible accounts or sales returns that have differed significantly from our estimates.

10 unchanged sentences

(i) outstanding accounts receivable balances within Alarm.com and certain subsidiaries and (ii) outstanding accounts receivable balances within all other subsidiaries.

There were no changes to our portfolio segments for our accounts receivable during the three and six months ended June 30, 2021, and no changes to our policies or practices that influenced our estimate of expected credit losses for accounts receivable.

There were no significant changes in the amount of accounts receivable write-offs during the three and six months ended June 30, 2021, as compared to historical periods other than a partial write-off of $ 0.7 million related to one of our distribution partners' outstanding balance during the six months ended June 30, 2021, upon the distributor being acquired by a third party.

There were no changes to our portfolio segments for our accounts receivable during the three and nine months ended September 30, 2021, and no changes to our policies or practices that influenced our estimate of expected credit losses for accounts receivable.

There were no significant changes in the amount of accounts receivable write-offs during the three and nine months ended September 30, 2021, as compared to historical periods other than a partial write-off of $ 0.7 million related to one of our distribution partners' outstanding balance during the nine months ended September 30, 2021, upon the distributor being acquired by a third party.

Expected credit losses are estimated over the contractual term of the financial assets and we adjust the term for expected prepayments when appropriate.

For the three and six months ended June 30, 2021, we recorded credit loss expense for accounts receivable and notes receivable of $ 0.1 million and less than $ 0.1 million, respectively, in general and administrative expense in our condensed consolidated statements of operations.

For the three months ended June 30, 2020, we recorded a reduction of credit loss expense of $ 0.9 million and for the six months ended June 30, 2020, we recorded credit loss expense of $ 0.5 million in general and administrative expense in our condensed consolidated statements of operations.

The contractual term excludes expected extensions, renewals and modifications because extension and renewal options are unconditionally cancelable by us.

Write-offs of the amortized cost basis are recorded to the allowance for credit losses.

Any subsequent recoveries of previously written off balances are recorded as a reduction to credit loss expense.

For the three and nine months ended September 30, 2021, we recorded a reduction of credit loss expense for accounts receivable and notes receivable of $ 0.4 million, in general and administrative expense in our condensed consolidated statements of operations.

For the three and nine months ended September 30, 2020, we recorded a reduction of credit loss expense of $ 1.2 million and $ 0.7 million in general and administrative expense, respectively, in our condensed consolidated statements of operations.

The contractual term excludes expected extensions, renewals and

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

modifications because extension and renewal options are unconditionally cancelable by us.

Write-offs of the amortized cost basis are recorded to the allowance for credit losses.

Any subsequent recoveries of previously written off balances are recorded as a reduction to credit loss expense.

The changes in our allowance for credit losses for accounts receivable are as follows (in thousands):

Three Months Ended

June 30, 2021 Three Months Ended

June 30, 2020 Six Months Ended

June 30, 2021 Six Months Ended

June 30, 2020

September 30, 2021 Three Months Ended

September 30, 2020 Nine Months Ended

September 30, 2021 Nine Months Ended

September 30, 2020

Subsidiaries All Other

7 unchanged sentences

Impact of adopting Topic 326 — — — — — — ( 212 ) ( 155 )

(Provision for) / recovery of expected credit losses ( 111 ) ( 7 ) 935 ( 15 ) ( 147 ) ( 3 ) ( 951 ) ( 14 )

Recovery of / (provision for) expected credit losses 415 ( 27 ) 1,146 56 268 ( 30 ) 195 42

Write-offs 25 3 170 16 1,171 129 283 31

1 unchanged sentence

The components of inventory are as follows (in thousands):

September 30,

2021 December 31,

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We believe the acquisition of the IPR&D will continue to strengthen our smart intercom capability, including building access security and convenience within the multiple dwelling unit market for residents, guests and deliveries.

In consideration for the purchase of the IPR&D, we paid $ 1.2 million in cash on March 12, 2020, with the remaining $ 0.3 million expected to be paid 18 months following the acquisition date, subject to offset for any indemnification obligations.

The $ 1.5 million consideration related to IPR&D was expensed at the time of the asset acquisition and was included in research and development expense in our condensed consolidated statements of operations during the six months ended June 30, 2020 , as the IPR&D had no alternative future use.

In consideration for the purchase of the IPR&D, we paid $ 1.2 million in cash on March 12, 2020 and the remaining $ 0.3 million in September 2021.

The $ 1.5 million consideration related to IPR&D was expensed at the time of the asset acquisition and was included in research and development expense in our condensed consolidated statements of operations during the nine months ended September 30, 2020 , as the IPR&D had no alternative future use.

On March 31, 2020, Alarm.com Incorporated acquired certain assets of an unrelated third party.

2 unchanged sentences

In consideration for the purchase of the IPR&D, we paid $ 2.1 million in cash on March 31, 2020, $ 0.1 million in December 2019 and the remaining $ 0.7 million in April 2021.

The $ 2.9 million consideration related to IPR&D was expensed at the time of the asset acquisition and was included in research and development expense in our condensed consolidated statements of operations during the six months ended June 30, 2020 , as the IPR&D had no alternative future use.

The $ 2.9 million consideration related to IPR&D was expensed at the time of the asset acquisition and was included in research and development expense in our condensed consolidated statements of operations during the nine months ended September 30, 2020 , as the IPR&D had no alternative future use.

Acquisition of a Business - Shooter Detection Systems

56 unchanged sentences

Measurement period adjustment 63 — 63

Balance as of June 30, 2021 $ 112,901 $ — $ 112,901

There were no impairments of goodwill during the three and six months ended June 30, 2021 and 2020.

Balance as of September 30, 2021 $ 112,901 $ — $ 112,901

There were no impairments of goodwill during the three and nine months ended September 30, 2021 and 2020.

The following table reflects changes in the net carrying amount of the components of intangible assets (in thousands):

4 unchanged sentences

Amortization ( 9,869 ) ( 2,507 ) ( 407 ) ( 12,783 )

Balance as of June 30, 2021 $ 66,091 $ 26,552 $ 2,094 $ 94,737

We recorded $ 4.3 million and $ 8.5 million of amortization related to our intangible assets for the three and six months ended June 30, 2021, respectively, as compared to $ 4.0 million and $ 8.0 million for the same periods in the prior year.

There were no impairments of long-lived intangible assets during the three and six months ended June 30, 2021 and 2020.

Balance as of September 30, 2021 $ 62,801 $ 25,716 $ 1,959 $ 90,476

We recorded $ 4.3 million and $ 12.8 million of amortization related to our intangible assets for the three and nine months ended September 30, 2021, respectively, as compared to $ 4.0 million and $ 12.1 million for the same periods in the prior year.

There were no impairments of long-lived intangible assets during the three and nine months ended September 30, 2021 and 2020.

ALARM.COM HOLDINGS, INC.

1 unchanged sentence

The following tables reflect the weighted average remaining life and carrying value of finite-lived intangible assets (in thousands, except weighted-average remaining life):

June 30, 2021

September 30, 2021

Amount Accumulated

19 unchanged sentences

From time to time, we enter into agreements to purchase patents or patent licenses.

The carrying value, net of amortization, of our purchased patents and patent licenses was $ 2.5 million and $ 2.9 million as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021 and December 31, 2020, $ 0.7 million of patent costs were included in other current assets and $ 1.8 million and $ 2.2 million of patent costs were included in other assets, respectively.

We have $ 7.0 million of historical cost in purchased patents and patent licenses as of June 30, 2021.

The carrying value, net of amortization, of our purchased patents and patent licenses was $ 2.4 million and $ 2.9 million as of September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021 and December 31, 2020, $ 0.7 million of patent costs were included in other current assets and $ 1.7 million and $ 2.2 million of patent costs were included in other assets, respectively.

We have $ 7.0 million of historical cost in purchased patents and patent licenses as of September 30, 2021.

We are amortizing the patent costs over the estimated useful lives of the patents, which range from three years to eighteen years .

Patent cost amortization of $ 0.1 million and $ 0.2 million was included in cost of SaaS and license revenue in our condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020, respectively.

Patent cost amortization of $ 0.1 million was included in amortization and depreciation in our condensed consolidated statements of operations for each of the three and six months ended June 30, 2021 and 2020.

Patent cost amortization of $ 0.1 million and $ 0.3 million was included in cost of SaaS and license revenue in our condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020, respectively.

Patent cost amortization of $ 0.1 million and $ 0.2 million was included in amortization and depreciation in our condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020, respectively.

Loan to a Distribution Partner

18 unchanged sentences

The amended subordinated credit agreement with the affiliated entity of the distribution partner matures on September 9, 2025 and interest on the outstanding principal balance accrues at a rate of 9.0 % per annum and is payable in kind.

As of June 30, 2021 and December 31, 2020, $ 4.4 million and $ 4.2 million of the notes receivable balance related to the subordinated credit agreement was included in other assets in our condensed consolidated balance sheets, respectively.

For the three and six months ended June 30, 2021, we recognized $ 0.9 million and $ 1.6 million of revenue from the distribution partners associated with these loans, respectively, as compared to $ 0.9 million and $ 1.3 million for the same periods in the prior year.

Loans to Service Provider Partners

As of September 30, 2021 and December 31, 2020, $ 4.5 million and $ 4.2 million of the notes receivable balance related to the subordinated credit agreement was included in other assets in our condensed consolidated balance sheets, respectively.

For the three and nine months ended September 30, 2021, we recognized $ 0.8 million and $ 2.4 million of revenue from the distribution partners associated with these loans, respectively, as compared to $ 0.5 million and $ 1.8 million for the same periods in the prior year.

Loans to a Service Provider Partner

In July 2020, we entered into a loan agreement with a service provider partner, under which we agreed to loan the service provider partner up to $ 2.5 million, collateralized by the assets of the service provider partner.

1 unchanged sentence

The maturity date of the loan is July 24, 2025.

As of each of June 30, 2021 and December 31, 2020, $ 1.2 million of principal was outstanding from the service provider partner under the loan agreement.

For the three and six months ended June 30, 2021 and 2020, we recognized less than $ 0.1 million and $ 0.1 million of revenue from the service provider partner associated with this loan, respectively.

As of each of September 30, 2021 and December 31, 2020, $ 1.2 million of principal was outstanding from the service provider partner under the loan agreement.

For each of the three and nine months ended September 30, 2021, we recognized $ 0.1 million of revenue from the service provider partner associated with this loan, as compared to less than $ 0.1 million and $ 0.1 million for the same periods in the prior year.

Investment in a Hardware Supplier

3 unchanged sentences

Under the alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments.

As of June 30, 2021 and December 31, 2020, our investment in the hardware supplier was $ 5.6 million.

As of September 30, 2021 and December 31, 2020, our investment in the hardware supplier was $ 5.6 million.

Investment in a Technology Partner

6 unchanged sentences

As of June 30, 2021 and December 31, 2020, our investment in the technology partner was $ 5.7 million and $ 0.7 million, respectively.

As of September 30, 2021 and December 31, 2020, our investment in the technology partner was $ 5.7 million and $ 0.7 million, respectively.

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Investment in a Platform Partner

On July 31, 2020, a platform partner, in which we held 3,548,820 shares of common stock of the platform partner, was acquired by an unrelated third party.

As a result of the sale, we received proceeds of $ 25.7 million in exchange for our shares of the platform partner's common stock and we recorded a gain of $ 24.7 million within other income, net, in our condensed consolidated statements of operations during the three and nine months ended September 30, 2020.

As of September 30, 2021 and December 31, 2020, our investment in the platform partner was zero .

Allowance for Credit Losses - Notes Receivable

1 unchanged sentence

(i) loan receivables and (ii) hardware financing receivables.

There were no changes to our portfolio segments for our notes receivable during the three and six months ended June 30, 2021, and no changes to our policies or practices involving the issuance of notes receivable, customer acquisitions or any other factors that influenced our estimate of expected credit losses for notes receivable.

There were no changes to our portfolio segments for our notes receivable during the three and nine months ended September 30, 2021, and no changes to our policies or practices involving the issuance of notes receivable, customer acquisitions or any other factors that influenced our estimate of expected credit losses for notes receivable.

We do not accrue interest on notes receivable that are considered impaired or are 90 days or greater past due based on their contractual payment terms.

5 unchanged sentences

We write-off any accrued interest on notes receivable that are considered impaired or are 90 days or greater past due based on their contractual payment terms by reversing interest income.

The accrued interest receivable as of each of June 30, 2021 and December 31, 2020 was less than $ 0.1 million, and is reflected in other current assets within our condensed consolidated balance sheets and excluded from the amortized cost basis of the notes receivable .

We did not write-off any accrued interest receivable during the three and six months ended June 30, 2021 and 2020.

There were no purchases or sales of financial assets during the three and six months ended June 30, 2021 and 2020.

There were no significant changes in the amount of note receivable write-offs during the three and six months ended June 30, 2021, as compared to historical periods.

The accrued interest receivable as of each of September 30, 2021 and December 31, 2020 was less than $ 0.1 million, and is reflected in other current assets within our condensed consolidated balance sheets and excluded from the amortized cost basis of the notes receivable .

We did not write-off any accrued interest receivable during the three and nine months ended September 30, 2021 and 2020.

There were no purchases or sales of financial assets during the three and nine months ended September 30, 2021 and 2020.

There were no significant changes in the amount of note receivable write-offs during the three and nine months ended September 30, 2021, as compared to historical periods.

The changes in our allowance for credit losses for notes receivable are as follows (in thousands):

Three Months Ended

June 30, 2021 Three Months Ended

June 30, 2020 Six Months Ended

June 30, 2021 Six Months Ended

June 30, 2020

September 30, 2021 Three Months Ended

September 30, 2020 Nine Months Ended

September 30, 2021 Nine Months Ended

September 30, 2020

Receivables Hardware

14 unchanged sentences

The following tables reflect the current and delinquent notes receivable by class of financing receivables and by year of origination (in thousands):

June 30, 2021

September 30, 2021

Loan Receivables:

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The amortized cost of notes receivables placed on nonaccrual status is as follows (in thousands):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Loan receivables $ — $ —

3 unchanged sentences

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

During the three and six months ended June 30, 2021 and 2020, there was no interest income recognized related to notes receivables that were in nonaccrual status.

As of June 30, 2021 and December 31, 2020, there were no notes receivables placed in nonaccrual status for which there was not a related allowance for credit losses.

As of June 30, 2021 and December 31, 2020, there were no notes receivables that were 90 days or greater past due for which we continued to accrue interest income.

During the three and nine months ended September 30, 2021 and 2020, there was no interest income recognized related to notes receivables that were in nonaccrual status.

As of September 30, 2021 and December 31, 2020, there were no notes receivables placed in nonaccrual status for which there was not a related allowance for credit losses.

As of September 30, 2021 and December 31, 2020, there were no notes receivables that were 90 days or greater past due for which we continued to accrue interest income.

Prepaid Expenses

As of June 30, 2021 and December 31, 2020, $ 12.0 million and $ 8.4 million of prepaid expenses were included in other current assets, respectively, primarily related to software licenses and for long lead-time parts related to our inventory.

As of September 30, 2021 and December 31, 2020, $ 14.4 million and $ 8.4 million of prepaid expenses were included in other current assets, respectively, primarily related to software licenses and for long lead-time parts related to our inventory .

Fair Value Measurements

1 unchanged sentence

Fair Value Measurements on a Recurring Basis as of

June 30, 2021

September 30, 2021

Fair value measurements in:

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

4 unchanged sentences

Our money market assets are valued using quoted prices in active markets.

See Note 12 for the carrying amount and estimated fair value of our convertible senior notes as of June 30, 2021.

See Note 12 for the carrying amount and estimated fair value of our convertible senior notes as of September 30, 2021.

The contingent consideration liability consisted of the potential earn-out payment related to our acquisition of 85 % of the issued and outstanding capital stock of OpenEye on October 21, 2019.

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Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another.

There were no transfers in or out of Level 3 during the three and six months ended June 30, 2021 and 2020.

There were no transfers in or out of Level 3 during the three and nine months ended September 30, 2021 and 2020.

We also monitor the value of the investments for other-than-temporary impairment on a quarterly basis.

No other-than-temporary impairments occurred during the three and six months ended June 30, 2021 and 2020.

No other-than-temporary impairments occurred during the three and nine months ended September 30, 2021 and 2020.

We lease office space, data centers and office equipment under non-cancelable operating leases with various expiration dates through 2026.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

2 unchanged sentences

Operating lease right-of-use assets obtained in exchange for new operating lease liabilities 1,431 1,998 2,446 8,645

September 30,

2021 December 31,

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(2) Imputed interest was calculated using the incremental borrowing rate applicable for each lease.

We did no t have any finance leases or subleases as of June 30, 2021 or December 31, 2020.

We did no t have any finance leases or subleases as of September 30, 2021 or December 31, 2020.

Our lease agreements do not contain any material residual value guarantees, restrictive covenants or variable lease payments.

Short-term lease costs were immaterial for the three and six months ended June 30, 2021 and 2020.

Short-term lease costs were immaterial for the three and nine months ended September 30, 2021 and 2020.

ALARM.COM HOLDINGS, INC.

1 unchanged sentence

The components of accounts payable, accrued expenses and other current liabilities are as follows (in thousands):

September 30,

2021 December 31,

4 unchanged sentences

The components of other liabilities are as follows (in thousands):

September 30,

2021 December 31,

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Issuance costs attributable to the equity component were netted with the equity component in additional paid-in capital.

As of June 30, 2021, the fair value of our 2026 Notes was $ 467.1 million.

As of September 30, 2021, the fair value of our 2026 Notes was $ 450.0 million.

The fair value was determined based on the quoted price of the 2026 Notes in an inactive market on the last traded day of the quarter and has been classified as Level 2 in the fair value hierarchy.

Based on the closing price of our common stock of $ 84.70 on the last trading day of the quarter, the if-converted value of the 2026 Notes did not exceed the principal amount of $ 500.0 million as of June 30, 2021.

Based on the closing price of our common stock of $ 78.19 on the last trading day of the quarter, the if-converted value of the 2026 Notes did not exceed the principal amount of $ 500.0 million as of September 30, 2021.

The net carrying amount of the liability component of the 2026 Notes is as follows (in thousands):

September 30,

2021 December 31,

6 unchanged sentences

The net carrying amount of the equity component of the 2026 Notes is as follows (in thousands):

September 30,

2021 December 31,

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

12 unchanged sentences

On January 20, 2021, we repaid the entire outstanding principal balance of $ 110.0 million of the 2017 Facility with proceeds from the 2026 Notes.

The 2017 Facility was terminated on January 20, 2021 and we recognized an extinguishment loss of $ 0.2 million in other income / (expense), net in our condensed consolidated statements of operations during the six months ended June 30, 2021 for previously capitalized debt issuance costs related to the 2017 Facility that were unamortized at the time of the termination of the 2017 Facility.

The 2017 Facility was terminated on January 20, 2021 and we recognized an extinguishment loss of $ 0.2 million in other income / (expense), net in our condensed consolidated statements of operations during the nine months ended September 30, 2021 for previously capitalized debt issuance costs related to the 2017 Facility that were unamortized at the time of the termination of the 2017 Facility.

The outstanding principal balance on the 2017 Facility accrued interest at a rate equal to, at our option, either (1) LIBOR, plus an applicable margin based on our consolidated leverage ratio, or (2) the highest of (a) the Wall Street Journal prime rate, (b) the Federal Funds rate plus 0.50 %, or (c) LIBOR plus 1.00 % plus an applicable margin based on our consolidated leverage ratio.

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The 2017 Facility also carried an unused line commitment fee of 0.20 %.

For the six months ended June 30, 2020, the effective interest rate on the 2017 Facility was 3.42 %.

The carrying value of the 2017 Facility was zero and $ 110.0 million as of June 30, 2021 and December 31, 2020, respectively.

For the nine months ended September 30, 2020, the effective interest rate on the 2017 Facility was 2.92 %.

The carrying value of the 2017 Facility was zero and $ 110.0 million as of September 30, 2021 and December 31, 2020, respectively.

The 2017 Facility included a variable interest rate that approximated market rates and, as such, we classified the liability as Level 2 within the fair value hierarchy and determined that the carrying amount of the 2017 Facility approximated its fair value as of December 31, 2020.

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In July 2018, the Federal Circuit issued orders affirming the PTAB’s March 2017 decisions that invalidated all challenged claims of two patents.

District Court, District of Utah lifted the stay on the litigation on June 26, 2017, with Vivint proceeding with its case on four of the six patents in its complaint.

District Court, District of Utah lifted the stay on the litigation on June 26, 2017.

Discovery closed on October 29, 2021.

No trial date has been set.

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Vivint appealed these decisions to the Federal Circuit on July 1, 2020 and April 26, 2021.

On September 29, 2021, the Federal Circuit issued a decision as to one of the reexaminations finding that the PTO erred in granting reexamination and ordered the reexamination dismissed.

On December 20, 2018, the Federal Circuit issued an order regarding the inter partes review of three of the remaining patents in suit that vacated, reversed and remanded the PTAB’s ruling with regard to the construction of a term (“communication device identification code”) as requested by Alarm.com and affirmed the PTAB’s May 2017 rulings invalidating certain of the Vivint patents in all other respects.

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EcoFactor is seeking a permanent limited exclusion order and permanent cease and desist order.

On November 22, 2019, the ITC instituted an investigation into EcoFactor’s allegations naming Alarm.com Incorporated, Alarm.com Holdings, Inc.

and others as respondents.

We answered the complaint on December 19, 2019.

Among other things, we asserted defenses based on non-infringement and invalidity of the

On November 22, 2019, the ITC instituted an investigation into

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

patents in question.

EcoFactor’s allegations naming Alarm.com Incorporated, Alarm.com Holdings, Inc.

and others as respondents.

We answered the complaint on December 19, 2019.

Among other things, we asserted defenses based on non-infringement and invalidity of the patents in question.

An evidentiary hearing was held in November 2020.

1 unchanged sentence

On July 20, 2021, the ITC commissioners issued a decision affirming the ruling in favor of Alarm.com and terminated the investigation.

EcoFactor appealed the ITC decision to the Federal Circuit on September 20, 2021.

On November 11, 2019, EcoFactor filed a lawsuit against us in U.S.

1 unchanged sentence

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

On December 26, 2019, the court issued an order staying the lawsuit pending the conclusion of the related ITC investigation.

On December 26, 2019, the court issued an order staying the lawsuit until the ITC investigation described above is finally resolved.

On May 26, 2020, EcoFactor filed a second lawsuit against us in U.S.

4 unchanged sentences

On May 10, 2021, the PTAB instituted inter partes review of the same patent and subsequently stayed the ex parte reexamination pending the conclusion of its review.

On May 13, 2021, the court issued an order staying the lawsuit until September 3, 2021 in light of the related ITC investigation.

On September 28, 2021, the court issued an order staying the lawsuit in light of EcoFactor’s appeal of the ITC decision and pending lawsuits that EcoFactor brought against other defendants that are scheduled for trial in January 2022.

A joint status report regarding the progress of the related cases is due by March 28, 2022.

Should EcoFactor prevail in its district court lawsuits we could be required to pay damages and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.

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Causam is seeking preliminary and permanent injunctions, enhanced damages and attorneys’ fees.

Our response is due on September 13, 2021.

We have not yet responded to the complaint.

On September 3, 2021, the court issued an order staying the lawsuit until the ITC investigation described below is finally resolved.

On July 28, 2021, Causam filed a complaint with the ITC naming Alarm.com Incorporated, Alarm.com Holdings, Inc., and EnergyHub, Inc., among others, as proposed respondents.

1 unchanged sentence

Causam is seeking a permanent limited exclusion order and permanent cease and desist order.

The ITC has not yet instituted an investigation into the allegations.

On August 27, 2021, the ITC instituted an investigation into Causam’s allegations naming Alarm.com Incorporated, Alarm.com Holdings, Inc., EnergyHub Inc.

and others as respondents.

We answered the complaint on October 4, 2021.

Among other things, we asserted defenses based on non-infringement and invalidity of the patents in question.

The administrative law judge presiding over the hearing has scheduled an evidentiary hearing in the investigation to begin on June 29, 2022.

The target date for completion of the investigation is March 16, 2023.

Should Causam prevail in an ITC investigation, Alarm.com thermostats manufactured abroad could be excluded from importation into the United States.

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For example, we are incurring costs associated with the indemnification of our service provider ADT, LLC in ongoing patent infringement suits.

On July 13, 2016, Applied Capital, Inc., or Applied Capital, filed a lawsuit against ADT, LLC, the ADT Corporation, and Icontrol Networks, Inc.

District Court, the District of New Mexico.

Applied Capital, Inc v.

The ADT Corporation et al., D.

New Mexico Case No.

1-16-cv-00815.

Icontrol was dismissed without prejudice on May 22, 2017.

Applied Capital alleges that ADT’s sales of ADT Pulse directly and indirectly infringes U.S.

8,378,817 and 9,728,082, which were allegedly purchased by Applied Capital.

Applied Capital is seeking damages and attorneys’ fees.

ADT answered Applied Capital’s amended complaint on July 16, 2018.

Among other things, ADT has asserted defenses based on non-infringement and invalidity of the patents-in-suit.

On April 5, 2019, Applied Capital filed a lawsuit for breach of contract against Rodney Fox, the inventor of the patents-in-suit, in the Second Judicial District Court, County of Bernalillo in New Mexico State Court (No.

D-202-CV-2019-02841).

Fox counterclaimed, alleging that he is the rightful owner of the patents-in-suit.

Based on the dispute of ownership, on October 15, 2019, ADT filed a motion to stay in this matter pending its resolution.

Applied Capital and Mr.

Fox reached settlement and stipulated to dismissal of the New Mexico State Court action on October 31, 2019.

Applied Capital filed its Second Amended Complaint on January 27, 2020 and ADT answered, adding a claim of inequitable conduct, on February 10, 2020.

The court issued its claim construction order on August 12, 2019, fact discovery closed on November 12, 2019, expert discovery closed on March 9, 2020, and summary judgment and Daubert motions briefing closed on June 3, 2020.

The parties reached settlement and the court dismissed the case on May 27, 2021.

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

On February 25, 2021, Vivint filed a lawsuit against ADT LLC a/k/a ADT LLC of Delaware d/b/a ADT Security Services in U.S.

3 unchanged sentences

ADT answered the amended complaint on April 30, 2021 and asserted defenses based on non-infringement and invalidity of all the patents in question, and inequitable conduct as to one of the patents.

On June 25, 2021, ADT filed a motion for judgment on the pleadings seeking judgment in its favor as to five of the six asserted patents on the grounds that the claimed inventions are directed to ineligible subject matter.

On June 25, 2021, ADT filed a motion for judgment on the pleadings seeking judgment in its favor as to five of the six asserted patents on the grounds that the claimed inventions are directed to

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

ineligible subject matter.

The motion has been fully briefed and is pending decision.

On August 6, 2021, the parties to the case stipulated to the dismissal of Vivint’s claims as to one of the six patents, leaving five in the case.

Should Vivint prevail on the claims that one or more elements of ADT’s products infringe, we could be required to indemnify ADT for damages in the form of a reasonable royalty or ADT could be enjoined from making, using and selling our solution if a license or other right to continue selling our technology is not made available or we are unable to design around such patents, and required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.

11 unchanged sentences

During the three months ended March 31, 2020, we repurchased 147,153 shares of our common stock under this program for $ 5.1 million, which includes applicable commissions and fees.

No shares were repurchased under this program during the three months ended June 30, 2020.

No shares were repurchased under this program during the three months ended September 30, 2020.

On December 3, 2020, our board of directors authorized another stock repurchase program, under which we are authorized to purchase up to an aggregate of $ 100.0 million of our outstanding common stock during the three-year period ending December 3, 2023.

No shares of our common stock were repurchased under this program during the three and six months ended June 30, 2021.

No shares of our common stock were repurchased under this program during the three and nine months ended September 30, 2021.

Additionally, no shares of our common stock were repurchased under this program from December 3, 2020 to December 31, 2020 .

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

4 unchanged sentences

Tax windfall benefit from stock-based awards $ 1,100 $ 1,658 $ 6,780 $ 3,846

We granted an aggregate of 133,700 stock options pursuant to our 2015 Equity Incentive Plan, or the 2015 Plan, during each of the three and six months ended June 30, 2021, as compared to an aggregate of 136,650 and 141,650 stock options for the same periods in the prior year.

There were 63,083 and 136,258 stock options exercised during the three and six months ended June 30, 2021, respectively, as compared to 194,443 and 258,191 stock options for the same periods in the prior year.

We granted an aggregate of 428,194 and 555,410 restricted stock units during the three and six months ended June 30, 2021, respectively, as compared to an aggregate of 218,344 and 319,072 restricted stock units for the same periods in the prior year.

The restricted stock units granted during the three and six months ended June 30, 2021 included 120,314 of performance-based stock awards.

There were no performance-based restricted stock units granted during the three and six months ended June 30, 2020.

There were 173,553 and 262,923 restricted stock units that vested during the three and six months ended June 30, 2021, respectively, as compared to 64,075 and 87,123 restricted stock units vested during the same periods in the prior year.

There were no performance-based restricted stock units that vested during the three months ended June 30, 2021 and there were 20,000 performance-based restricted stock units that vested during the six months ended June 30, 2021.

There were no performance-based restricted stock units that vested during the three and six months ended June 30, 2020.

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

We granted an aggregate of 7,500 and 141,200 stock options pursuant to our 2015 Equity Incentive Plan, or the 2015 Plan, during the three and nine months ended September 30, 2021, as compared to an aggregate of 2,000 and 143,650 stock options for the same periods in the prior year.

There were 74,932 and 211,190 stock options exercised during the three and nine months ended September 30, 2021, respectively, as compared to 139,225 and 397,416 stock options for the same periods in the prior year.

We granted an aggregate of 173,005 and 728,415 restricted stock units during the three and nine months ended September 30, 2021, respectively, as compared to an aggregate of 169,699 and 488,771 restricted stock units for the same periods in the prior year.

There were no performance-based restricted stock units granted during the three months ended September 30, 2021.

The restricted stock units granted during the nine months ended September 30, 2021 included 120,314 of performance-based stock awards, as compared to 66,000 for the three and nine months ended September 30, 2020.

There were 49,263 and 312,186 restricted stock units that vested during the three and nine months ended September 30, 2021, respectively, as compared to 34,136 and 121,259 restricted stock units vested during the same periods in the prior year.

There were no performance-based restricted stock units that vested during the three months ended September 30, 2021 and there were 20,000 performance-based restricted stock units that vested during the nine months ended September 30, 2021.

There were no performance-based restricted stock units that vested during the three and nine months ended September 30, 2020.

Earnings Per Share

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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The amount of the net income or loss attributable to redeemable noncontrolling interests is recorded in the condensed consolidated statements of operations.

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Since we expect to settle the principal amount on our outstanding 2026 Notes in cash and any excess in cash or shares of our common stock, we use the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable.

The conversion spread has a dilutive impact on diluted net income per share of common stock when the average market price of our common stock for a given period exceeds the conversion price of $ 147.19 per share for the 2026 Notes.

Based on the initial conversion price and the average market price of our common stock for the three and six months ended June 30, 2021, there was no dilutive effect of the 2026 Notes on our earnings per share during the three and six months ended June 30, 2021.

Based on the initial conversion price and the average market price of our common stock for the three and nine months ended September 30, 2021, there was no dilutive effect of the 2026 Notes on our earnings per share during the three and nine months ended September 30, 2021.

Significant Service Providers

During the three and six months ended June 30, 2021, our 10 largest revenue service provider partners accounted for 48 % and 49 % of our consolidated revenue, respectively, as compared to 46 % and 48 % for the same periods in the prior year.

One of our service provider partners within the Alarm.com segment individually represented greater than 10 % but not more than 15 % of our revenue for each of the three and six months ended June 30, 2021.

One of our service provider partners within the Alarm.com segment individually represented greater than 15 % but not more than 20 % of our revenue for each of the three and six months ended June 30, 2020.

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

One service provider partner in the Alarm.com segment represented more than 10% of accounts receivable as of June 30, 2021.

During the three and nine months ended September 30, 2021, our 10 largest revenue service provider partners accounted for 48 % and 49 % of our consolidated revenue, respectively, as compared to 50 % and 49 % for the same periods in the prior year.

One of our service provider partners within the Alarm.com segment individually represented greater than 15 % but not more than 20 % of our revenue for each of the three and nine months ended September 30, 2021 and 2020.

No service provider partner in the Alarm.com segment represented more than 10% of accounts receivable as of September 30, 2021.

Two service provider partners in the Alarm.com segment represented more than 10% of accounts receivable as of December 31, 2020.

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Discrete items that impact the tax provision are recorded in the period incurred.

For the three and six months ended June 30, 2021, we recorded a benefit from income taxes of $ 1.7 million and $ 4.7 million, respectively, resulting in an effective income tax rate of ( 13.6 )% and ( 19.1 )% for those periods.

For the three and six months ended June 30, 2020, we recorded a benefit from income taxes of $ 2.3 million and $ 1.1 million, respectively, resulting in an effective income tax rate of ( 15.9 )% and ( 4.5 )% for those periods.

For the three and nine months ended September 30, 2021, we recorded a provision for income taxes of $ 1.8 million and a benefit from income taxes of $ 2.9 million, respectively, resulting in an effective income tax rate of 11.8 % and ( 7.3 )% for those periods.

For the three and nine months ended September 30, 2020, we recorded a provision for income taxes of $ 6.5 million and $ 5.5 million, respectively, resulting in an effective income tax rate of 15.4 % and 8.2 % for those periods.

Our effective tax rates were below the statutory rate primarily due to research and development tax credits claimed, tax windfall benefits from employee stock-based payment transactions and foreign derived intangible income deductions, partially offset by the impact of state taxes, foreign withholding taxes and other nondeductible expenses.

We recognize a valuation allowance if, based on the weight of available evidence, both positive and negative, it is more likely than not that some portion, or all, of net deferred tax assets will not be realized.

Due to the uncertainty of realization of certain deferred tax assets acquired in 2017 related to our Canadian net operating losses and research and development tax credits, we established a valuation allowance of $ 0.3 million during the second quarter of 2019, which remained at $ 0.3 million as of June 30, 2021 and December 31, 2020.

During 2020, we established a valuation allowance of $ 1.3 million for state research and development tax credit carryforwards, which remained at $ 1.3 million as of June 30, 2021 and December 31, 2020.

During 2020, we established a valuation allowance of $ 1.3 million for state research and development tax credit carryforwards, which remained at $ 1.3 million as of September 30, 2021 and December 31, 2020.

We apply guidance for uncertainty in income taxes that requires the application of a more likely than not threshold to the recognition and de-recognition of uncertain tax positions.

If the recognition threshold is met, this guidance permits us to recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is more likely than not to be realized upon settlement.

We recorded an increase to the unrecognized tax benefits of $ 1.5 million primarily for research and development tax credits claimed during the six months ended June 30, 2021.

We recorded unrecognized tax benefits of $ 1.9 million for research and development tax credits claimed during the six months ended June 30, 2020.

As of June 30, 2021 and December 31, 2020, we accrued $ 0.1 million of total interest expense related to unrecognized tax benefits.

We recorded an increase to the unrecognized tax benefits of $ 2.1 million primarily for research and development tax credits claimed during the nine months ended September 30, 2021.

We recorded an increase to the unrecognized tax benefits of $ 1.1 million for research and development tax credits claimed during the nine months ended September 30, 2020.

Our tax returns are subject to on-going review and examination by various tax authorities.

Tax authorities may not agree with the treatment of items reported in our tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable.

On October 13, 2021, the Internal Revenue Service commenced an examination of our federal income tax return for 2018, which is ongoing.

The anticipated completion date of the Internal Revenue Service examination cannot be estimated at this time.

As of September 30, 2021 and December 31, 2020, we accrued $ 0.1 million of total interest expense related to unrecognized tax benefits.

We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense.

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Segment Information

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Management bases strategic goals and decisions on these segments and the data presented below is used to measure financial results.

Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that contributed 95 % of our revenue for each of the three and six months ended June 30, 2021, as compared to 94 % for the same periods in the prior year.

Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that contributed 94 % and 95 % of our revenue, net of intersegment eliminations, for the three and nine months ended September 30, 2021, respectively, as compared to 94 % for the same periods in the prior year.

Our Other segment is focused on researching, developing and offering residential and commercial automation solutions and energy management products and services in adjacent markets.

4 unchanged sentences

The reportable segment operational data is presented in the tables below (in thousands):

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

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19,968 ( 1,021 ) 244 ( 107 ) 19,084

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

6 unchanged sentences

18,810 ( 889 ) 189 ( 54 ) 18,056

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

6 unchanged sentences

57,130 ( 6,717 ) 632 ( 233 ) 50,812

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

7 unchanged sentences

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

Assets as of June 30, 2021 $ 1,191,907 $ 26,304 $ ( 61,408 ) $ ( 12 ) $ 1,156,791

Assets as of September 30, 2021 $ 1,217,403 $ 28,202 $ ( 63,870 ) $ 19 $ 1,181,754

Assets as of December 31, 2020 763,925 26,739 ( 58,983 ) 6 731,687

Our SaaS and license revenue for the Alarm.com segment included software license revenue of $ 8.3 million and $ 17.0 million for the three and six months ended June 30, 2021, respectively, as compared to $ 9.8 million and $ 19.5 million for the same periods in the prior year.

There was no software license revenue recorded for the Other segment during the three and six months ended June 30, 2021 and 2020.

Depreciation and amortization expense was $ 7.4 million and $ 14.7 million for the Alarm.com segment for the three and six months ended June 30, 2021, respectively, as compared to $ 6.7 million and $ 13.1 million for the same periods in the prior year.

Depreciation and amortization expense was $ 0.1 million and $ 0.2 million for the Other segment for the three and six months ended June 30, 2021, respectively, as compared to less than $ 0.1 million for the same periods in the prior year.

Additions to property and equipment were $ 2.7 million and $ 6.2 million for the Alarm.com segment for the three and six months ended

Our SaaS and license revenue for the Alarm.com segment included software license revenue of $ 7.9 million and $ 24.9 million for the three and nine months ended September 30, 2021, respectively, as compared to $ 9.5 million and $ 29.0 million for the same periods in the prior year.

There was no software license revenue recorded for the Other segment during the three and nine months ended September 30, 2021 and 2020.

Depreciation and amortization expense was $ 7.3 million and $ 22.0 million for the Alarm.com segment for the three and nine months ended September 30, 2021, respectively, as compared to $ 6.7 million and $ 19.8 million for the same periods in the prior year.

Depreciation and amortization expense was $ 0.1 million and $ 0.3 million for the Other segment for the three and nine months ended September 30, 2021, respectively, as compared to $ 0.1 million and $ 0.2 million for the same periods in the prior year.

Additions to property and equipment were $ 1.2 million and $ 7.4 million for the Alarm.com segment for the three and nine

ALARM.COM HOLDINGS, INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited) — (Continued)

June 30, 2021, respectively, as compared to $ 3.9 million and $ 6.5 million for the same periods in the prior year.

Additions to property and equipment were $ 0.1 million for the Other segment for each of the three and six months ended June 30, 2021, as compared to $ 0.1 million and $ 0.9 million for the same periods in the prior year.

We derived substantially all revenue from North America for the three and six months ended June 30, 2021 and 2020.

Substantially all of our long-lived assets were in North America as of June 30, 2021 and December 31, 2020.

months ended September 30, 2021, respectively, as compared to $ 4.7 million and $ 11.2 million for the same periods in the prior year.

Additions to property and equipment were $ 0.2 million and $ 0.3 million for the Other segment for the three and nine months ended September 30, 2021, respectively, as compared to $ 0.1 million and $ 1.0 million for the same periods in the prior year.

We derived substantially all revenue from North America for the three and nine months ended September 30, 2021 and 2020.

Substantially all of our long-lived assets were in North America as of September 30, 2021 and December 31, 2020.

Related Party Transactions

2 unchanged sentences

We account for this investment using the equity method.

As of June 30, 2021 and December 31, 2020, our investment balance in our installation partner was zero .

During the three and six months ended June 30, 2021 and 2020, we recorded $ 0.1 million and $ 0.2 million of cost of hardware and other revenue in connection with this installation partner, respectively.

As of June 30, 2021 and December 31, 2020, the accounts payable balance to our installation partner was less than $ 0.1 million.

As of September 30, 2021 and December 31, 2020, our investment balance in our installation partner was zero .

During the three and nine months ended September 30, 2021, we recorded $ 0.1 million and $ 0.2 million of cost of hardware and other revenue in connection with this installation partner, respectively, as compared to $ 0.1 million and $ 0.3 million for the same periods in the prior year.

As of September 30, 2021 and December 31, 2020, the accounts payable balance to our installation partner was less than $ 0.1 million.

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 1. Financial Statements