What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-08 compared with 2024-05-10 · 335 added, 148 removed, 620 unchanged (44% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

SaaS and license revenue $ 155,927 $ 140,432 $ 306,271 $ 275,826

16 unchanged sentences

Income before income taxes 33,404 22,118 59,555 35,103

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

Provision for income taxes 884 6,507 3,631 5,285

Net income 32,520 15,611 55,924 29,818

15 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net income $ 32,520 $ 15,611 $ 55,924 $ 29,818

12 unchanged sentences

Cash and cash equivalents $ 1,104,539 $ 696,983

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

Accounts receivable, net of allowance for credit losses of $ 3,766 and $ 3,864 , and net of allowance for product returns of $ 2,608 and $ 2,279 as of June 30, 2024 and December 31, 2023, respectively

123,551 130,626

7 unchanged sentences

Operating lease right-of-use assets 22,025 24,242

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

Other assets, net of allowance for credit losses of $ 1 and $ 5 as of June 30, 2024 and December 31, 2023, respectively

38,987 39,500

16 unchanged sentences

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

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

no shares issued and outstanding as of June 30, 2024 and December 31, 2023

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

52,321,569 and 51,888,838 shares issued;

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

and 49,183,838 and 49,868,175 shares outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 506,850 531,734

Treasury stock, at cost;

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

3,137,731 and 2,020,663 shares as of June 30, 2024 and December 31, 2023, respectively

( 186,291 ) ( 111,291 )

7 unchanged sentences

(in thousands)

Three Months Ended

Cash flows from / (used in) operating activities:

Six Months Ended

Cash flows from operating activities:

Net income $ 55,924 $ 29,818

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

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

Provision for credit losses on accounts receivable 357 616

1 unchanged sentence

Provision for credit losses on notes receivable 3,996 —

Inventory write-down — 1,181

Amortization on patents and tooling 417 637

5 unchanged sentences

Stock-based compensation 22,481 24,617

Loss from investment in unconsolidated entity 23 —

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

6 unchanged sentences

Other liabilities 2,776 ( 2,920 )

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

Cash flows from operating activities 72,816 33,267

Cash flows used in investing activities:

4 unchanged sentences

Capitalized software development costs ( 632 ) ( 115 )

Purchase of investment in unconsolidated entity — ( 200 )

Purchase of investment in unconsolidated entities ( 2,950 ) ( 200 )

Purchases of other intangible assets ( 45 ) ( 5,915 )

Cash flows used in investing activities ( 9,159 ) ( 19,591 )

Cash flows from financing activities:

Cash flows from / (used in) financing activities:

Proceeds from issuance of convertible senior notes 500,000 —

Payments of debt issuance costs ( 13,946 ) —

Purchases of capped calls related to convertible senior notes ( 63,050 ) —

Payments of deferred consideration for acquisitions ( 4,569 ) ( 1,655 )

Purchases of treasury stock, including transaction costs ( 75,000 ) ( 6,726 )

Payments of tax withholdings related to vesting of restricted stock units ( 3,401 ) —

Purchases of redeemable noncontrolling interest — ( 832 )

Payments of acquired debt — ( 389 )

Issuances of common stock from equity-based plans 6,734 1,513

Cash flows from financing activities 6,356 842

Cash flows from / (used in) financing activities 346,768 ( 8,089 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 133 ) ( 124 )

Net increase / (decrease) in cash, cash equivalents and restricted cash 52,068 ( 15,609 )

Net increase in cash, cash equivalents and restricted cash 410,292 5,463

Cash, cash equivalents and restricted cash at beginning of the period 701,079 622,879

18 unchanged sentences

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

Common stock issued in connection with equity-based plans — 209 2 376 — — — — 378

Purchase of treasury stock, including transaction costs and excise tax — — — ( 559 ) 1,117 ( 75,000 ) — — ( 75,559 )

Tax withholding related to vesting of restricted stock units — — — ( 3,401 ) — — — — ( 3,401 )

Stock-based compensation expense — — — 11,250 — — — — 11,250

Accretion adjustments of redeemable noncontrolling interest to redemption value 1,212 — — ( 1,212 ) — — — — ( 1,212 )

Purchases of capped calls related to convertible senior notes, net of tax — — — ( 47,436 ) — — — — ( 47,436 )

Net income / (loss) attributable to common stockholders ( 991 ) — — — — — — 33,511 33,511

Other comprehensive loss — — — — — — ( 156 ) — ( 156 )

Balance as of June 30, 2024 $ 37,933 52,322 $ 523 $ 506,850 3,138 $ ( 186,291 ) $ 1,095 $ 323,292 $ 645,469

ALARM.COM HOLDINGS, INC.

Condensed Consolidated Statements of Equity — (Continued)

(in thousands)

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

7 unchanged sentences

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

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements (Unaudited)

March 31, 2024 and 2023

June 30, 2024 and 2023

Alarm.com Holdings, Inc.

16 unchanged sentences

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

The results of operations for the three and six months ended June 30, 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.

6 unchanged sentences

Significant Accounting Policies

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.

Other than those disclosed herein, there have been no other material changes to our significant accounting policies during the three and six months ended June 30, 2024 from those disclosed in our Annual Report.

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

June 30, 2024 and 2023

Capped Call Transactions

On May 31, 2024, we issued $ 500.0 million aggregate principal amount of 2.25 % convertible senior notes due June 1, 2029 in a private placement to qualified institutional buyers, or the 2029 Notes.

In connection with the offering of the 2029 Notes, we entered into privately negotiated capped call transactions with one of the initial purchasers and certain other financial institutions, at a cost of $ 63.1 million.

The capped call transactions cover, subject to customary adjustments substantially similar to those applicable to the 2029 Notes, the number of shares of our common stock initially underlying the 2029 Notes.

As the capped call options are both legally detachable and separately exercisable from the 2029 Notes, we account for the capped call options separately from the 2029 Notes.

The capped call options are indexed to our own common stock and classified in stockholders’ equity.

As such, the premiums paid for the capped call options were included as a net reduction to additional paid-in capital in the condensed consolidated balance sheets.

The capped call transactions will not be remeasured as long as they continue to meet the conditions for equity classification.

We elected to integrate the capped call options with the 2029 Notes for federal income tax purposes pursuant to applicable U.S.

Treasury Regulations.

Accordingly, the $ 63.1 million cost of the purchased capped calls will be deductible for income tax purposes.

The original issue discount is accreted over the term of the 2029 Notes.

Recent Accounting Pronouncements

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

During the three and six months ended June 30, 2024, we did not adopt any new accounting pronouncements.

Not Yet Adopted

11 unchanged sentences

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

ALARM.COM HOLDINGS, INC.

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

June 30, 2024 and 2023

Revenue from Contracts with Customers

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Beginning of period balance $ 10,466 $ 13,879 $ 9,099 $ 13,975

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Beginning of period balance $ 24,212 $ 20,231 $ 22,885 $ 18,332

2 unchanged sentences

End of period balance $ 25,907 $ 21,460 $ 25,907 $ 21,460

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

Accounts Receivable, Net

5 unchanged sentences

Accounts receivable, net $ 123,551 $ 130,626

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.

For the three and six months ended June 30, 2024, we recorded a provision for credit losses of $ 0.1 million and $ 0.4 million, respectively, as compared to $ 0.1 million and $ 0.6 million for the same periods in the prior year.

For the three and six months ended June 30, 2024, we recorded a reserve for product returns of $ 0.9 million and $ 2.0 million in our hardware and other revenue, respectively, as compared to $ 1.3 million and $ 2.5 million for the same periods in the prior year.

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

Allowance for Credit Losses - Accounts Receivable

Allowance for Credit Losses

The allowance for credit losses is a valuation account that is deducted from the accounts receivable and notes receivable amortized cost basis (see Note 8) to present the net amount expected to be collected.

4 unchanged sentences

For periods beyond the twelve-month reasonable and supportable forecast period, we revert to historical loss information immediately.

ALARM.COM HOLDINGS, INC.

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

June 30, 2024 and 2023

The allowance for credit losses is measured on a pooled basis when similar risk characteristics exist.

When assessing whether to measure certain financial assets on a pooled basis, we considered various risk characteristics, including the financial asset type, size and the historical or expected credit loss pattern.

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

(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 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 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.

For the three and six months ended June 30, 2024, we recorded credit loss expense for accounts receivable and notes receivable of $ 0.2 million and $ 4.2 million, respectively, in general and administrative expense in our condensed consolidated statements of operations.

For the three and six months ended June 30, 2023, we recorded credit loss expense for accounts receivable and notes receivable of less than $ 0.1 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.

1 unchanged sentence

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

Allowance for Credit Losses - Accounts Receivable

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

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

There were no changes to our portfolio segments for our accounts receivable during the three and six months ended June 30, 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 and six months ended June 30, 2024, as compared to historical periods.

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

Three Months Ended

March 31, 2024 Three Months Ended

March 31, 2023

June 30, 2024 Three Months Ended

June 30, 2023 Six Months Ended

June 30, 2024 Six Months Ended

June 30, 2023

Subsidiaries All Other

1 unchanged sentence

Subsidiaries All Other

Subsidiaries Alarm.com

Subsidiaries All Other

Subsidiaries Alarm.com

Subsidiaries All Other

Beginning of period balance $ ( 3,966 ) $ ( 88 ) $ ( 3,102 ) $ ( 97 ) $ ( 3,723 ) $ ( 141 ) $ ( 2,755 ) $ ( 80 )

2 unchanged sentences

End of period balance $ ( 3,677 ) $ ( 89 ) $ ( 2,968 ) $ ( 191 ) $ ( 3,677 ) $ ( 89 ) $ ( 2,968 ) $ ( 191 )

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):

6 unchanged sentences

The inventory write-down was 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)

June 30, 2024 and 2023

Asset Acquisition

21 unchanged sentences

Foreign currency translation adjustment ( 142 ) — ( 142 )

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

Balance as of June 30, 2024 $ 154,356 $ — $ 154,356

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

Relationships Developed

Technology Trade Name Capitalized Software Development Costs Total

Technology Trade Name Capitalized Software Development Costs Other

Balance as of January 1, 2024

3 unchanged sentences

Amortization ( 4,837 ) ( 4,106 ) ( 414 ) ( 64 ) — ( 9,421 )

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.

Balance as of June 30, 2024 $ 34,457 $ 33,068 $ 803 $ 1,555 $ 45 $ 69,928

During the three and six months ended June 30, 2024, we paid less than $ 0.1 million for the purchase of domain names.

We recorded $ 4.7 million and $ 9.4 million of amortization related to our intangible assets for the three and six months ended June 30, 2024, respectively, as compared to $ 4.7 million and $ 9.3 million for the same periods in the prior year.

There were no impairments of long-lived intangible assets during the three and six months ended June 30, 2024 and 2023.

During the six months ended June 30, 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.

ALARM.COM HOLDINGS, INC.

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

June 30, 2024 and 2023

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

March 31, 2024

June 30, 2024

Amount Accumulated

22 unchanged sentences

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.

We placed this loan in nonaccrual status and recorded a full allowance for credit losses for this note receivable as of March 31, 2024.

During the three months ended June 30, 2024, we wrote off the entire $ 4.0 million outstanding note receivable balance and reversed the previously recorded 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.

For the three and six months ended June 30, 2024, we recognized $ 0.6 million and $ 1.3 million of revenue from the distribution partner associated with this loan, respectively, as compared to $ 0.8 million and $ 1.6 million for the same periods in the prior year.

ALARM.COM HOLDINGS, INC.

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

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.

June 30, 2024 and 2023

Loan to a Service Provider Partner

2 unchanged sentences

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

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.

As of June 30, 2024 and December 31, 2023, $ 1.0 million of principal was outstanding from the service provider partner under the loan agreement.

For the three and six months ended June 30, 2024 and 2023, we recognized less than $ 0.1 million and $ 0.1 million, respectively, 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 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.

As of June 30, 2024 and December 31, 2023, $ 1.5 million of principal was outstanding from the technology partner under the convertible promissory note.

For the three and six months ended June 30, 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 March 31, 2024 and December 31, 2023, our investment in the hardware supplier was $ 5.6 million.

As of June 30, 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 March 31, 2024 and December 31, 2023, our investment in the technology partner was $ 5.7 million.

As of June 30, 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 March 31, 2024 and December 31, 2023, our investment in the technology partner was $ 5.1 million.

As of June 30, 2024 and December 31, 2023, our investment in the technology partner was $ 5.1 million.

Allowance for Credit Losses - Notes Receivable

2 unchanged sentences

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.

1 unchanged sentence

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

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

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 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.

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

ALARM.COM HOLDINGS, INC.

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

June 30, 2024 and 2023

The accrued interest receivable as of June 30, 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 six months ended June 30, 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 June 30, 2024 or the three and six months ended June 30, 2023.

There were no purchases or sales of financial assets during the three and six months ended June 30, 2024 and 2023.

During the three and six months ended June 30, 2024, we wrote off $ 4.0 million related to a note receivable that originated in 2017 with the Affiliate and reversed the previously recorded allowance for credit losses.

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

Three Months Ended

March 31, 2024 Three Months Ended

March 31, 2023

June 30, 2024 Three Months Ended

June 30, 2023 Six Months Ended

June 30, 2024 Six Months Ended

June 30, 2023

Beginning of period balance $ ( 4,003 ) $ ( 2 ) $ ( 5 ) $ ( 2 )

Provision for expected credit losses

Recover of / (provision for) expected credit losses

2 — ( 3,996 ) —

Write-offs 4,000 — 4,000 —

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):

March 31, 2024

June 30, 2024

Loan Receivables:

15 unchanged sentences

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

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.

There were no notes receivable placed on nonaccrual status as of June 30, 2024 and December 31, 2023.

During the three and six months ended June 30, 2024 and 2023, there was no interest income recognized related to notes receivable that were in nonaccrual status.

As of June 30, 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 June 30, 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.

Prepaid Expenses

As of June 30, 2024 and December 31, 2023, $ 15.6 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 our office leases.

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

Prepaid Expenses

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.

June 30, 2024 and 2023

Fair Value Measurements

2 unchanged sentences

Level 1 Level 2 Level 3 Total

Money market accounts as of March 31, 2024

Money market accounts as of June 30, 2024

$ 1,093,874 $ — $ — $ 1,093,874

Equity securities with readily determinable fair value as of June 30, 2024

1,427 — — 1,427

Money market accounts as of December 31, 2023

679,734 — — 679,734

Contingent consideration liability from acquisition as of March 31, 2024

Contingent consideration liability from acquisition as of June 30, 2024

$ — $ — $ 2,105 $ 2,105

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Beginning of period balance $ 2,092 $ 2,006 $ 2,061 $ —

2 unchanged sentences

End of period balance $ 2,105 $ 2,020 $ 2,105 $ 2,020

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.

As of June 30, 2024, $ 1.1 billion of our money market accounts was included in cash and cash equivalents, $ 5.2 million was included in other assets and $ 1.6 million was included in other current assets in our condensed consolidated balance sheets.

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

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.

Our equity securities with readily determinable fair value represent our investments in publicly traded companies, which are valued using quoted prices in active markets.

During the three and six months ended June 30, 2024, we recorded an unrealized loss on equity securities of less than $ 0.1 million.

Our investments in public entities are recorded at fair value within other current assets in our condensed consolidated balance sheets and changes in fair value of the investments are recorded within other expense, net within our condensed consolidated statements of operations.

See Note 12 for the carrying amounts and estimated fair values of our convertible senior notes as of June 30, 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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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 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 %.

During the three and six months ended June 30, 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 June 30, 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 6.1 %, weighted by the probability of achievement of the performance targets at various dates, including a range of 6.1 % to 6.2 %.

Selecting another probability of expected achievement or discount rate within an acceptable range would not result in a significant change to the fair value of the contingent consideration liability.

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

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.

June 30, 2024 and 2023

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 or out of Level 3 or reclassifications between levels of the fair value hierarchy during the three and six months ended June 30, 2024 and 2023.

As of June 30, 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.

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Operating lease cost $ 2,977 $ 2,871 $ 5,953 $ 5,621

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

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

We did no t have any finance leases or subleases as of June 30, 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 months ended March 31, 2024 and 2023.

Short-term lease costs were immaterial for the three and six months ended June 30, 2024 and 2023.

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

June 30, 2024 and 2023

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

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

Convertible Senior Notes

Convertible Senior Notes - 2026 Notes

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

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

March 31, 2024 and 2023

June 30, 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.

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

As of June 30, 2024 and December 31, 2023, the fair value of our 2026 Notes was $ 457.0 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 $ 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.

Based on the closing price of our common stock of $ 63.54 on the last trading day of the quarter, the if-converted value of the 2026 Notes did not exceed the principal amount of $ 500.0 million as of June 30, 2024.

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

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Amortization of debt issuance costs $ 791 $ 786 $ 1,581 $ 1,570

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

March 31, 2024 and 2023

June 30, 2024 and 2023

Convertible Senior Notes - 2029 Notes

On May 31, 2024, we issued $ 500.0 million aggregate principal amount of 2.25 % convertible senior notes due June 1, 2029 in a private placement to qualified institutional buyers, or the 2029 Notes.

The terms of the 2029 Notes are governed by an Indenture, or the 2029 Indenture, by and between Alarm.com Holdings, Inc.

Bank Trust Company, National Association, as trustee.

The 2029 Notes are senior unsecured obligations that bear interest at a rate of 2.25 % per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024, and the principal amount of the 2029 Notes will not accrete.

We received proceeds from the issuance of the 2029 Notes of $ 485.2 million, net of $ 14.8 million of transaction fees and other debt issuance costs.

We may redeem for cash, all or any portion of the 2029 Notes (subject to the partial redemption limitation described below), at our option, on or after June 7, 2027, at a redemption price equal to 100 % of the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid 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 2029 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.

If we redeem less than all the 2029 Notes, at least $ 75.0 million aggregate principal amount of the 2029 Notes must be outstanding and not subject to redemption as of the relevant redemption notice date.

No sinking fund is provided for the 2029 Notes.

The 2029 Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding January 1, 2029, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2024 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the 2029 Notes on each applicable trading day;

(2) during the five business day period immediately after any 10 consecutive trading day period in which, for each trading day of that period, the trading price per $1,000 principal amount of 2029 Notes for such trading day was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate for the 2029 Notes on each such trading day;

(3) if we call any or all of the 2029 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the 2029 Notes called (or deemed called) for redemption;

or (4) upon the occurrence of specified corporate events as set forth in the 2029 Indenture.

On or after January 1, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2029 Notes, holders of the 2029 Notes may convert all or any portion of their 2029 Notes at any time, regardless of the foregoing conditions.

Upon conversion, we may satisfy our conversion obligation by paying or delivering, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

It is our current intent to settle the principal amount of the 2029 Notes with cash.

The initial conversion rate for the 2029 Notes is 11.4571 shares of our common stock per $1,000 principal amount of 2029 Notes, which is equivalent to an initial conversion price of $ 87.28 per share of our common stock, subject to adjustment under certain circumstances in accordance with the terms of the 2029 Indenture.

In addition, following certain corporate events that occur prior to the maturity date of the 2029 Notes or if we deliver a notice of redemption in respect of some or all of the 2029 Notes, we will, under certain circumstances, increase the conversion rate of the 2029 Notes for a holder who elects to convert its 2029 Notes (or any portion thereof) in connection with such a corporate event or convert its 2029 Notes called (or deemed called) for redemption during the related redemption period (as defined in the 2029 Indenture), as the case may be.

If we undergo a fundamental change (as defined in the 2029 Indenture), subject to certain exceptions and except as described in the 2029 Indenture, holders may require us to repurchase for cash all or any portion of their 2029 Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the 2029 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

The 2029 Indenture includes customary covenants and sets forth certain events of default after which the 2029 Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving us after which the 2029 Notes become automatically due and payable.

We used $ 63.1 million of the net proceeds from the 2029 Notes to pay the cost of the capped call transactions described below and used $ 75.0 million to repurchase 1,117,068 shares of our common stock concurrently with the pricing of the 2029 Notes, which was separately authorized by our board of directors.

We expect to use the remaining net proceeds from the issuance of the 2029 Notes for general corporate purposes, which may include acquisitions or strategic investments in complementary businesses or technologies, other repurchases of our common stock, repurchases of our 2026 Notes and for working capital, operating expenses and capital expenditures.

ALARM.COM HOLDINGS, INC.

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

June 30, 2024 and 2023

We account for the 2029 Notes as a liability.

The debt issuance costs are presented as a deduction from the outstanding principal balance of the 2029 Notes and are amortized to interest expense using the effective interest method over the contractual term of the 2029 Notes at a rate of 2.9 %.

As of June 30, 2024, the fair value of our 2029 Notes was $ 491.4 million.

The fair value was determined based on the quoted price of the 2029 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 $ 63.54 on the last trading day of the quarter, the if-converted value of the 2029 Notes did not exceed the principal amount of $ 500.0 million as of June 30, 2024.

The net carrying amount of the liability component of the 2029 Notes is as follows (in thousands):

2024 December 31,

Principal $ 500,000 $ —

Unamortized debt issuance costs ( 14,604 ) —

Net carrying amount $ 485,396 $ —

Interest expense related to the 2029 Notes is as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Interest expense

$ 938 $ — $ 938 $ —

Amortization of debt issuance costs 230 — 230 —

Total interest expense $ 1,168 $ — $ 1,168 $ —

Capped Call – 2029 Notes

The cap price of the capped call transactions is initially $ 134.28 per share of our common stock, which represents a premium of 100% over the closing price of our common stock on the Nasdaq Global Select Market on May 28, 2024, and is subject to certain adjustments under the terms of the capped call transactions.

The exercise price is $ 87.28 per share of common stock, subject to customary anti-dilution adjustments that mirror corresponding adjustments for the 2029 Notes.

We elected to integrate the capped call options with the 2029 Notes for federal income tax purposes pursuant to applicable U.S.

Treasury Regulations.

Accordingly, the $ 63.1 million cost of the purchased capped calls will be deductible for income tax purposes.

The original issue discount is accreted over the term of the 2029 Notes.

The capped call transactions are generally expected to reduce the potential dilution to holders of our common stock upon any conversion of the 2029 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2029 Notes, as the case may be, with such reduction and/or offset subject to a cap.

As the capped call options are both legally detachable and separately exercisable from the 2029 Notes, we account for the capped call options separately from the 2029 Notes.

The capped call options are indexed to our own common stock and classified in stockholders’ equity.

As such, the premiums paid for the capped call options were included as a net reduction to additional paid-in capital in the condensed consolidated balance sheets.

The capped call transactions will not be remeasured as long as they continue to meet the conditions for equity classification.

Commitments and Contingencies

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Although we cannot predict the maximum potential amount of future payments that may become due under these indemnification agreements, we do not believe any potential liability that might arise from such indemnity provisions is probable or material.

ALARM.COM HOLDINGS, INC.

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

June 30, 2024 and 2023

Legal Proceedings

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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.

The case is currently in the discovery and claim construction 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)

March 31, 2024 and 2023

A trial is scheduled for July 6, 2026.

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.

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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)

June 30, 2024 and 2023

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 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.

On February 15, 2023, our board of directors authorized a stock repurchase program, effective February 23, 2023, under which we were 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.

On May 24, 2024, our board of directors authorized the repurchase of our common stock in connection with the issuance of the 2029 Notes, the cancellation of the balance under the stock repurchase program ending February 23, 2025 and also authorized a stock repurchase program, effective May 31, 2024, 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 May 31, 2026.

The full repurchase balance for this program of $ 100.0 million was available as of June 30, 2024.

During the three and six months ended June 30, 2024, 1,117,068 shares were repurchased for $ 75.0 million under our stock repurchase program authorized in connection with the issuance of the 2029 Notes.

During the three and six months ended June 30, 2023, 134,255 shares of our common stock were repurchased for $ 6.7 million under our stock repurchase program that was subsequently cancelled effective May 31, 2024.

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.

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.

Shares Withheld

As permitted under the terms of the 2015 Equity Incentive Plan, in 2021 the Compensation Committee authorized the withholding of shares of common stock in connection with the vesting of restricted stock unit awards issued to employees to satisfy applicable tax withholding requirements.

These withheld shares are not issued or considered common stock repurchases under our stock repurchase program.

We paid $ 3.4 million of tax withholdings related to vesting of restricted stock units during the three and six months ended June 30, 2024.

No tax withholdings related to the vesting of restricted stock units were paid during the three and six months ended June 30, 2023.

We also utilized the sell-to-cover method in which shares of our restricted stock unit awards were sold into the market on behalf of the employee upon vesting to cover tax withholding liabilities.

We may utilize either the withholding method or sell-to-cover method in the future.

ALARM.COM HOLDINGS, INC.

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

June 30, 2024 and 2023

Stock-Based Compensation

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Cost of hardware and other revenue

$ 1 $ — $ 2 $ —

Sales and marketing 724 892 1,479 1,924

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Stock options $ 1,146 $ 1,071 $ 2,133 $ 1,983

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$ 645 $ ( 669 ) $ 1,131 $ ( 691 )

We granted 93,500 and 99,500 stock options pursuant to our 2015 Equity Incentive Plan during the three and six months ended June 30, 2024, respectively, as compared to 172,000 and 193,400 stock options for the same periods in the prior year.

There were 14,467 and 142,993 stock options exercised during the three and six months ended June 30, 2024, respectively, as compared to 12,184 and 83,135 stock options for the same periods in the prior year.

There was an aggregate of 241,728 and 329,878 restricted stock units without performance conditions granted to certain of our employees and directors during the three and six months ended June 30, 2024, respectively, as compared to an aggregate of 103,522 and 186,397 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 our employees during the three and six months ended June 30, 2024 and 2023.

There were 209,087 and 290,783 restricted stock units without performance conditions that vested during the three and six months ended June 30, 2024, respectively, as compared to 226,865 and 393,950 restricted stock units without performance conditions vested during the same periods in the prior year.

There were 33,395 restricted stock units with performance conditions that vested during each of the three and six months ended June 30, 2024, as compared to 30,406 and 39,406 restricted stock units with performance conditions, respectively, vested for the same periods in the prior year.

ALARM.COM HOLDINGS, INC.

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

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.

June 30, 2024 and 2023

Earnings Per Share

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net income $ 32,520 $ 15,611 $ 55,924 $ 29,818

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Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Stock options 422,524 602,135 422,524 602,135

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.

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 months ended March 31, 2024 and 2023.

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.

We use the if-converted method when calculating the dilutive impact of the 2026 Notes and 2029 Notes on net income per share.

We included 1,951,484 and 975,742 shares related to the 2029 Notes within the weighted average shares outstanding when calculating the diluted net income per share for each of the three and six months ended June 30, 2024, respectively.

Additionally, we included $ 1.5 million and $ 2.1 million of interest expense and debt issuance cost amortization, net of tax, within the numerator of the diluted net income per share for the three and six months ended June 30, 2024, respectively, as compared to $ 0.6 million and $ 1.2 million for the same periods in the prior year.

The denominator for diluted net income per share does not include any effect from the capped call transactions we entered into concurrently with the issuance of the 2029 Notes, as this effect would be anti-dilutive.

In the event of conversion of the 2029 Notes, shares delivered to us under the capped call will offset the dilutive effect of the shares that we would issue under the 2029 Notes.

See Note 12 for further details on our 2029 Notes and the related capped call transactions.

ALARM.COM HOLDINGS, INC.

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

March 31, 2024 and 2023

June 30, 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.

During each of the three and six months ended June 30, 2024, our 10 largest revenue service provider partners or distributors accounted for 47 % of our consolidated revenue as compared to 50 % 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 six months ended June 30, 2024 and 2023.

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

For the three and six months ended June 30, 2024, we recorded a provision for income taxes of $ 0.9 million and $ 3.6 million, respectively, resulting in an effective income tax rate of 2.6 % and 6.1 % for those periods.

For the three and six months ended June 30, 2023, we recorded a provision for income taxes of $ 6.5 million and $ 5.3 million, respectively, resulting in an effective income tax rate of 29.4 % and 15.1 % for those periods.

For the three months ended June 30, 2024, our effective tax rate was below the 21.0% statutory rate primarily due to a favorable true-up adjustment of our 2023 income tax provision estimate associated with research and development tax credits, 2024 research and development tax credits claimed, the foreign derived intangible income deduction and tax windfall benefits from employee stock-based compensation.

For the six months ended June 30, 2024, our effective tax rate was below the 21.0% statutory rate primarily due to a favorable true-up adjustment of our 2023 income tax provision estimate associated with research and development tax credits, 2024 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 June 30, 2023, our effective tax rate was above the 21.0% statutory rate primarily due to an unfavorable true-up adjustment of our 2022 income tax provision estimate associated with research and development tax credits, an increase in foreign withholding taxes and a stock-based compensation tax shortfall.

For the six months ended June 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 and a stock-based compensation tax shortfall.

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 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.

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 June 30, 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 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 recorded a net decrease to the unrecognized tax benefits liability of $ 0.4 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 six months ended June 30, 2024.

We recorded a net increase to the unrecognized tax benefits liability of $ 0.8 million primarily for research and development tax credits claimed during the six months ended June 30, 2023.

Our condensed consolidated balance sheets included an accrual for total interest expense related to unrecognized tax benefits of $ 0.8 million and $ 0.7 million as of December 31, 2023 and June 30, 2024, respectively.

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

3 unchanged sentences

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.

As a result, we paid $ 0.6 million in additional federal taxes, including interest, during the three months ended June 30, 2024, and recognized a net income tax benefit of $ 1.7 million during the three months ended March 31, 2024.

ALARM.COM HOLDINGS, INC.

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

June 30, 2024 and 2023

As of June 30, 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.

1 unchanged sentence

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

5 unchanged sentences

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 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 Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that contributed 93 % of our revenue, net of intersegment eliminations, for each of the three and six months ended June 30, 2024, as compared to 94 % for the same periods in the prior year.

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

Inter-segment revenue includes sales of hardware between our segments.

ALARM.COM HOLDINGS, INC.

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

June 30, 2024 and 2023

Management evaluates the performance of its segments and allocates resources to them based on operating income / (loss) as compared to prior periods and current performance levels.

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

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

6 unchanged sentences

30,690 ( 4,851 ) ( 89 ) 24 25,774

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

6 unchanged sentences

19,901 ( 3,878 ) 41 95 16,159

Six Months Ended June 30, 2024

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

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

SaaS and license revenue $ 278,713 $ 27,558 $ — $ — $ 306,271

Hardware and other revenue

149,827 2,862 ( 1,545 ) ( 325 ) 150,819

Total revenue

428,540 30,420 ( 1,545 ) ( 325 ) 457,090

Operating income / (loss)

54,261 ( 9,593 ) ( 222 ) 53 44,499

Six Months Ended June 30, 2023

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

SaaS and license revenue $ 253,406 $ 22,420 $ — $ — $ 275,826

Hardware and other revenue

156,128 3,579 ( 1,658 ) ( 284 ) 157,765

Total revenue

409,534 25,999 ( 1,658 ) ( 284 ) 433,591

Operating income / (loss)

33,831 ( 9,068 ) 46 169 24,978

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

Assets as of June 30, 2024 $ 1,907,486 $ 55,017 $ ( 107,239 ) $ ( 17 ) $ 1,855,247

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

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.

Our SaaS and license revenue for the Alarm.com segment included software license revenue of $ 5.2 million and $ 10.4 million for the three and six months ended June 30, 2024, respectively, as compared to $ 5.9 million and $ 12.1 million for the same periods in the prior year.

There was no software license revenue recorded for the Other segment during the three and six months ended June 30, 2024 and 2023.

Amortization and depreciation expense was $ 6.8 million and $ 13.9 million for the Alarm.com segment for the three and six months ended June 30, 2024, respectively, as compared to $ 7.6 million and $ 15.0 million for the same periods in the prior year.

Amortization and depreciation expense was $ 0.3 million and $ 0.5 million for the Other segment for the three and six months ended June 30, 2024, respectively, as compared to $ 0.3 million and $ 0.6 million for the same periods in the prior year.

Additions to property and equipment were $ 1.9 million and $ 5.8 million for the Alarm.com segment for the three and six months ended

ALARM.COM HOLDINGS, INC.

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

June 30, 2024 and 2023

June 30, 2024, respectively, as compared to $ 2.8 million and $ 5.8 million the same periods in the prior year.

Additions to property and equipment were less than $ 0.1 million and $ 0.1 million for the Other segment for the three and six months ended June 30, 2024, respectively, as compared to $ 0.1 million for the same periods in the prior year.

We derived substantially all revenue from North America for the three and six months ended June 30, 2024 and 2023.

Substantially all of our long-lived assets were in North America as of June 30, 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