What changed in this filing

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Item 1. Financial Statements

2024-05-10 compared with 2023-11-09 · 213 added, 467 removed, 555 unchanged (55% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

SaaS and license revenue $ 150,344 $ 135,394

14 unchanged sentences

Interest income 8,540 5,182

Other (expense) / income, net ( 435 ) ( 76 ) ( 1,214 ) 42

Other expense, net ( 318 ) ( 148 )

Income before income taxes 26,151 12,985

Provision for income taxes 3,972 246 9,257 472

Provision for / (benefit from) income taxes 2,747 ( 1,222 )

Net income 23,404 14,207

15 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 23,404 $ 14,207

9 unchanged sentences

(in thousands, except share and per share data)

September 30,

2024 December 31,

1 unchanged sentence

Cash and cash equivalents $ 747,877 $ 696,983

Accounts receivable, net of allowance for credit losses of $ 3,856 and $ 2,835 , and net of allowance for product returns of $ 2,175 and $ 1,551 as of September 30, 2023 and December 31, 2022, respectively

Accounts receivable, net of allowance for credit losses of $ 4,054 and $ 3,864 , and net of allowance for product returns of $ 2,595 and $ 2,279 as of March 31, 2024 and December 31, 2023, respectively

128,451 130,626

Inventory 85,723 96,140

Other current assets, net of allowance for credit losses of $ 0 as of September 30, 2023 and December 31, 2022

26,685 29,056

Other current assets, net 35,812 33,031

Total current assets 997,863 956,780

4 unchanged sentences

Operating lease right-of-use assets 24,324 24,242

Other assets, net of allowance for credit losses of $ 2 as of September 30, 2023 and December 31, 2022

Other assets, net of allowance for credit losses of $ 4,003 and $ 5 as of March 31, 2024 and December 31, 2023, respectively

35,381 39,500

16 unchanged sentences

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

no shares issued and outstanding as of September 30, 2023 and December 31, 2022

no shares issued and outstanding as of March 31, 2024 and December 31, 2023

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

52,113,344 and 51,888,838 shares issued;

and 49,915,713 and 49,452,709 shares outstanding as of September 30, 2023 and December 31, 2022, respectively

and 50,092,681 and 49,868,175 shares outstanding as of March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 547,832 531,734

Treasury stock, at cost;

1,772,285 and 1,532,745 shares as of September 30, 2023 and December 31, 2022, respectively

2,020,663 shares as of March 31, 2024 and December 31, 2023

( 111,291 ) ( 111,291 )

7 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Cash flows from operating activities:

Three Months Ended

Cash flows from / (used in) operating activities:

Net income $ 23,404 $ 14,207

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

Adjustments to reconcile net income to net cash flows from / (used in) operating activities:

Provision for credit losses on accounts receivable 254 540

Reserve for product returns 1,149 1,151

Recovery of credit losses on notes receivable — ( 77 )

Inventory write-down 1,181 —

Provision for credit losses on notes receivable 3,998 —

Amortization on patents and tooling 220 316

5 unchanged sentences

Stock-based compensation 11,268 12,686

Gain on investment — ( 140 )

Changes in operating assets and liabilities (net of business acquisitions):

6 unchanged sentences

Other liabilities ( 1,007 ) ( 3,511 )

Cash flows from operating activities 96,093 22,455

Cash flows from / (used in) operating activities 49,853 ( 3,521 )

Cash flows used in investing activities:

5 unchanged sentences

Purchase of investment in unconsolidated entity — ( 200 )

Proceeds from sale of investment — 140

Purchases of developed technology and other assets ( 5,915 ) —

Cash flows used in investing activities ( 3,961 ) ( 12,943 )

Cash flows used in financing activities:

Payments of deferred consideration for acquisitions ( 1,672 ) —

Purchases of treasury stock, including transaction costs ( 12,854 ) ( 51,866 )

Purchases of redeemable noncontrolling interest ( 832 ) —

Cash flows from financing activities:

Payments of acquired debt — ( 469 )

Issuances of common stock from equity-based plans 6,356 1,311

Cash flows used in financing activities ( 15,245 ) ( 48,475 )

Cash flows from financing activities 6,356 842

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 180 ) 13

18 unchanged sentences

Net income / (loss) attributable to common stockholders ( 191 ) — — — — — — 23,595 23,595

Other comprehensive income — — — — — — 170 — 170

Balance as of March 31, 2023 $ 25,840 51,255 $ 513 $ 509,132 1,533 $ ( 83,993 ) $ 170 $ 199,559 $ 625,381

Common stock issued in connection with equity-based plans — 270 2 200 — — — — 202

Purchase of treasury stock — — — — 134 ( 6,726 ) — — ( 6,726 )

Stock-based compensation expense — — — 11,965 — — — — 11,965

Purchases of redeemable noncontrolling interest ( 1,238 ) — — 406 — — — — 406

Accretion adjustments of redeemable noncontrolling interest to redemption value 3,454 — — ( 3,454 ) — — — — ( 3,454 )

Net income / (loss) attributable to common stockholders ( 188 ) — — — — — — 15,799 15,799

Other comprehensive income — — — — — — 658 — 658

Balance as of June 30, 2023 $ 27,868 51,525 $ 515 $ 518,249 1,667 $ ( 90,719 ) $ 828 $ 215,358 $ 644,231

Common stock issued in connection with equity-based plans — 163 2 1,614 — — — — 1,616

Purchase of treasury stock — — — — 105 ( 6,128 ) — — ( 6,128 )

Stock-based compensation expense — — — 11,854 — — — — 11,854

Accretion adjustments of redeemable noncontrolling interests to redemption values 2,647 — — ( 2,647 ) — — — — ( 2,647 )

Net income / (loss) attributable to common stockholders ( 173 ) — — — — — — 19,524 19,524

Other comprehensive loss — — — — — — ( 147 ) — ( 147 )

Balance as of September 30, 2023 $ 30,342 51,688 $ 517 $ 529,070 1,772 $ ( 96,847 ) $ 76 $ 234,882 $ 667,698

ALARM.COM HOLDINGS, INC.

Condensed Consolidated Statements of Equity — (Continued)

(in thousands)

Redeemable Noncontrolling Interests Common Stock Additional Paid-In Capital Treasury Stock Retained Earnings Total Stockholders’ Equity

Balance as of March 31, 2024 $ 37,712 52,113 $ 521 $ 547,832 2,021 $ ( 111,291 ) $ 1,251 $ 289,781 $ 728,094

Redeemable Noncontrolling Interests Common Stock Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income Retained Earnings Total Stockholders’ Equity

Shares Amount Shares Amount

Balance as of December 31, 2022 $ 23,988 50,985 $ 510 $ 497,199 1,533 $ ( 83,993 ) $ — $ 185,143 $ 598,859

Adoption of accounting standard on debt with conversion and other options — — — ( 56,515 ) — — 9,972 ( 46,543 )

Common stock issued in connection with equity-based plans — 270 3 1,308 — — — — 1,311

Purchase of treasury stock — — — — 354 ( 23,331 ) — ( 23,331 )

Stock-based compensation expense — — — 12,686 — — — — 12,686

1 unchanged sentence

Net income / (loss) attributable to common stockholders ( 209 ) — — — — — — 14,416 14,416

Other comprehensive income — — — — — — 170 — 170

Balance as of March 31, 2023 $ 25,840 51,255 $ 513 $ 509,132 1,533 $ ( 83,993 ) $ 170 $ 199,559 $ 625,381

Common stock issued in connection with equity-based plans — 205 2 581 — — — 583

Purchase of treasury stock — — — — 481 ( 28,168 ) — ( 28,168 )

Reclassification of subsidiary long-term incentive plan liability related to modification — — — 3,104 — — — 3,104

Stock-based compensation expense — — — 12,789 — — — 12,789

Accretion adjustments of redeemable noncontrolling interest to redemption value 860 — — ( 860 ) — — — ( 860 )

Net income / (loss) attributable to common stockholders ( 14 ) — — — — — 10,842 10,842

Balance as of June 30, 2022 $ 16,127 50,697 $ 507 $ 468,698 982 $ ( 56,648 ) $ 148,726 $ 561,283

Common stock issued in connection with equity-based plans — 150 1 1,727 — — — 1,728

Purchase of treasury stock — — — — 5 ( 367 ) — ( 367 )

Stock-based compensation expense — — — 13,154 — — — 13,154

Noncontrolling interest assumed through acquisition 6,770 — — — — — — —

Accretion adjustments of redeemable noncontrolling interest to redemption value 354 — — ( 354 ) — — — ( 354 )

Net income / (loss) attributable to common stockholders ( 222 ) — — — — — 18,332 18,332

Balance as of September 30, 2022 $ 23,029 50,847 $ 508 $ 483,225 987 $ ( 57,015 ) $ 167,058 $ 593,776

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2023 and 2022

March 31, 2024 and 2023

Alarm.com Holdings, Inc.

3 unchanged sentences

Our solutions are delivered through an established network of trusted service provider partners, who are experts at selling, installing and supporting our solutions.

The number of our service provider partners exceeded 11,000 as of December 31, 2022.

We derive revenue from the sale of our cloud-based Software-as-a-Service, or SaaS, services, license fees, software, hardware, activation fees and other revenue.

8 unchanged sentences

In the opinion of management, these condensed consolidated financial statements include all normal recurring adjustments necessary for a fair statement of the results of operations, financial position and cash flows for the periods presented.

However, the global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of significant worldwide events, including public health crises, such as the COVID-19 pandemic, and geopolitical upheaval, such as Russia’s incursion into Ukraine and the war between Israel and Hamas, disruptions to global supply chains, rising interest rates, risk of recession and inflation (collectively, the Macroeconomic Conditions).

However, the global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of significant worldwide events, including public health crises, and geopolitical upheaval, such as Russia’s incursion into Ukraine and the conflict between Israel and regional adversaries, disruptions to global supply chains, rising interest rates, risk of recession and inflation (collectively, the Macroeconomic Conditions).

These Macroeconomic Conditions have and may continue to create supply chain disruptions, inventory disruptions, and fluctuations in economic growth, including fluctuations in employment rates, inflation, energy prices and consumer sentiment.

It remains difficult to assess or predict the ultimate duration and economic impact of the Macroeconomic Conditions.

The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2023, which is increasingly true in periods of extreme uncertainty, such as the uncertainty caused by the Macroeconomic Conditions.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2024, which is increasingly true in periods of extreme uncertainty, such as the uncertainty caused by the Macroeconomic Conditions.

Prolonged uncertainties could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.

4 unchanged sentences

Because of the use of estimates inherent in the financial reporting process and in light of the continuing uncertainty arising from the Macroeconomic Conditions, actual results could differ from those estimates and any such differences may be material.

Estimates are used when accounting for revenue recognition, allowances for credit losses, allowance for hardware returns, estimates of obsolete inventory, long-term incentive compensation, the lease term and incremental borrowing rates for leases, stock-based compensation, income taxes, legal reserves and goodwill, intangible assets and other long-lived assets.

Estimates are used when accounting for revenue recognition, allowances for credit losses, allowance for hardware returns, estimates of obsolete inventory, long-term incentive compensation, the lease term and incremental borrowing rates for leases, stock-based compensation, income taxes, legal reserves, goodwill, intangible assets and other long-lived assets.

Significant Accounting Policies

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, 2023 from those disclosed in our Annual Report.

There have been no material changes to our significant accounting policies during the three months ended March 31, 2024 from those disclosed in our Annual Report.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income.

Other comprehensive (loss) / income refers to gains and losses that are recorded as an element of stockholders' equity and excluded from net income.

Our other comprehensive (loss) / income consists of foreign currency translation adjustments.

Foreign Currency

For foreign operations where substantially all monetary transactions are in the local currency, we use the local currency as our functional currency.

For these foreign operations, assets and liabilities are translated at period-end exchange rates and revenue and expense items are translated at weighted-average exchange rates prevailing during the periods being reported.

The effects of translating financial statements of foreign operations into our reporting currency are recognized as a cumulative translation adjustment within accumulated other comprehensive income, a separate component of stockholders’ equity.

Gains or losses from foreign currency remeasurements that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in our results of operations.

Redeemable Noncontrolling Interests

Noncontrolling interests with redemption features that are not solely within our control are considered redeemable noncontrolling interests.

Our redeemable noncontrolling interests relate to our 86 % equity ownership interest in PC Open Incorporated, a Washington corporation, doing business as OpenEye and our 85 % equity ownership interest in Noonlight, Inc., or Noonlight, a Delaware corporation.

The OpenEye and Noonlight stockholder agreements contain a put option that gives the minority stockholders the right to sell their shares to us based on the fair value of the shares and also contain a call option that gives us the right to purchase the remaining shares from the minority stockholders based on the fair value of the shares.

The next put and call options related to OpenEye can each be exercised beginning in the first quarter of 2024.

The put and call options related to Noonlight can each be exercised beginning in the first quarter of 2026.

These redeemable noncontrolling interests are considered temporary equity and we report them between liabilities and stockholders’ equity in the condensed consolidated balance sheets.

The amount of the net income or loss attributable to the redeemable noncontrolling interests is recorded in the condensed consolidated statements of operations and the accretion of the redemption values is recorded as an adjustment to additional paid-in capital.

We account for purchases of redeemable noncontrolling interest as a component of stockholders' equity when control is maintained.

We recognize the difference between the consideration paid for the acquired redeemable noncontrolling interest and the fair value of the acquired redeemable noncontrolling interest as an adjustment to additional paid-in capital.

March 31, 2024 and 2023

Recent Accounting Pronouncements

During the three months ended March 31, 2024, we did not adopt any new accounting pronouncements.

Not Yet Adopted

On November 27, 2023, the Financial Accounting Standards Board, or FASB, issued ASU 2023-07, "Segment Reporting (Topic 280),” which revises the disclosure requirements about a public entity’s reportable segments and a reportable segment’s expenses.

This amendment requires a public entity to (i) disclose significant segment expense that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, (ii) disclose an amount for other segment items by reportable segment and a description of its composition and (iii) provide annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods.

The amendment is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

This amendment is required to be applied retrospectively to all prior periods presented.

We are currently assessing the impact this pronouncement will have on our consolidated financial statement disclosures.

On December 14, 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740)," which requires additional annual disclosures regarding specific categories in the income tax rate reconciliation as well additional information for reconciling items that meet a quantitative threshold.

This amendment also requires annual disclosures regarding the amount of income taxes paid, including income taxes paid disaggregated by (i) federal, state and foreign taxes as well as (ii) individual jurisdictions in which income taxes paid is equal to or greater than five percent of total income taxes paid.

Additionally, this amendment requires annual disclosures for income from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign as well as income tax expense (or benefit) disaggregated between federal, state and foreign.

The amendment is effective for annual periods beginning after December 15, 2024, and early adoption is permitted.

This amendment should be applied on a prospective basis, but retrospective application is permitted.

We are currently assessing the impact this pronouncement will have on our consolidated financial statement disclosures.

Revenue from Contracts with Customers

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Beginning of period balance $ 9,099 $ 13,975

Commission costs and upfront payments to a customer capitalized in period 3,112 1,673

Reimbursement of previously capitalized upfront payments to customers

( 6,774 ) — ( 6,774 ) —

Amortization of contract assets ( 1,745 ) ( 1,769 )

End of period balance $ 10,466 $ 13,879

On July 27, 2023, we received $ 6.9 million in cash related to the reimbursement of previously capitalized upfront payments to a customer.

On the date of payment, the $ 6.8 million unamortized portion of the contract asset balance was reduced to zero and the remaining amount of $ 0.1 million recorded as an increase to SaaS and license revenue.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

Contract Liabilities

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Beginning of period balance $ 22,885 $ 18,332

2 unchanged sentences

End of period balance $ 24,212 $ 20,231

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

Accounts Receivable, Net

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

September 30,

2024 December 31,

3 unchanged sentences

Accounts receivable, net $ 128,451 $ 130,626

For the three and nine months ended September 30, 2023, we recorded a provision for credit losses of $ 0.8 million and $ 1.4 million, respectively, as compared to $ 1.1 million and $ 1.6 million for the same periods in the prior year.

For the three and nine months ended September 30, 2023, we recorded a reserve for product returns of $ 0.5 million and $ 3.0 million in our hardware and other revenue, respectively, as compared to $ 2.0 million and $ 3.7 million for the same periods in the prior year.

For the three months ended March 31, 2024, we recorded a provision for credit losses of $ 0.3 million, as compared to $ 0.5 million for the same period in the prior year.

For the three months ended March 31, 2024, we recorded a reserve for product returns of $ 1.1 million in our hardware and other revenue, as compared to $ 1.2 million for the same period 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 nine months ended September 30, 2023, and no changes to our policies or practices that influenced our estimate of expected credit losses for accounts receivable.

Additionally, there were no significant changes in the amount of accounts receivable write-offs during the three and nine months ended September 30, 2023, as compared to historical periods.

There were no changes to our portfolio segments for our accounts receivable during the three months ended March 31, 2024, and no changes to our policies or practices that influenced our estimate of expected credit losses for accounts receivable.

Additionally, there were no significant changes in the amount of accounts receivable write-offs during the three months ended March 31, 2024, as compared to historical periods.

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 nine months ended September 30, 2023, we recorded credit loss expense for accounts receivable and notes receivable of $ 0.6 million and $ 1.1 million, respectively, in general and administrative expense in our condensed consolidated statements of operations.

For the three and nine months ended September 30, 2022, we recorded credit loss expense of $ 1.0 million and $ 1.3 million, respectively, in general and administrative expense in our condensed consolidated statements of operations.

For the three months ended March 31, 2024 and 2023, we recorded credit loss expense for accounts receivable and notes receivable of $ 4.0 million and $ 0.5 million, respectively, 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

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

allowance for credit losses.

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.

1 unchanged sentence

Three Months Ended

September 30, 2023 Three Months Ended

September 30, 2022 Nine Months Ended

September 30, 2023 Nine Months Ended

September 30, 2022

Subsidiaries All Other

Subsidiaries Alarm.com

Subsidiaries All Other

Subsidiaries Alarm.com

March 31, 2024 Three Months Ended

March 31, 2023

Subsidiaries All Other

5 unchanged sentences

End of period balance $ ( 3,966 ) $ ( 88 ) $ ( 3,102 ) $ ( 97 )

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

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

September 30,

2024 December 31,

3 unchanged sentences

Total inventory $ 85,723 $ 96,140

Inventory values include a write-down of $ 1.2 million during the nine months ended September 30, 2023, which is reflected in cost of hardware and other revenue within our condensed consolidated statements of operations.

The inventory write-down is the result of a lower of cost or net realizable value adjustment for finished goods.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

Inventory values are net of a write-down of $ 1.4 million during the year ended December 31, 2023, which is reflected in cost of hardware and other revenue within our condensed consolidated statements of operations.

The inventory write-down was the result of a lower of cost or net realizable value adjustment for finished goods.

Asset Acquisition

14 unchanged sentences

The purchase price allocation was finalized during the third quarter of 2023.

The overall impacts to our condensed consolidated financial statements were not considered material for the three and nine months ended September 30, 2023.

Acquisition of a Business - Noonlight

On September 23, 2022, Alarm.com Incorporated acquired 85 % of the issued and outstanding shares of capital stock of Noonlight.

Noonlight provides a connected safety and event management software and services platform that enables new applications and provides enhanced emergency response capabilities.

We believe the acquisition of Noonlight will enhance our comprehensive suite of interactive cloud-based services and allow us to expand markets for emergency response services as well as accelerate innovation in those services.

In consideration for the purchase of 85 % of the issued and outstanding shares of capital stock of Noonlight, we paid $ 31.9 million in cash on September 23, 2022, after deducting $ 1.5 million related to an outstanding loan issued to Noonlight during May 2022 and $ 4.9 million related to agreed holdback provisions.

The working capital adjustment was finalized during the first quarter of 2023 and $ 0.4 million was paid during the second quarter of 2023.

The remaining amount of the holdback of $ 4.6 million is expected to be paid to the stockholders of Noonlight by the end of the first quarte r of 2024, subject to off set for any indemnification obligations.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

The table below sets forth the purchase consideration and the fair value allocation of the tangible and intangible net assets acquired (in thousands):

September 23, 2022

Calculation of Purchase Consideration:

Cash paid, net of working capital adjustment $ 31,805

Outstanding principal and interest of loan provided to Noonlight 1,537

Holdback consideration 4,910

Total consideration $ 38,252

Tangible and Intangible Net Assets:

Accounts receivable 291

Other current and non-current assets 200

Property and equipment 45

Deferred tax assets 424

Developed technology 9,335

Trade names 150

Accounts payable ( 321 )

Accrued expenses and other current liabilities ( 318 )

Deferred revenue ( 67 )

Redeemable noncontrolling interest ( 6,770 )

Goodwill 35,095

Total tangible and intangible net assets $ 38,252

Goodwill of $ 35.1 million reflects the value of acquired workforce and synergies we expect to achieve from integrating Noonlight's suite of emergency response cloud-managed application program interfaces into our existing comprehensive suite of interactive cloud-based services.

None of the goodwill recognized is expected to be deductible for income tax purposes in future periods.

We allocate goodwill to reporting units based on expected benefit from synergies and have allocated the goodwill to the Alarm.com segment.

Fair Value of Net Assets Acquired and Intangibles

The acquired activities and assets in the purchase of Noonlight constituted a business and with the exception of contract liabilities accounted for under Topic 606, in accordance with Accounting Standards Codification, or ASC 805, " Business Combinations ," the assets and liabilities were recorded at their respective fair values as of September 23, 2022.

We developed the fair value of intangible net assets using a multi-period excess earnings method for developed technology and the relief from royalty method for the trade name.

Developed Technology

Developed technology primarily consists of intellectual property of proprietary software that is marketed for sale.

We valued the developed technology using the multi-period excess earnings method, an income approach.

The significant assumptions used in the income approach include estimates about future expected cash flows from the developed technology, the obsolescence factor and the discount rate.

We are amortizing the Noonlight developed technology, valued at $ 9.3 million, on an attribution method based on the discounted cash flows of the model over an estimated useful life of seven years .

We valued the trade names acquired using a relief from royalty method.

The significant assumptions used in the income approach include future expected cash flows from the trade name, the royalty rate and the discount rate.

We are amortizing the trade names, valued at $ 0.2 million, on an attribution basis derived from the discounted cash flows of the model over an estimated useful life of five years .

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

Redeemable Noncontrolling Interest

We have a redeemable noncontrolling interest related to our 85 % equity ownership interest in Noonlight.

The Noonlight stockholder agreement contains a put option that gives the minority Noonlight stockholders the right to sell their remaining 15 % equity ownership interest to us based on the fair value of the shares and also contains a call option that gives us the right to purchase the remaining Noonlight shares from the minority Noonlight stockholders based on the fair value of the shares.

The put and call options can each be exercised beginning in the first quarter of 2026.

This redeemable noncontrolling interest was recorded at fair value on September 23, 2022, by applying the income approach using unobservable inputs for projected cash flows, including projected financial results and a discount rate, which are considered Level 3 inputs.

This redeemable noncontrolling interest is considered temporary equity and we report it between liabilities and stockholders’ equity in the condensed consolidated balance sheets.

The redemption value of the Noonlight noncontrolling interest was $ 6.8 million as of September 23, 2022 and $ 6.5 million as of September 30, 2023.

Business Combinations in Operations - Noonlight

The operations of the Noonlight business combination discussed above were included in the condensed consolidated financial statements as of the acquisition date.

The pro forma information as well as the revenue and net losses of the business combination were not material to the condensed consolidated financial statements in the year of acquisition.

The overall impacts to our condensed consolidated financial statements were not considered material during the year of the acquisition .

Goodwill and Intangible Assets, Net

3 unchanged sentences

$ 154,498 $ — $ 154,498

Goodwill acquired 7,200 — 7,200

Measurement period adjustments ( 1,509 ) — ( 1,509 )

Foreign currency translation adjustment ( 65 ) — ( 65 )

Balance as of September 30, 2023 $ 153,847 $ — $ 153,847

On January 18, 2023, we acquired 100 % of the issued and outstanding shares of capital stock of EBS and initially recorded $ 7.2 million of goodwill in the Alarm.com segment.

The measurement period adjustments relate to the Noonlight and EBS working capital and tax adjustments during the three and nine months ended September 30, 2023.

Balance as of March 31, 2024 $ 154,433 $ — $ 154,433

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

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

6 unchanged sentences

Amortization ( 2,417 ) ( 2,053 ) ( 207 ) ( 8 ) ( 4,685 )

Balance as of September 30, 2023 $ 41,776 $ 38,968 $ 1,357 $ 397 $ 82,498

We recorded $ 5.6 million and $ 14.9 million of amortization related to our intangible assets for the three and nine months ended September 30, 2023, respectively, as compared to $ 4.6 million and $ 13.7 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, 2023 and 2022.

During the nine months ended September 30, 2022, we wrote-off $ 0.7 million in fully amortized intangible assets in the Alarm.com segment that were acquired in 2014 related to customer relationships, developed technology, trade name and other intangible assets that no longer existed as of January 1, 2022.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

Balance as of March 31, 2024 $ 36,877 $ 35,121 $ 1,010 $ 1,350 $ 74,358

We recorded $ 4.7 million of amortization related to our intangible assets for the three months ended March 31, 2024, as compared to $ 4.6 million for the same period in the prior year.

There were no impairments of long-lived intangible assets during the three months ended March 31, 2024 and 2023.

During the three months ended March 31, 2024, $ 0.3 million of fully amortized developed technology intangible assets previously acquired were written-off in the Alarm.com segment as the technology was no longer in use.

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

September 30, 2023

March 31, 2024

Amount Accumulated

15 unchanged sentences

Trade name 4,474 ( 3,257 ) 1,217 2.6

Capitalized software development costs 882 ( 3 ) 879 3.3

Total intangible assets $ 203,697 $ ( 125,133 ) $ 78,564 5.4

Loan to a Distribution Partner

In December 2022, we amended a subordinated credit agreement with the affiliated entity of one of our distribution partners.

The amended subordinated credit agreement with the affiliated entity of the distribution partner matures on June 18, 2027 and interest on the outstanding principal balance accrues at a rate of 12.0 % per annum and is payable in kind.

As of September 30, 2023 and December 31, 2022, $ 4.4 million and $ 4.0 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, 2023, we recognized $ 0.9 million and $ 2.5 million of revenue from the distribution partner associated with this loan, respectively, as compared to $ 0.8 million and $ 2.3 million for the same periods in the prior year.

In December 2022, we amended a subordinated credit agreement with the affiliated entity of one of our distribution partners, or the Affiliate.

The amended subordinated credit agreement with the Affiliate matures on June 18, 2027 and interest on the outstanding principal balance accrues at a rate of 12.0 % per annum and is payable in kind.

In March 2024, the Affiliate was in default on a loan arrangement with one of its third party secured lenders.

Based on this information from the Affiliate, during the three months ended March 31, 2024, we recorded a credit loss expense of $ 4.0 million in general and administrative expense and recorded a reduction to our interest income of $ 0.5 million related to the reversal of payable in kind interest associated with the subordinated credit agreement.

We placed this loan in nonaccrual status as of March 31, 2024.

As of March 31, 2024, the $ 4.0 million outstanding notes receivable balance had a full allowance for credit losses.

As of December 31, 2023, $ 4.5 million of the notes receivable balance related to the subordinated credit agreement was included in other assets in our condensed consolidated balance sheet.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

March 31, 2024 and 2023

For the three months ended March 31, 2024, we recognized $ 0.7 million of revenue from the distribution partner associated with this loan, as compared to $ 0.8 million for the same period in the prior year.

Loan to a Service Provider Partner

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

As of September 30, 2023 and December 31, 2022, $ 1.1 million of principal was outstanding from the service provider partner under the loan agreement.

For three and nine months ended September 30, 2023 and 2022, we recognized less than $ 0.1 million and $ 0.1 million, respectively, of revenue from the service provider partner associated with this loan.

As of March 31, 2024 and December 31, 2023, $ 1.0 million of principal was outstanding from the service provider partner under the loan agreement.

For the three months ended March 31, 2024 and 2023, we recognized less than $ 0.1 million of revenue from the service provider partner associated with this loan.

Loan to a Technology Partner

2 unchanged sentences

Interest and principal payments are due on the maturity date of the loan, which is June 27, 2029, unless the loan is converted prior to the maturity date, which may occur upon a qualified financing event, as defined in the convertible promissory note, upon a sale of the technology partner or upon our election on the maturity date of the loan.

As of September 30, 2023 and December 31, 2022, $ 1.5 million of principal was outstanding from the technology partner under the convertible promissory note.

For the three and nine months ended September 30, 2023 and 2022, we did not record any revenue from the technology partner associated with this convertible promissory note.

As of March 31, 2024 and December 31, 2023, $ 1.5 million of principal was outstanding from the technology partner under the convertible promissory note.

For the three months ended March 31, 2024 and 2023, we did not record any revenue from the technology partner associated with this convertible promissory note.

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 September 30, 2023 and December 31, 2022, our investment in the hardware supplier was $ 5.6 million.

As of March 31, 2024 and December 31, 2023, our investment in the hardware supplier was $ 5.6 million.

Investments in Technology Partners

2 unchanged sentences

Under the measurement 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 September 30, 2023 and December 31, 2022, our investment in the technology partner was $ 5.7 million.

As of March 31, 2024 and December 31, 2023, our investment in the technology partner was $ 5.7 million.

In December 2022, we paid $ 5.1 million in cash to another technology partner to purchase 4,231,717 shares of its Series A Preferred Stock.

The $ 5.1 million equity investment, which is included in the Alarm.com segment, does not meet the criteria for consolidation and is accounted for using the measurement alternative.

As of September 30, 2023 and December 31, 2022, our investment in the technology partner was $ 5.1 million.

As of March 31, 2024 and December 31, 2023, our investment in the technology partner was $ 5.1 million.

Allowance for Credit Losses - Notes Receivable

We identified the following two portfolio segments for our notes receivable:

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

There were no changes to our portfolio segments for our notes receivable during the three and nine months ended September 30, 2023, 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 hardware financing receivables outstanding as of September 30, 2023 and December 31, 2022.

We identified one portfolio segment, loan receivables, for our notes receivable.

We previously disclosed a hardware financing receivable portfolio segment;

however, there has been no activity within that portfolio segment since 2022.

There were 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 during the three months ended March 31, 2024.

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.

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Notes receivable may be placed on nonaccrual status earlier if, in management’s opinion, a timely collection of the full principal and interest becomes uncertain.

After a note receivable has been placed on nonaccrual status, interest will be recognized when cash is received.

A note receivable may be returned to accrual status after all of the customer’s delinquent balances of principal and interest have been settled, and collection of all remaining contractual amounts due is reasonably assured.

We have elected not to measure an allowance for credit losses for accrued interest receivables .

We write-off any accrued interest on notes receivable

After a note receivable has been placed on nonaccrual status, interest will be recognized when cash

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

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 September 30, 2023 and December 31, 2022 was less than $ 0.1 million, and is reflected in other current assets and other 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, 2023 and 2022.

There were no purchases or sales of financial assets during the three and nine months ended September 30, 2023 and 2022.

There were no significant changes in the amount of note receivable write-offs during the three and nine months ended September 30, 2023, as compared to historical periods.

March 31, 2024 and 2023

We have elected not to measure an allowance for credit losses for accrued interest receivables .

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 March 31, 2024 and December 31, 2023 was $ 0.1 million, and is reflected in other current assets and other assets within our condensed consolidated balance sheets and excluded from the amortized cost basis of the notes receivable .

During the three months ended March 31, 2024, we recorded a reduction to our interest income of $ 0.5 million related to the reversal of payable in kind interest associated with a subordinated credit agreement with the Affiliate.

We did not write-off any accrued interest receivable during the three months ended March 31, 2023.

There were no purchases or sales of financial assets during the three months ended March 31, 2024 and 2023.

There were no significant changes in the amount of note receivable write-offs during the three months ended March 31, 2024, as compared to historical periods.

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

Three Months Ended

September 30, 2023 Three Months Ended

September 30, 2022 Nine Months Ended

September 30, 2023 Nine Months Ended

September 30, 2022

Receivables Hardware

Receivables Loan

Receivables Hardware

Receivables Loan

Receivables Hardware

Receivables Loan

Receivables Hardware

March 31, 2024 Three Months Ended

March 31, 2023

Beginning of period balance $ ( 5 ) $ ( 2 )

Recovery of / (provision for) expected credit losses — — ( 1 ) — — — 76 1

Provision for expected credit losses

Write-offs — —

2 unchanged sentences

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

September 30, 2023

March 31, 2024

Loan Receivables:

15 unchanged sentences

Total $ 150 $ 1,500 $ — $ 1,039 $ — $ 4,524 $ 7,213

There were no notes receivable placed on nonaccrual status as of September 30, 2023 and December 31, 2022.

During the three and nine months ended September 30, 2023 and 2022, there was no interest income recognized related to notes receivable that were in nonaccrual status.

As of September 30, 2023 and December 31, 2022, there were no notes receivable placed in nonaccrual status for which there was not a related allowance for credit losses.

As of September 30, 2023 and December 31, 2022, there were no notes receivable that were 90 days or greater past due for which we continued to accrue interest income.

There was one note receivable placed on nonaccrual status as of March 31, 2024 in the amount of $ 4.0 million.

There were no notes receivable placed on nonaccrual status as of December 31, 2023.

During the three months ended March 31, 2024 and 2023, there was no interest income recognized related to notes receivable that were in nonaccrual status.

As of March 31, 2024 and December 31, 2023, there were no notes receivable placed in nonaccrual status for which there was not a related allowance for credit losses.

As of March 31, 2024 and December 31, 2023, there were no notes receivable that were 90 days or greater past due for which we continued to accrue interest income.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

March 31, 2024 and 2023

Prepaid Expenses

As of September 30, 2023 and December 31, 2022, $ 17.4 million and $ 14.5 million of prepaid expenses were included in other current assets, respectively, primarily related to software licenses, insurance, and long lead-time parts related to our inventory.

As of March 31, 2024 and December 31, 2023, $ 16.9 million and $ 14.6 million of prepaid expenses were included in other current assets, respectively, primarily related to software licenses, long lead-time parts related to our inventory and insurance.

Fair Value Measurements

2 unchanged sentences

Level 1 Level 2 Level 3 Total

Money market accounts as of September 30, 2023

Money market accounts as of March 31, 2024

$ 723,877 $ — $ — $ 723,877

1 unchanged sentence

679,734 — — 679,734

Contingent consideration liability from acquisition as of September 30, 2023

Contingent consideration liability from acquisition as of March 31, 2024

$ — $ — $ 2,092 $ 2,092

Contingent consideration liability from acquisition as of December 31, 2023

The following table summarizes the change in fair value of the Level 3 liabilities with significant unobservable inputs (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

— — 2,061 2,061

Contingent Consideration Liability from Acquisition Subsidiary Long-Term Incentive Plan Contingent Consideration Liability from Acquisition Subsidiary Long-Term Incentive Plan

The following table summarizes the change in fair value of the Level 3 contingent consideration liability with significant unobservable inputs (in thousands):

Three Months Ended

Beginning of period balance $ 2,061 $ —

1 unchanged sentence

Changes in fair value included in earnings 31 13

Reclassification to additional paid in capital upon modification — — — ( 3,104 )

End of period balance $ 2,092 $ 2,006

As of September 30, 2023, $ 656.1 million of our money market accounts was included in cash and cash equivalents and $ 1.9 million was included in other assets in our condensed consolidated balance sheets.

As of March 31, 2024, $ 718.7 million of our money market accounts was included in cash and cash equivalents, $ 4.0 million was included in other assets and $ 1.2 million was included in other current assets in our condensed consolidated balance sheets.

As of December 31, 2023, $ 675.6 million was included in cash and cash equivalents and $ 4.1 million was included in other assets in our condensed consolidated balance sheets.

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 September 30, 2023 and December 31, 2022.

The liability for the subsidiary long-term incentive plan consisted of the potential cash payment contingent upon meeting certain financial milestones related to the agreement established with certain employees of one of our subsidiaries.

This incentive plan was established in November 2017 and the amount of compensation awarded to employees depended on the fair market value of the subsidiary, which was determined in part by the subsidiary’s projected financial results.

We accounted for the subsidiary long-term incentive plan using fair value and established liabilities for the future payments under the terms of the incentive plan based on estimating revenue, EBITDA and EBITDA margin of the subsidiary over the period of the incentive plan through the anticipated achievement of the milestones.

We estimated the fair value of the liability by using a Monte Carlo simulation model which involves several Level 3 unobservable inputs.

The significant unobservable inputs used in the valuation included a weighted average revenue volatility and the revenue risk adjustment.

The revenue volatility was weighted using revenue volatility results from the subsidiary’s peer group as well as market transaction metrics.

The revenue risk adjustment was calculated using capital structure allocations from the subsidiary’s peer group, market transaction metrics as well as United States Treasury yields.

In May 2022, we terminated the subsidiary long-term incentive plan.

The fair value of the liability related to the subsidiary long-term incentive plan as of the termination date was consistent with the liability as of March 31, 2022.

Concurrent with the termination of the subsidiary long-term incentive plan, we granted performance-based restricted stock units to those employees who previously participated in the subsidiary long-term incentive plan.

We accounted for the termination of the subsidiary long-

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

term incentive plan and concurrent grant of performance-based restricted stock units as a modification of the original subsidiary long-term incentive plan.

As a result, we reclassified the $ 3.1 million liability related to the subsidiary long-term incentive plan to additional paid-in capital during the three months ended June 30, 2022.

Additionally, we recorded $ 1.2 million in incremental compensation costs as additional stock-based compensation expense to the applicable operating expense category based on the respective employee’s function (sales and marketing, general and administrative or research and development) during the three months ended June 30, 2022.

The incremental compensation costs represented the excess of the fair value of the performance-based restricted stock units over the fair value of the subsidiary long-term incentive plan as of the modification date of the subsidiary long-term incentive plan.

Our assets from money market accounts 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 March 31, 2024 and December 31, 2023.

The contingent consideration liability consists of the potential earn-out payment related to our acquisition of 100 % of the issued and outstanding capital stock of EBS on January 18, 2023.

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At each reporting date until December 31, 2025, or the achievement of the performance targets, we will remeasure the liability, using the same valuation approach.

The fair value of the contingent consideration liability is included within accounts payable, accrued expenses and other current liabilities as well as other liabilities within our condensed consolidated balance sheets.

Changes in fair value resulting from information that existed subsequent to the acquisition date are recorded in general and administrative expense in the condensed consolidated statements of operations.

During the three and nine months ended September 30, 2023, the contingent consideration liability did not materially change from the acquisition date fair value of $ 2.0 million as there were minor changes in the expected probability of achievement for the performance targets.

The unobservable inputs used in the valuation as of September 30, 2023 included a weighted average expected achievement percentage of 89.5 %, weighted by the potential payout of the performance targets, including a range of 80.0 % to 99.0 %.

During the three months ended March 31, 2024, the contingent consideration liability did not materially change from the acquisition date fair value of $ 2.0 million as there were minor changes in the expected probability of achievement for the performance targets.

The unobservable inputs used in the valuation as of March 31, 2024 included a weighted average expected achievement percentage of 89.5 %, weighted by the potential payout of the performance targets, including a range of 80.0 % to 99.0 %.

The valuation also included a weighted average discount rate of 5.5 %, weighted by the probability of achievement of the performance targets at various dates, including a range of 5.4 % to 5.7 %.

1 unchanged sentence

We monitor the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy.

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 into Level 3 or reclassifications between levels of the fair value hierarchy during the three and nine months ended September 30, 2023 and 2022.

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 nine months ended September 30, 2023 and 2022.

As of September 30, 2023, we leased office space, data centers and office equipment under non-cancelable operating leases with various expiration dates through 2030.

Changes in economic conditions or model-based valuation techniques may require the transfer of

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

financial instruments from one fair value level to another.

There were no transfers into or out of Level 3 or reclassifications between levels of the fair value hierarchy during the three months ended March 31, 2024 and 2023.

No other-than-temporary impairments occurred during the three months ended March 31, 2024 and 2023.

As of March 31, 2024, we leased office space, data centers and office equipment under non-cancelable operating leases with various expiration dates through 2030.

In August 2014, we signed a lease for office space in Tysons, Virginia, where we relocated our headquarters to in February 2016.

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Operating lease cost $ 2,976 $ 2,750

1 unchanged sentence

Operating lease right-of-use assets obtained in exchange for new operating lease liabilities 2,643 3,927

September 30,

2024 December 31,

1 unchanged sentence

Weighted-average discount rate — operating leases 5.2 % 4.9 %

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

Maturities of lease liabilities are as follows (in thousands):

9 unchanged sentences

(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 September 30, 2023 or December 31, 2022.

We did no t have any finance leases or subleases as of March 31, 2024 or December 31, 2023.

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 nine months ended September 30, 2023 and 2022.

Short-term lease costs were immaterial for the three months ended March 31, 2024 and 2023.

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

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

September 30,

2024 December 31,

3 unchanged sentences

Holdback liability from business combinations and asset acquisitions 7,340 7,340

Contingent consideration liability from acquisition

Other current liabilities 9,876 14,037

1 unchanged sentence

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

September 30,

2024 December 31,

Holdback liability from business combination $ — $ 4,560

Contingent consideration liability from acquisition $ 911 $ 2,061

3 unchanged sentences

The debt, commitments and contingencies described below would require us, or our subsidiaries, to make payments to third parties under certain circumstances.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

Convertible Senior Notes

6 unchanged sentences

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 not redeem the 2026 Notes prior to January 20, 2024.

We may redeem for cash, all or any portion of the 2026 Notes, at our option, on or after January 20, 2024, at a redemption price equal to 100 % of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date, if the last reported sale price of our common stock has been at least 130 % of the conversion price for the 2026 Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption.

5 unchanged sentences

or (4) upon the occurrence of specified corporate events as set forth in the Indenture.

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

On or after August 15, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2026 Notes, holders of the 2026 Notes may convert all or any portion of their 2026 Notes at any time, regardless of the foregoing conditions.

7 unchanged sentences

We are using the remaining net proceeds from the issuance of the 2026 Notes for working capital and other general corporate purposes, which may include acquisitions or strategic investments in complementary businesses or technologies.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

We account for the 2026 Notes as a liability.

The debt issuance costs are presented as a deduction from the outstanding principal balance of the 2026 Notes and are amortized to interest expense using the effective interest method over the contractual term of the 2026 Notes at a rate of 0.6 %.

As of September 30, 2023 and December 31, 2022, the fair value of our 2026 Notes was $ 434.3 million and $ 411.5 million, respectively.

As of March 31, 2024 and December 31, 2023, the fair value of our 2026 Notes was $ 461.2 million and $ 444.8 million, respectively.

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 $ 61.14 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, 2023.

Based on the closing price of our common stock of $ 72.47 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 March 31, 2024.

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

September 30,

2024 December 31,

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Amortization of debt issuance costs $ 790 $ 784

Total interest expense $ 790 $ 784

Acquired Debt - EBS

On January 18, 2023, one of our wholly-owned subsidiaries acquired 100 % of the issued and outstanding shares of capital stock of EBS.

As part of this acquisition we acquired $ 2.9 million of outstanding debt, which decreased to zero as of September 30, 2023.

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

Commitments and Contingencies

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Legal Proceedings

On June 2, 2015, Vivint, Inc., or Vivint, filed a lawsuit against us in U.S.

District Court, District of Utah, alleging that our technology directly and indirectly infringes six patents that Vivint purchased.

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

We answered the complaint on July 23, 2015.

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

In 2017 and 2019, the U.S.

Patent Trial and Appeal Board, or PTAB, issued final written decisions in inter partes reviews finding all or some of the claims in five of the asserted patents unpatentable.

These decisions were affirmed on appeal.

Discovery has closed with respect to seven claims in three of the asserted patents.

Vivint has moved for partial summary judgment and Alarm.com has moved for summary judgment as to those seven claims;

both motions are pending decision.

Alarm.com has also moved for summary judgment as to the six asserted claims from the fourth asserted patent.

Discovery has been stayed with respect to the fourth patent while the summary judgment motion remains pending.

No trial date has been set.

Should Vivint prevail in proving Alarm.com infringes one or more of its patent claims, we could be required to pay damages of Vivint’s lost profits and/or a reasonable royalty for sales of our solution.

Since all remaining patent claims in the litigation have expired, Vivint shall not be entitled to injunctive relief as a remedy in this matter.

While we believe we have valid defenses to Vivint’s claims, any of these outcomes could result in a material adverse effect on our business.

Based on currently available information, we have determined a loss is not probable or reasonably estimable at this time.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

Further related to Vivint, on October 27, 2022, we filed a demand for arbitration of a dispute arising under the Patent Cross License Agreement between Alarm.com and Vivint executed in November 2013.

Vivint has stopped paying license fees to Alarm.com under the agreement.

Vivint had been paying the required license fees to Alarm.com since the agreement was executed in November 2013.

Alarm.com disputes Vivint's refusal of payment and is seeking continued payments of license fees in the arbitration, as well as interest and declaratory relief.

There can be no assurance that Alarm.com will be successful in the arbitration proceedings.

As a result of Vivint’s refusal to pay license fees under the agreement, which began during the fourth quarter of 2022, SaaS and license revenue and total revenue will continue to be lowered by approximately $ 6.0 million on a quarterly basis.

We also believe that quarterly earnings and cash flow will continue to be impacted by the aforementioned $ 6.0 million, plus additional legal fees.

We also filed a lawsuit against Vivint on January 4, 2023 in U.S.

District Court, Eastern District of Texas, alleging that Vivint infringes 15 of our patents.

Since then, we have voluntarily dismissed without prejudice the infringement claims with respect to one of the patents, leaving 14 asserted patents.

The case is docketed as No.

2:23-CV-0004-JRG-RSP (E.D.

We are seeking compensatory and enhanced damages, a permanent injunction and other relief.

Vivint filed a partial motion to dismiss the complaint on February 27, 2023 which we have opposed.

On March 8, 2023, Vivint filed counterclaims in the action alleging that Alarm.com’s products and services directly and indirectly infringe 14 patents owned by Vivint.

Most of Vivint’s counterclaims also name our service provider ADT LLC as a defendant.

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

We answered the complaint on April 28, 2023.

Among other things, we asserted defenses based on non-infringement and invalidity of Vivint’s patents.

Trial is scheduled to begin on September 9, 2024.

While we believe we have valid defenses to Vivint’s counterclaims, the outcome of these legal claims cannot be predicted with certainty and any of these outcomes could result in an adverse effect on our business.

Based on currently available information, we have determined a loss is not probable or reasonably estimable at this time.

On January 10, 2022, EcoFactor, Inc., or EcoFactor, filed a lawsuit against us in U.S.

1 unchanged sentence

patents owned by EcoFactor.

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

We moved to dismiss the case for failure to state a claim on March 28, 2022.

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

EcoFactor had previously asserted two of the same patents against us in an October 2019 complaint with the U.S.

2 unchanged sentences

EcoFactor appealed the decision but withdrew its appeal in December 2021.

Four of the asserted patents are in ex parte reexamination proceedings at the PTO, and all claims of the fifth were found unpatentable by the PTAB in inter partes review on April 18, 2022.

Also on April 18, 2022, the district court stayed the case at the request of the parties pending the disposition of other proceedings involving the asserted patents.

We moved to dismiss the Oregon case for failure to state a claim on March 28, 2022.

Three of the asserted patents are in ex parte reexamination proceedings at the PTO, and ex parte reexamination of a fourth patent concluded on August 23, 2023 after the claims were amended.

On April 18, 2022, all claims of a fifth patent were found unpatentable by the U.S.

Patent Trial and Appeal Board, or PTAB, in an inter partes review, and all claims were canceled on February 1, 2024.

On April 18, 2022, the district court stayed the case at the request of the parties pending the disposition of PTAB and other proceedings involving the asserted patents.

Should EcoFactor prevail in its lawsuit 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 filed an appeal of the ITC decision on April 14, 2023.

Causam did not appeal the ITC decision with respect to Alarm.com and EnergyHub.

Should Causam prevail in its district court lawsuit 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.

1 unchanged sentence

Based on currently available information, we have determined a loss is not probable or reasonably estimable at this time.

In addition to the matters described above, we may be required to provide indemnification to certain of our service provider partners for certain claims regarding our solutions.

For example, we incur costs associated with the indemnification of our service provider Central Security Group – Nationwide, Inc.

(d/b/a Alert 360), or CSG, in an ongoing patent litigation.

In 2018, Ubiquitous Connectivity, LP, or Ubiquitous, brought suit against CSG in U.S.

District Court, Northern District of Oklahoma, alleging infringement of two U.S.

The case was stayed by agreement of the parties for several years while the patents in suit were challenged before the PTAB.

In January 2021, the PTAB deemed 42 out of 46 claims of the two asserted patents unpatentable.

Ubiquitous appealed a portion of the PTAB’s findings to the United States Court of Appeals for the Federal Circuit.

The Federal Circuit affirmed the PTAB’s ruling on August 8, 2023.

As a result, only four patent claims remain at issue and the Northern District of Oklahoma case is no longer stayed.

The case is currently in the discovery phase.

A claim construction hearing is scheduled for December 12, 2024.

A hearing on dispositive motions, including for summary judgment, is scheduled for April 15, 2026.

A trial is scheduled for June 22, 2026.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

In addition to the matters described above, we may be required to provide indemnification to certain of our service provider partners for certain claims regarding our solutions.

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

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.

District Court, District of Utah, alleging that ADT Pulse, Control, and Blue each infringe one or more patents owned by Vivint.

Vivint is seeking damages and attorneys’ fees.

Vivint filed a second amended complaint on March 8, 2022.

ADT answered the second amended complaint on March 22, 2022, asserted defenses based on non-infringement and invalidity of all five asserted patents and counterclaimed for declaratory judgment of invalidity of all five asserted patents.

The PTAB granted inter partes review of two of the asserted patents at ADT's request.

On June 17, 2022, the court entered an order staying the case in view of the pending proceedings before the PTAB, with the exception of certain discovery of source code.

In decisions issued in February and March 2023, the PTAB found all challenged claims of the two patents under review unpatentable.

Vivint filed appeals of the PTAB decisions on April 13, 2023 and May 30, 2023.

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.

March 31, 2024 and 2023

Should Ubiquitous prevail on its infringement claims, we could be required to indemnify CSG for damages in the form of a reasonable royalty or of Ubiquitous’s lost profits.

CSG 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 if we are unable to design around such patents, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.

The outcome of these legal claims cannot be predicted with certainty.

We believe there are valid defenses to the claims made by Vivint.

Based on currently available information, we have determined a loss is not probable or reasonably estimable at this time.

We also incurred costs associated with the indemnification of our service provider Monitronics International, Inc.

d/b/a Brinks in patent infringement suits.

On November 4, 2022, January 13, 2023 and April 18, 2023, IOT Innovations LLC, or IOT, sued Monitronics in U.S.

District Court, Eastern District of Texas, alleging patent infringement of certain products and services sold by Monitronics.

Together, IOT asserted infringement of 26 patents and sought permanent injunctions, enhanced damages and attorneys' fees.

On October 3, 2023, IOT filed a stipulation of dismissal of all three cases, ending the cases and the Company's involvement therein.

We may also be a party to litigation and subject to claims incident to the ordinary course of business.

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Stock Repurchase Programs

On December 3, 2020, our board of directors authorized a stock repurchase program, under which we were 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 nine months ended September 30, 2023.

During the three and nine months ended September 30, 2022, we repurchased 5,595 and 840,249 shares of our common stock under this program for $ 0.4 million and $ 51.9 million, respectively, which includes applicable commissions and fees.

On February 15, 2023, our board of directors authorized the cancellation of the balance under the stock repurchase program ending December 3, 2023 and also authorized a stock repurchase program, effective February 23, 2023, under which we are authorized to purchase up to an aggregate of $ 100.0 million of our outstanding common stock during the two-year period ending February 23, 2025.

During the three and nine months ended September 30, 2023, 105,285 and 239,540 shares of our common stock were repurchased under this program for $ 6.2 million and $ 12.9 million, respectively, which includes applicable commissions and fees.

As of January 1, 2023, we are subject to a 1.0% excise tax on the value of net corporate stock repurchases under the Inflation Reduction Act of 2022.

On February 15, 2023, our board of directors authorized a stock repurchase program, effective February 23, 2023, under which we are authorized to purchase up to an aggregate of $ 100.0 million of our outstanding common stock during the two-year period ending February 23, 2025.

No shares were repurchased under this program during the three months ended March 31, 2024 and 2023.

Beginning January 1, 2023, we are subject to a 1.0% excise tax on the value of net corporate stock repurchases under the Inflation Reduction Act of 2022.

When applicable, the excise tax will be included as part of the cost basis of shares acquired and is presented within stockholders’ equity in the condensed consolidated balance sheets.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Cost of hardware and other revenue

$ 3 $ — $ 3 $ —

Sales and marketing 755 1,032

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Stock options $ 987 $ 912

2 unchanged sentences

Total stock-based compensation expense $ 11,268 $ 12,686

Tax (shortfall) / windfall benefit from stock-based awards $ ( 111 ) $ 916 $ ( 802 ) $ 1,949

We granted 4,500 and 197,900 stock options pursuant to our 2015 Equity Incentive Plan during the three and nine months ended September 30, 2023, respectively, as compared to 87,000 and 182,000 stock options for the same periods in the prior year.

There were 38,044 and 121,179 stock options exercised during the three and nine months ended September 30, 2023, respectively, as compared to 62,324 and 101,586 stock options for the same periods in the prior year.

There was an aggregate of 117,025 and 303,422 restricted stock units without performance conditions granted to certain of our employees and directors during the three and nine months ended September 30, 2023, respectively, as compared to an aggregate of 229,400 and 819,824 restricted stock units without performance conditions for the same periods in the prior year.

There were no restricted stock units with performance conditions granted to certain of our employees during the three and nine months ended September 30, 2023, as compared to 96,289 and 168,223 restricted stock units with performance conditions for the same periods in the prior year.

There were 112,310 and 506,260 restricted stock units without performance conditions that vested during the three and nine months ended September 30, 2023, respectively, as compared to 75,452 and 312,947 restricted stock units without performance conditions vested during the same periods in the prior year.

There were zero and 39,406 restricted stock units with performance conditions that vested during the three and nine months ended September 30, 2023, respectively, as compared to zero restricted stock units with performance conditions vested for the same periods in the prior year.

Tax windfall benefit / (shortfall) from stock-based awards

$ 486 $ ( 22 )

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

March 31, 2024 and 2023

We granted 6,000 and 21,400 stock options pursuant to our 2015 Equity Incentive Plan during the three months ended March 31, 2024 and 2023, respectively.

There were 128,526 stock options exercised during the three months ended March 31, 2024, as compared to 70,951 stock options for the same period in the prior year.

There was an aggregate of 88,150 restricted stock units without performance conditions granted to certain of our employees during the three months ended March 31, 2024, as compared to an aggregate of 82,875 restricted stock units without performance conditions for the same period in the prior year.

There were no restricted stock units with performance conditions granted to our employees during the three months ended March 31, 2024 and 2023.

There were 81,696 restricted stock units without performance conditions that vested during the three months ended March 31, 2024, as compared to 167,085 restricted stock units without performance conditions vested during the same period in the prior year.

There were no restricted stock units with performance conditions that vested during the three months ended March 31, 2024, as compared to 9,000 restricted stock units with performance conditions vested for the same period in the prior year.

Earnings Per Share

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 23,404 $ 14,207

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Stock options 329,749 431,052

1 unchanged sentence

Our redeemable noncontrolling interests are related to our 86 % equity ownership interests in OpenEye, and our 85 % equity ownership interest in Noonlight.

See Note 6 for details on the put option and call option contained in the Noonlight stockholder agreement.

We use the if-converted method when calculating the dilutive impact of the 2026 Notes on net income per share.

As a result, we included 3,396,950 shares related to the 2026 Notes within the weighted average shares outstanding when calculating the diluted net income per share for each of the three and nine months ended September 30, 2023 and 2022.

Additionally, we included $ 0.6 million and $ 1.8 million of debt issuance cost amortization, net of tax, within the numerator of the diluted net income per share for the three and nine months ended September 30, 2023 and 2022, respectively.

Significant Service Providers and Distributors

During the three and nine months ended September 30, 2023, our 10 largest revenue service provider partners or distributors accounted for 49 % and 50 % of our consolidated revenue, respectively, as compared to 52 % 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, 2023 and 2022.

No service provider partner or distributor in the Alarm.com segment represented more than 10% of accounts receivable as of September 30, 2023.

Two service provider partners or distributors in the Alarm.com segment each represented greater than 10% of accounts receivable as of December 31, 2022.

Additionally, we included $ 0.6 million of debt issuance cost amortization, net of tax, within the numerator of the diluted net income per share for the three months ended March 31, 2024 and 2023.

We use the treasury stock method when calculating the dilutive impact of the stock options and restricted stock units on net income per share.

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

March 31, 2024 and 2023

Significant Service Providers and Distributors

During the three months ended March 31, 2024, our 10 largest revenue service provider partners or distributors accounted for 48 % of our consolidated revenue, as compared to 50 % for the same period 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 the three months ended March 31, 2024 and 2023.

One service provider partner in the Alarm.com segment represented more than 10% of accounts receivable as of March 31, 2024 and December 31, 2023.

For purposes of interim reporting, our annual effective income tax rate is estimated in accordance with ASC 740-270, "Interim Reporting." This rate is applied to the pre-tax book income of the entities expected to be benefited during the year.

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

For the three and nine months ended September 30, 2023, we recorded a provision for income taxes of $ 4.0 million and $ 9.3 million, respectively, resulting in an effective income tax rate of 17.0 % and 15.8 % for those periods.

For the three and nine months ended September 30, 2022, we recorded a provision for income taxes of $ 0.2 million and $ 0.5 million, respectively, resulting in an effective income tax rate of 1.3 % and 1.2 % for those periods.

For the three months ended September 30, 2023, our effective tax rate was below the 21.0% statutory rate primary due to research and development tax credits claimed, the foreign derived intangible income deduction and a favorable true-up adjustment of our 2022 income tax provision estimate, partially offset by the impact of state taxes, foreign withholding taxes and a stock-based compensation tax shortfall.

For the nine months ended September 30, 2023, our effective tax rate was below the 21.0% statutory rate primarily due to research and development tax credits claimed and the foreign derived intangible income deduction, partially offset by an unfavorable true-up adjustment of our 2022 income tax provision estimate associated with research and development tax credits, the impact of state taxes, foreign withholding taxes, other nondeductible expenses and a stock-based compensation tax shortfall.

For the three and nine months ended September 30, 2022, our effective tax rate was below the 21.0% statutory rate primarily due to research and development tax credits claimed, tax windfall benefits from employee stock-based compensation and the foreign derived intangible income deduction, partially offset by the impact of state taxes, foreign withholding taxes and other nondeductible expenses.

For the three months ended March 31, 2024, we recorded a provision for income taxes of $ 2.7 million, resulting in an effective income tax rate of 10.5 %.

For the three months ended March 31, 2023, we recorded a benefit from income taxes of $ 1.2 million, resulting in an effective income tax rate of ( 9.4 )%.

For the three months ended March 31, 2024, our effective tax rate was below the 21.0% statutory rate primarily due to research and development tax credits claimed, the foreign derived intangible income deduction, the release of an unrecognized tax benefit liability due to the closure of the 2018 and 2019 Internal Revenue Service federal income tax examination and tax windfall benefits from employee stock-based compensation, partially offset by the impact of state taxes, federal estimated tax payment interest expense and other nondeductible expenses.

For the three months ended March 31, 2023, our effective tax rate was below the 21.0% statutory rate primarily due to research and development tax credits claimed and the foreign derived intangible income deduction, partially offset by the impact of state income 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.

Our valuation allowance for state research and development tax credit carryforwards was $ 2.6 million as of December 31, 2022 and increased to $ 2.9 million as of September 30, 2023.

Our valuation allowance for state research and development tax credit carryforwards and net deferred tax assets of our EBS subsidiary was $ 3.8 million as of December 31, 2023 and decreased to $ 3.7 million as of March 31, 2024.

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 a net increase to the unrecognized tax benefits liability of $ 1.1 million primarily for research and development tax credits claimed during the nine months ended September 30, 2023.

We recorded an increase to the unrecognized tax benefits liability of $ 2.1 million primarily for research and development tax credits claimed during the nine months ended September 30, 2022.

We recorded a net decrease to the unrecognized tax benefits liability of $ 1.9 million primarily due to the closure of the 2018 and 2019 Internal Revenue Service federal income tax return examination, partially offset by a liability for research and development tax credits claimed during the three months ended March 31, 2024.

We recorded an increase to the unrecognized tax benefits liability of $ 0.7 million primarily for research and development tax credits claimed during the three months ended March 31, 2023.

Our condensed consolidated balance sheets included an accrual for total interest expense related to unrecognized tax benefits of $ 0.8 million as of December 31, 2023, which decreased to $ 0.6 million as of March 31, 2024.

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

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 and on August 12, 2022, the Internal Revenue Service expanded the examination to include our federal income tax return for 2019, both of which are ongoing.

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

As of September 30, 2023 and December 31, 2022, our condensed consolidated balance sheets included a $ 0.3 million accrual for 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.

On January 25, 2024, the Internal Revenue Service notified us that the income tax examination of our 2018 and 2019 federal income tax returns has been closed.

As a result, we owe $ 0.6 million in additional federal taxes, including interest, and recognized a net income tax benefit of $ 1.7 million during the three months ended March 31, 2024.

As of March 31, 2024, we did not have material undistributed foreign earnings.

We have not recorded a deferred tax liability on the undistributed earnings from our foreign subsidiaries, as such earnings are considered to be indefinitely reinvested.

In August 2022, the Inflation Reduction Act of 2022 was enacted in the United States which, among other provisions, includes a minimum 15.0% tax on companies that have a three-year average annual adjusted financial statement income of more than $1.0 billion and a 1.0% excise tax on the value of net corporate stock repurchases.

Both provisions became effective on January 1, 2023 and the provisions did not have a material impact on our financial condition or results of operations as of September 30, 2023.

Both provisions became effective on January 1, 2023 and the provisions did not have a material impact on our financial condition or results of operations for the periods presented.

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

Segment Information

2 unchanged sentences

• Other segment

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

Our chief operating decision maker is our chief executive officer.

1 unchanged sentence

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 93 % and 94 % of our revenue, net of intersegment eliminations, for the three and nine months ended September 30, 2023, respectively, 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 % of our revenue, net of intersegment eliminations, for the three months ended March 31, 2024, as compared to 95 % for the same period 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.

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

Three Months Ended September 30, 2023

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

SaaS and license revenue $ 130,711 $ 14,316 $ — $ — $ 145,027

Hardware and other revenue

76,336 1,685 ( 1,021 ) ( 173 ) 76,827

Total revenue

207,047 16,001 ( 1,021 ) ( 173 ) 221,854

Operating income / (loss)

18,929 ( 3,270 ) 406 106 16,171

Three Months Ended September 30, 2022

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

SaaS and license revenue $ 122,555 $ 10,571 $ — $ — $ 133,126

Hardware and other revenue

82,300 1,876 ( 1,059 ) ( 105 ) 83,012

Total revenue

204,855 12,447 ( 1,059 ) ( 105 ) 216,138

Operating income / (loss)

20,874 ( 4,738 ) 105 75 16,316

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

6 unchanged sentences

23,574 ( 4,742 ) ( 135 ) 28 18,725

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

7 unchanged sentences

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

Assets as of September 30, 2023 $ 1,457,416 $ 46,326 $ ( 92,247 ) $ 2 $ 1,411,497

Assets as of March 31, 2024 $ 1,538,429 $ 64,350 $ ( 115,786 ) $ ( 11 ) $ 1,486,982

Assets as of December 31, 2023 1,477,674 73,621 ( 111,725 ) ( 7 ) 1,439,563

ALARM.COM HOLDINGS, INC.

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

September 30, 2023 and 2022

Our SaaS and license revenue for the Alarm.com segment included software license revenue of $ 5.7 million and $ 17.8 million for the three and nine months ended September 30, 2023, respectively, as compared to $ 6.5 million and $ 20.5 million for the same periods in the prior year.

There was no software license revenue recorded for the Other segment during the three and nine months ended September 30, 2023 and 2022.

Amortization and depreciation expense was $ 7.7 million and $ 22.7 million for the Alarm.com segment for the three and nine months ended September 30, 2023, respectively, as compared to $ 7.3 million and $ 22.2 million for the same periods in the prior year.

Amortization and depreciation expense was $ 0.2 million and $ 0.8 million for the Other segment for the three and nine months ended September 30, 2023, respectively, as compared to $ 0.3 million and $ 0.9 million for the same periods in the prior year.

Additions to property and equipment were $ 2.1 million and $ 7.9 million for the Alarm.com segment for the three and nine months ended September 30, 2023, respectively, as compared to $ 1.9 million and $ 27.6 million for the same periods in the prior year.

Additions to property and equipment were $ 0.1 million and $ 0.2 million for the Other segment for the three and nine months ended September 30, 2023, respectively, as compared to less than $ 0.1 million and $ 0.2 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, 2023 and 2022.

Substantially all of our long-lived assets were in North America as of September 30, 2023 and December 31, 2022.

Our SaaS and license revenue for the Alarm.com segment included software license revenue of $ 5.2 million for the three months ended March 31, 2024, as compared to $ 6.2 million for the same period in the prior year.

There was no software license revenue recorded for the Other segment during the three months ended March 31, 2024 and 2023.

Amortization and depreciation expense was $ 7.1 million for the Alarm.com segment for the three months ended March 31, 2024, as compared to $ 7.4 million for the same period in the prior year.

Amortization and depreciation expense was $ 0.2 million for the Other segment for the three months ended March 31, 2024, as compared to $ 0.3 million for the same period in the prior year.

Additions to property and equipment were $ 3.9 million for the Alarm.com segment for the three months ended March 31, 2024, as compared to $ 3.0 million the same period in the prior year.

Additions to property and equipment were less than $ 0.1 million for the Other segment for each of the three months ended March 31, 2024 and 2023.

We derived substantially all revenue from North America for the three months ended March 31, 2024 and 2023.

Substantially all of our long-lived assets were in North America as of March 31, 2024 and December 31, 2023.

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