What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-09 compared with 2024-11-07 · 315 added, 366 removed, 643 unchanged (51% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

SaaS and license revenue $ 163,800 $ 150,344

34 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net income $ 27,712 $ 23,404

9 unchanged sentences

(in thousands, except share and per share data)

September 30,

2025 December 31,

1 unchanged sentence

Cash and cash equivalents $ 1,186,195 $ 1,220,701

Accounts receivable, net of allowance for credit losses of $ 3,847 and $ 3,864 , and net of allowance for product returns of $ 2,547 and $ 2,279 as of September 30, 2024 and December 31, 2023, respectively

Accounts receivable, net of allowance for credit losses of $ 4,721 and $ 3,870 , and net of allowance for product returns of $ 1,999 and $ 2,448 as of March 31, 2025 and December 31, 2024, respectively

118,757 126,082

7 unchanged sentences

Operating lease right-of-use assets 55,260 53,425

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

Other assets, net of allowance for credit losses of $ 1 as of March 31, 2025 and December 31, 2024

64,054 41,332

5 unchanged sentences

Deferred revenue 13,927 12,940

Convertible senior notes, net 497,475 —

Operating lease liabilities 8,493 7,700

1 unchanged sentence

Deferred revenue 13,597 13,619

Convertible senior notes, net 981,977 493,515

Convertible senior notes, net, noncurrent 487,500 983,477

Operating lease liabilities 69,908 65,534

5 unchanged sentences

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

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

no shares issued and outstanding as of March 31, 2025 and December 31, 2024

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

52,903,810 and 52,756,077 shares issued;

and 49,331,867 and 49,868,175 shares outstanding as of September 30, 2024 and December 31, 2023, respectively

and 49,679,679 and 49,618,346 shares outstanding as of March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital 530,528 521,192

Treasury stock, at cost;

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

3,224,131 and 3,137,731 shares as of March 31, 2025 and December 31, 2024, respectively

( 191,350 ) ( 186,291 )

7 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

4 unchanged sentences

Provision for credit losses on notes receivable — 3,998

Inventory write-down — 1,181

Amortization on patents and tooling 178 220

5 unchanged sentences

Stock-based compensation 9,458 11,268

Loss from investment in unconsolidated entity 203 —

Loss from investments in unconsolidated entities 2,313 —

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

2 unchanged sentences

Other current and non-current assets ( 8,768 ) ( 962 )

Accounts payable, accrued expenses and other current liabilities ( 4,904 ) 371

Accounts payable and other current liabilities ( 12,749 ) 4,524

Deferred revenue 965 1,327

9 unchanged sentences

Purchase of investment in unconsolidated entities ( 3,773 ) —

Purchases of other intangible assets ( 46 ) ( 5,915 )

Cash flows used in investing activities ( 55,179 ) ( 3,961 )

Cash flows from / (used in) financing activities:

Proceeds from issuance of convertible senior notes 500,000 —

Payments of debt issuance costs ( 14,834 ) —

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

Payments of deferred consideration for acquisitions ( 7,269 ) ( 1,672 )

Cash flows (used in) / from financing activities:

Purchases of treasury stock, including transaction costs ( 5,059 ) —

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

Purchases of redeemable noncontrolling interest — ( 832 )

Payments of acquired debt — ( 3,016 )

Issuances of common stock from equity-based plans 1,583 6,356

Cash flows from / (used in) financing activities 344,286 ( 15,245 )

Cash flows (used in) / from financing activities ( 3,476 ) 6,356

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 118 ) ( 180 )

Net increase in cash, cash equivalents and restricted cash 477,596 59,056

Net (decrease) / increase in cash, cash equivalents and restricted cash ( 34,716 ) 52,068

Cash, cash equivalents and restricted cash at beginning of the period 1,229,132 701,079

8 unchanged sentences

(in thousands)

Redeemable Noncontrolling Interests Additional Paid-In Capital Accumulated Other Comprehensive Income / (Loss) Retained Earnings Total Stockholders’ Equity

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

Common Stock Treasury Stock

2 unchanged sentences

Common stock issued in connection with equity-based plans — 148 1 1,582 — — — — 1,583

Stock-based compensation expense — — — 11,339 — — — — 11,339

Accretion adjustments of redeemable noncontrolling interest to redemption value 1,595 — — ( 1,595 ) — — — — ( 1,595 )

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

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

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 — — — ( 3 ) 86 ( 5,059 ) — — ( 5,062 )

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

Stock-based compensation expense — — — 9,481 — — — — 9,481

Noncontrolling interest assumed through acquisition 6,352 — — — — — — — —

Accretion adjustments of redeemable noncontrolling interest to redemption value 1,724 — — ( 1,724 ) — — — — ( 1,724 )

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

Net income / (loss) attributable to common stockholders ( 238 ) — — — — — — 27,950 27,950

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

Common stock issued in connection with equity-based plans — 148 2 1,104 — — — — 1,106

Changes in excise tax related to previous stock repurchases — — — 51 — — — — 51

Stock-based compensation expense — — — 9,218 — — — — 9,218

Accretion adjustments of redeemable noncontrolling interests to redemption values 2,903 — — ( 2,903 ) — — — — ( 2,903 )

Net income / (loss) attributable to common stockholders ( 226 ) — — — — — — 36,682 36,682

Other comprehensive income — — — — — — 829 — 829

Balance as of September 30, 2024 $ 40,610 52,470 $ 525 $ 514,320 3,138 $ ( 186,291 ) $ 1,773 $ 359,974 $ 690,301

ALARM.COM HOLDINGS, INC.

Condensed Consolidated Statements of Equity — (Continued)

(in thousands)

Balance as of March 31, 2025 $ 52,585 52,904 $ 529 $ 530,528 3,224 $ ( 191,350 ) $ 1,644 $ 418,252 $ 759,603

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, 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 — 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 interest to redemption value 2,647 — — ( 2,647 ) — — — — ( 2,647 )

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

Other comprehensive loss — — — — — — ( 752 ) — ( 752 )

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

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2024 and 2023

March 31, 2025 and 2024

Alarm.com Holdings, Inc.

(referred to herein as Alarm.com, the Company, or we) is the leading platform for the intelligently connected property.

Our cloud-based platform offers an expansive suite of Internet of Things, or IoT, solutions addressing opportunities in the residential, multi-family, small business and enterprise commercial markets.

Alarm.com’s solutions include security, video and video analytics, energy management, access control, electric utility grid management, indoor gunshot detection, water management, health and wellness and data-rich emergency response.

Our cloud-based platform offers an expansive suite of Internet of Things, or IoT, solutions addressing global opportunities in the residential, multi-family, small business and enterprise commercial markets.

Alarm.com’s solution suite includes security, video and video analytics, energy management, access control, electric utility grid management, indoor gunshot detection, water management, health and wellness, personal safety and data-rich emergency response.

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

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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, 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.

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 (including the ongoing conflicts in Ukraine, and in the Middle East and surrounding areas), disruptions to global supply chains, fluctuations in interest rates, tariffs, risk of recession and inflation (collectively, the Macroeconomic Conditions).

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, 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 months ended March 31, 2025 are not necessarily indicative of the results that can be expected for our entire fiscal year ending December 31, 2025, 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.

5 unchanged sentences

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, 2024 from those disclosed in our Annual Report.

Reclassifications

Certain previously reported amounts in the liabilities footnote for the year ended December 31, 2024 have been reclassified to conform to our current presentation, including the addition of the holdback liability from business combinations and asset acquisitions as a separate line item within the presentation of other liabilities.

ALARM.COM HOLDINGS, INC.

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

September 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.

March 31, 2025 and 2024

Significant Accounting Policies

There have been no material changes to our significant accounting policies during the three months ended March 31, 2025 from those disclosed in our Annual Report.

Recent Accounting Pronouncements

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

During the three months ended March 31, 2025, 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 expect this amendment to increase the amount of disclosures we provide within Note 18 related to segment expenses in the annual reporting period ending December 31, 2024 and interim reporting periods thereafter.

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.

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Additionally, this amendment requires the disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively and the disclosure of the total amount of selling expenses and, on an annual basis, an entity's definition of selling expenses.

The amendment is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

The amendment is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted.

1 unchanged sentence

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)

September 30, 2024 and 2023

Revenue from Contracts with Customers

3 unchanged sentences

The non-current portion of capitalized commission costs and upfront payments made to customers is reflected in other assets within our condensed consolidated balance sheets.

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

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Beginning of period balance $ 12,088 $ 9,099

Commission costs and upfront payments to a customer capitalized in period 3,184 3,112

Reimbursement of previously capitalized upfront payments to customers

— ( 6,774 ) — ( 6,774 )

Amortization of contract assets ( 2,125 ) ( 1,745 )

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Beginning of period balance $ 26,559 $ 22,885

4 unchanged sentences

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

September 30,

2025 December 31,

3 unchanged sentences

Accounts receivable, net $ 118,757 $ 126,082

For the three and nine months ended September 30, 2024, we recorded a provision for credit losses of $ 0.1 million and $ 0.5 million, respectively, as compared to $ 0.8 million and $ 1.4 million for the same periods in the prior year.

For the three and nine months ended September 30, 2024, we recorded a reserve for product returns of $ 0.7 million and $ 2.7 million in our hardware and other revenue, respectively, as compared to $ 0.5 million and $ 3.0 million for the same periods in the prior year.

For the three months ended March 31, 2025, we recorded a provision for credit losses of $ 1.0 million, as compared to $ 0.3 million for the same period in the prior year.

For the three months ended March 31, 2025, we recorded a reserve for product returns of $ 0.4 million in our hardware and other revenue, as compared to $ 1.1 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.

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

Allowance for Credit Losses

7 unchanged sentences

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.

These risk characteristics are relevant to accounts receivable and notes receivable.

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

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 September 30, 2024, we recorded a reduction to credit loss expense for accounts receivable and notes receivable of $ 0.1 million and for the nine months ended September 30, 2024, we recorded credit loss expense for accounts receivable and notes receivable of $ 4.1 million, in general and administrative expense in our condensed consolidated statements of operations.

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 months ended March 31, 2025, we recorded credit loss expense for accounts receivable and notes receivable of $ 0.7 million, in general and administrative expense in our condensed consolidated statements of operations.

For the three months ended March 31, 2024, we recorded credit loss expense for accounts receivable and notes receivable of $ 4.0 million, in general and administrative expense in our condensed consolidated statements of operations.

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

4 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, 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 nine months ended September 30, 2024, as compared to historical periods.

There were no changes to our portfolio segments for our accounts receivable during the three months ended March 31, 2025, 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, 2025, as compared to historical periods.

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

Three Months Ended

September 30, 2024 Three Months Ended

September 30, 2023 Nine Months Ended

September 30, 2024 Nine Months Ended

September 30, 2023

Subsidiaries All Other

Subsidiaries Alarm.com

Subsidiaries All Other

Subsidiaries Alarm.com

March 31, 2025 Three Months Ended

March 31, 2024

Subsidiaries All Other

6 unchanged sentences

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

September 30,

2025 December 31,

3 unchanged sentences

Total inventory $ 90,136 $ 87,435

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

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

On April 21, 2023, Alarm.com Incorporated, one of our wholly-owned subsidiaries, acquired certain assets of Vintra, Inc., or Vintra.

On November 22, 2024, EnergyHub International, Inc., one of our wholly-owned subsidiaries, acquired certain assets of Finland-based Kapacity.io Solutions Oy.

Substantially all of the acquired assets consisted of developed technology.

We believe the acquisition of the developed technology will expand Alarm.com's learning program and accelerate deployment of advanced video analytics solutions for the Alarm.com and OpenEye platforms.

In consideration for the purchase of the acquired assets, we paid $ 5.5 million in cash on April 21, 2023, after deducting $ 0.3 million related to the settlement of an outstanding loan issued to Vintra during March 2023 and $ 1.0 million related to an agreed holdback provision.

The holdback was paid during the third quarter of 2024.

We believe the acquisition of the developed technology will help accelerate deployment of a cloud-based demand response platform internationally for our EnergyHub subsidiary.

In consideration for the purchase of the developed technology, we paid $ 1.3 million in cash in November 2024, after deducting $ 0.2 million related to an agreed holdback provision.

Additionally, we incurred $ 0.1 million in direct transaction costs related to legal fees during 2024 that were capitalized as a component of the consideration transferred.

The $ 7.1 million purchase price consideration allocated to developed technology was recorded as an intangible asset at the time of the asset acquisition and is being amortized on a straight-line basis over an estimated useful life of five years .

The remaining $ 0.1 million purchase price consideration was allocated to property and equipment.

Acquisition of a Business - EBS

On January 18, 2023, one of our wholly-owned subsidiaries acquired 100 % of the issued and outstanding shares of capital stock of EBS Spółka z ograniczoną odpowiedzialnością, or EBS, an international producer of universal smart communicator devices, headquartered in Warsaw, Poland.

We believe this acquisition will assist in the continued expansion of our international operations as well as benefit our supply chain operations.

In consideration for the purchase of EBS, we paid $ 9.8 million in cash on January 18, 2023, after deducting $ 2.2 million related to agreed holdback provisions.

An earn-out up to an additional $ 2.5 million is payable if certain performance targets are met, which was initially recorded at the acquisition date fair value of $ 2.0 million.

The acquisition was accounted for as a business combination within our Alarm.com segment.

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 during the year of the acquisition.

The $ 1.6 million purchase price consideration related to developed technology was recorded as an intangible asset at the time of the asset acquisition and is being amortized on a straight-line basis over an estimated useful life of seven years .

The asset acquisition was recorded within our Other segment.

Acquisition of a Business – CHeKT

On February 10, 2025, Alarm.com Incorporated, one of our wholly-owned subsidiaries, acquired 81 % of the issued and

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

outstanding shares of capital stock of CHeKT, Inc., or CHeKT.

CHeKT provides a remote video monitoring service for central station operators that is compatible with a variety of cameras.

We believe the acquisition of CHeKT will help to expand our opportunity to provide remote video monitoring solutions in the commercial and residential markets.

In consideration for the purchase of 81 % of the issued and outstanding shares of capital stock of CHeKT, we paid $ 23.6 million in cash on February 10, 2025, after deducting $ 3.7 million related to agreed holdback provisions.

Pursuant to the terms of the stock purchase agreement, following the preliminary determination of the working capital of CHeKT as of the closing date, the purchase price decreased by $ 0.2 million.

The working capital adjustment is expected to be finalized by the second quarter of 2025 and $ 0.5 million of the holdback is expected to be paid to stockholders of CHeKT at that time.

The remaining $ 3.0 million of the holdback is expected to be paid to the stockholders of CHeKT by the end of the second quarter of 2026, subject to offset for any indemnification obligations.

As a result of the acquisition of CHeKT, we recorded approximately $ 0.3 million in acquisition-related costs for the three months ended March 31, 2025.

These costs include expenses directly related to acquiring CHeKT, are expensed as incurred and are included in general and administrative expense in our condensed consolidated statements of operations.

The purchase price allocation was not finalized as of the filing date of this Quarterly Report on Form 10-Q and is primarily pending the final determination of the working capital adjustment as well as tax adjustments, including the assessment of any net operating losses acquired and the related limitations on any identified net operating losses.

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

February 10, 2025

Calculation of Purchase Consideration:

Cash paid, net of working capital adjustment $ 23,386

Holdback consideration 3,700

Total consideration $ 27,086

Estimated Tangible and Intangible Net Assets:

Accounts receivable 308

Inventory 645

Other current assets

Customer relationships 486

Developed technology 9,412

Trade names 814

Accounts payable ( 150 )

Accrued expenses and other current liabilities ( 272 )

Deferred tax liability

Redeemable noncontrolling interest ( 6,352 )

Goodwill 23,579

Total estimated tangible and intangible net assets

Goodwill of $ 23.6 million reflects the value of acquired workforce and synergies we expect to achieve from integrating CHeKT's remote video monitoring services into our existing solutions in the commercial and residential markets.

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 CHeKT constituted a business and in accordance with ASC 805, " Business Combinations ," the assets and liabilities were recorded at their respective fair values as of February 10, 2025.

We developed the fair value of intangible net assets using the multi-period excess earnings method for developed technology, the with-and-without method for customer relationships and the relief from royalty method for the trade name.

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

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 CHeKT developed technology, valued at $ 9.4 million, on an attribution method based on the discounted cash flows of the model over an estimated useful life of 11 years.

Customer Relationships

We recorded the customer relationships intangible separately from goodwill based on determination of the length, strength and contractual nature of the relationship that CHeKT shared with its customers.

We valued the single group of customer relationships using the with-and-without method, an income approach.

The significant assumptions used in the income approach include estimates about future expected cash flows from customer contracts and the discount rate.

We are amortizing the customer relationships, valued at $ 0.5 million, on a straight-line basis over an estimated useful life of three 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 $ 0.8 million, on an attribution basis derived from the discounted cash flows of the model over an estimated useful life of seven years .

Redeemable Noncontrolling Interest

We have a redeemable noncontrolling interest related to our 81 % equity ownership interest in CHeKT.

The CHeKT stockholder agreement contains a put option that gives the minority CHeKT stockholders the right to sell their remaining 19 % 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 CHeKT shares from the minority CHeKT stockholders based on the fair value of the shares.

The put and call options can each be exercised beginning in the first quarter of 2028.

This redeemable noncontrolling interest was recorded at fair value on February 10, 2025, 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 CHeKT noncontrolling interest was $ 6.4 million as of February 10, 2025 and March 31, 2025.

Business Combinations in Operations - CHeKT

The operations of the CHeKT 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 income of the business combination were not material to the condensed consolidated financial statements for the three months ended March 31, 2025.

Goodwill and Intangible Assets, Net

3 unchanged sentences

$ 154,211 $ — $ 154,211

Goodwill acquired 23,579 — 23,579

Foreign currency translation adjustment 403 — 403

Balance as of September 30, 2024 $ 154,669 $ — $ 154,669

Balance as of March 31, 2025 $ 178,193 $ — $ 178,193

On February 10, 2025, we acquired 81 % of the issued and outstanding shares of capital stock of CHeKT and recorded $ 23.6 million of goodwill in the Alarm.com segment.

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

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

6 unchanged sentences

Amortization ( 2,003 ) ( 2,055 ) ( 44 ) ( 74 ) — ( 4,176 )

Balance as of September 30, 2024 $ 32,163 $ 31,218 $ 618 $ 1,999 $ 46 $ 66,044

During the nine months ended September 30, 2024, we paid less than $ 0.1 million for the purchase of domain names.

We recorded $ 4.4 million and $ 13.8 million of amortization related to our intangible assets for the three and nine months ended September 30, 2024, respectively, as compared to $ 5.6 million and $ 14.9 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, 2024 and 2023.

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

During the nine months ended September 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.

Balance as of March 31, 2025 $ 28,108 $ 37,900 $ 1,270 $ 2,802 $ 46 $ 70,126

We recorded $ 4.5 million of amortization related to our intangible assets for the three months ended March 31, 2025, as compared to $ 4.7 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, 2025 and 2024.

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, 2024

March 31, 2025

Amount Accumulated

23 unchanged sentences

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 nine months ended September 30, 2024, we recognized $ 0.7 million and $ 2.0 million of revenue from the distribution partner associated with this loan, respectively, as compared to $ 0.9 million and $ 2.5 million for the same periods in the prior year.

During the three months ended June 30, 2024, we wrote off the entire $ 4.0 million outstanding note receivable balance that originated in 2017 and reversed the previously recorded allowance for credit losses.

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

Loan to a Service Provider Partner

March 31, 2025 and 2024

For the three months ended March 31, 2025, we recognized $ 0.5 million of revenue from the distribution partner associated with this loan, as compared to $ 0.7 million for the same period in the prior year.

Loans to Service Provider Partners

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

1 unchanged sentence

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

As of September 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 nine months ended September 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.

As of March 31, 2025 and December 31, 2024, $ 1.0 million of principal was outstanding from the service provider partner under the loan agreement.

For the three months ended March 31, 2025 and 2024, we recognized less than $ 0.1 million of revenue from the service provider partner associated with this loan.

On January 30, 2025, we entered into a senior secured loan agreement with another service provider partner, under which a term loan was provided to the service provider partner in the original principal amount of $ 21.5 million, which loan is collateralized by the assets of the service provider partner.

Quarterly principal payments begin in the second quarter of 2027.

Interest on the outstanding principal accrues at a rate per annum equal to the overnight financing rate published by the Federal Reserve Bank of New York for a period of three months, plus 3.0 %.

For the first two years of the loan, monthly interest payments can be payable in kind at the election of the borrower.

The maturity date of the loan is January 30, 2030.

As of March 31, 2025, $ 21.5 million of principal was outstanding from the service provider partner under the loan agreement.

For the three months ended March 31, 2025 and 2024, we recognized less than $ 0.1 million of revenue from the service provider partner associated with this loan.

Loan to a Technology Partner

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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, 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 nine months ended September 30, 2024 and 2023, we did not record any revenue from the technology partner associated with this convertible promissory note.

As of March 31, 2025 and December 31, 2024, $ 1.5 million of principal was outstanding from the technology partner under the convertible promissory note.

For the three months ended March 31, 2025 and 2024, 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, 2024 and December 31, 2023, our investment in the hardware supplier was $ 5.6 million.

As of March 31, 2025 and December 31, 2024, 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, 2024 and December 31, 2023, our investment in the technology partner was $ 5.7 million.

As of March 31, 2025 and December 31, 2024, 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, 2024 and December 31, 2023, our investment in the technology partner was $ 5.1 million.

As of March 31, 2025 and December 31, 2024, our investment in the technology partner was $ 5.1 million.

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

In December 2023, we paid $ 1.5 million to another technology partner as part of a Simple Agreement for Future Equity, or SAFE.

We paid an additional $ 1.5 million during both May 2024 and December 2024 to the same technology partner via a SAFE for a total investment of $ 4.5 million.

The SAFE provides us the right to be issued certain shares of the technology partner's stock in connection with a qualified equity financing or liquidity event.

Our 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, 2025 and December 31, 2024, our investment in the privately-held company was $ 4.5 million.

Allowance for Credit Losses - Notes Receivable

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 and nine months ended September 30, 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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We have elected not to measure an allowance for credit losses for accrued interest receivables .

We write-off any accrued interest on notes receivable

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

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, 2024 and December 31, 2023 was $ 0.2 million and $ 0.1 million, respectively, 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 nine months ended September 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 September 30, 2024 or the three and nine months ended September 30, 2023.

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

During the nine months ended September 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.

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, 2025 and December 31, 2024 was $ 0.5 million and $ 0.2 million, respectively, 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, 2025.

There were no purchases or sales of financial assets during the three months ended March 31, 2025 and 2024.

There were no significant changes in the amount of note receivable write-offs during the three months ended March 31, 2025, 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, 2024 Three Months Ended

September 30, 2023 Nine Months Ended

September 30, 2024 Nine Months Ended

September 30, 2023

March 31, 2025 Three Months Ended

March 31, 2024

Beginning of period balance $ ( 1 ) $ ( 5 )

Provision for expected credit losses

— — ( 3,996 ) —

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, 2024

March 31, 2025

Loan Receivables:

6 unchanged sentences

Total $ 21,500 $ 500 $ 134 $ 1,500 $ — $ 976 $ 24,610

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

December 31, 2024

7 unchanged sentences

Total $ 500 $ 146 $ 1,500 $ — $ 993 $ — $ 3,139

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

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

As of September 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 September 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.

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

There were no notes receivable placed on nonaccrual status as of March 31, 2025 and December 31, 2024.

During the three months ended March 31, 2025 and 2024, there was no interest income recognized related to notes receivable that were in nonaccrual status.

As of March 31, 2025 and December 31, 2024, there were no notes receivable placed in nonaccrual status for which there was not a related allowance for credit losses.

As of March 31, 2025 and December 31, 2024, 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 September 30, 2024 and December 31, 2023, $ 21.5 million and $ 14.6 million of prepaid expenses were included in other current assets, respectively, primarily related to software licenses, insurance, long lead-time parts related to our inventory and our office leases.

As of March 31, 2025 and December 31, 2024, $ 23.4 million and $ 16.1 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, 2024

$ 1,164,218 $ — $ — $ 1,164,218

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

Money market accounts as of March 31, 2025

$ 1,175,836 $ — $ — $ 1,175,836

1 unchanged sentence

1,209,474 — — $ 1,209,474

Contingent consideration liability from acquisition as of September 30, 2024

Equity securities with readily determinable fair value as of March 31, 2025

8,910 — — $ 8,910

Equity securities with readily determinable fair value as of December 31, 2024

7,425 — — $ 7,425

Contingent consideration liability from acquisition as of March 31, 2025

$ — $ — $ 1,868 $ 1,868

Contingent consideration liability from acquisition as of December 31, 2024

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Beginning of period balance $ 2,169 $ 2,061

Acquired liabilities — — — 1,993

Changes in fair value included in earnings ( 301 ) 31

End of period balance $ 1,868 $ 2,092

As of September 30, 2024, $ 1.16 billion of our money market accounts was included in cash and cash equivalents, $ 6.0 million was included in other assets and $ 1.9 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.

As of March 31, 2025, $ 1.17 billion of our money market accounts was included in cash and cash equivalents, $ 6.2 million was included in other assets and $ 1.9 million was included in other current assets in our condensed consolidated balance sheets.

As of December 31, 2024, $ 1.20 billion of our money market accounts was included in cash and cash equivalents, $ 1.9 million was included in other current assets and $ 6.2 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.

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 nine months ended September 30, 2024, we recorded an unrealized loss on equity securities of $ 0.2 million.

During the three months ended March 31, 2025, we recorded an unrealized loss on equity securities of $ 2.3

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

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 September 30, 2024 and December 31, 2023.

See Note 12 for the carrying amounts and estimated fair values of our convertible senior notes as of March 31, 2025 and December 31, 2024.

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.

The earn-out payment is contingent on the satisfaction of certain performance targets related to the integration of EBS's hardware into the Alarm.com platform by December 31, 2025 and has a maximum potential payment of up to $ 2.5 million.

The earn-out payment is contingent on the satisfaction of two performance targets related to the integration of EBS's hardware into the Alarm.com platform by December 31, 2025, and has a maximum potential payment of up to $ 2.5 million.

We account for the contingent consideration using fair value and established a liability for the future earn-out payment based on an estimation of the probability of the future achievement of the performance targets.

2 unchanged sentences

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.

The fair value of the contingent consideration liability as of March 31, 2025 was included within accounts payable, accrued expenses and other current liabilities within our condensed consolidated balance sheet.

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, 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 September 30, 2024 included a weighted average expected achievement percentage of 89.5 %, weighted by the

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

potential payout of the performance targets, including a range of 80.0 % to 99.0 %.

One of the performance targets was achieved during the three months ended March 31, 2025, and the related payment of $ 1.3 million is expected to be made during the second quarter of 2025.

The $ 0.3 million decrease in the contingent consideration liability during the three months ended March 31, 2025 was primarily due to a decrease in the expected probability of achievement for the remaining performance target.

The unobservable inputs used in the valuation for the remaining performance target as of March 31, 2025 included an expected achievement percentage of 50.0 %.

The valuation also included a weighted average discount rate of 5.6 %, weighted by the probability of achievement of the performance targets at various dates, including a range of 5.5 % to 5.6 %.

2 unchanged sentences

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 nine months ended September 30, 2024 and 2023.

As of September 30, 2024, we leased office space, data centers and office equipment under non-cancelable operating leases with various expiration dates through 2034.

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, 2025 and 2024.

As of March 31, 2025, we leased office space, data centers and office equipment under non-cancelable operating leases with various expiration dates through 2034.

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

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Operating lease cost $ 3,903 $ 2,976

1 unchanged sentence

Operating lease right-of-use assets obtained in exchange for new operating lease liabilities 4,141 2,643

September 30,

2025 December 31,

1 unchanged sentence

Weighted-average discount rate — operating leases 8.2 % 8.2 %

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

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

6 unchanged sentences

_______________

(1) Excludes $ 18.3 million of legally binding minimum lease payments for leases executed but not yet commenced.

(1) Operating lease payments exclude $ 4.4 million of legally binding minimum lease payments for leases executed but not yet commenced.

There are no options to extend lease terms that were reasonably certain of being exercised included in these balances.

(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, 2024 or December 31, 2023.

Our finance leases and sublease were not material to the condensed consolidated financial statements as of March 31, 2025.

We did not have any finance leases or subleases as of December 31, 2024.

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, 2024 and 2023.

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

Short-term lease costs were immaterial for the three months ended March 31, 2025 and 2024.

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

September 30,

2025 December 31,

7 unchanged sentences

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

September 30,

2025 December 31,

Holdback liability from business combinations and asset acquisitions

$ 3,000 $ 200

Contingent consideration liability from acquisition — 953

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)

March 31, 2025 and 2024

Convertible Senior Notes - 2026 Notes

13 unchanged sentences

or (4) upon the occurrence of specified corporate events as set forth in the 2026 Indenture.

ALARM.COM HOLDINGS, INC.

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

September 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.

9 unchanged sentences

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, 2024 and December 31, 2023, the fair value of our 2026 Notes was $ 466.7 million and $ 444.8 million, respectively.

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

As of March 31, 2025 and December 31, 2024, the fair value of our 2026 Notes was $ 480.8 million and $ 473.8 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 $ 54.67 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, 2024.

Based on the closing price of our common stock of $ 55.65 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, 2025.

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

September 30,

2025 December 31,

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Amortization of debt issuance costs $ 794 $ 790

Total interest expense $ 794 $ 790

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

Convertible Senior Notes - 2029 Notes

15 unchanged sentences

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.

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

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

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.

3 unchanged sentences

We are using 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)

September 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 September 30, 2024, the fair value of our 2029 Notes was $ 477.9 million.

As of March 31, 2025 and December 31, 2024, the fair value of our 2029 Notes was $ 484.5 million and $ 496.7 million, respectively.

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 $ 54.67 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 September 30, 2024.

Based on the closing price of our common stock of $ 55.65 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 March 31, 2025.

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

September 30,

2025 December 31,

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Interest expense

$ 2,812 $ — $ 3,750 $ —

Amortization of debt issuance costs 704 —

Total interest expense $ 3,517 $ —

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

Capped Call – 2029 Notes

17 unchanged sentences

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)

September 30, 2024 and 2023

Legal Proceedings

8 unchanged sentences

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.

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.

These proceedings include four ex parte reexamination proceedings at the U.S.

Patent and Trademark Office and one inter partes review.

Three of the patents were found unpatentable in reexamination.

EcoFactor appealed the decision with respect to one of the patents to the United States Court of Appeals for the Federal Circuit on July 9, 2024, EcoFactor filed a pending request for rehearing in the U.S.

Patent Trial and Appeal Board, or PTAB, with respect to a second patent on March 28, 2025, and EcoFactor appealed the rejection of the third patent to the PTAB, filing its appeal brief on June 10, 2024.

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 PTAB in inter partes review, and all claims were canceled on February 1, 2024.

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

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

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

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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.

For example, we incurred 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.

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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 and claim construction phase.

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

The case is currently in the discovery phase.

The court held a claim construction hearing on December 12, 2024, but has not yet rendered a claim construction opinion.

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

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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)

September 30, 2024 and 2023

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

5 unchanged sentences

Stock Repurchase Programs

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 September 30, 2024.

No shares were repurchased under our stock repurchase program during the three months ended September 30, 2024.

During the nine months ended September 30, 2024, 1,117,068 shares were repurchased for $ 75.0 million under our stock repurchase program.

During the three and nine months ended September 30, 2023, 105,285 and 239,540 shares of our common stock were repurchased for $ 6.2 million and $ 12.9 million, respectively, under our stock repurchase program that was subsequently canceled 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.

On May 24, 2024, our board of directors authorized the repurchase of our common stock in connection with the issuance of the 2029 Notes 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.

During the three months ended March 31, 2025, we repurchased 86,400 shares of our common stock under this program for $ 5.1 million, which includes applicable commissions and fees.

No shares were repurchased under our stock repurchase programs during the three months ended March 31, 2024.

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.

No payments of tax withholdings were made related to vesting of restricted stock units during the three months ended September 30, 2024.

We paid $ 3.4 million of tax withholdings related to vesting of restricted stock units during the nine months ended September 30, 2024.

No tax withholdings related to the vesting of restricted stock units were paid during the three and nine months ended September 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)

September 30, 2024 and 2023

March 31, 2025 and 2024

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Cost of hardware and other revenue

$ — $ 3 $ 2 $ 3

Sales and marketing 480 755

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Stock options $ 993 $ 987

2 unchanged sentences

Total stock-based compensation expense $ 9,458 $ 11,268

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

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

$ ( 251 ) $ 486

We granted 34,000 and 133,500 stock options pursuant to our 2015 Equity Incentive Plan during the three and nine months ended September 30, 2024, respectively, as compared to 4,500 and 197,900 stock options for the same periods in the prior year.

There were 11,280 and 154,273 stock options exercised during the three and nine months ended September 30, 2024, respectively, as compared to 38,044 and 121,179 stock options for the same periods in the prior year.

There was an aggregate of 134,925 and 464,803 restricted stock units without performance conditions granted to certain of our employees and directors during the three and nine months ended September 30, 2024, respectively, as compared to an aggregate of 117,025 and 303,422 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 nine months ended September 30, 2024 and 2023.

There were 121,087 and 411,870 restricted stock units without performance conditions that vested during the three and nine months ended September 30, 2024, respectively, as compared to 112,310 and 506,260 restricted stock units without performance conditions vested during the same periods in the prior year.

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

We granted 35,000 stock options pursuant to our 2015 Equity Incentive Plan during the three months ended March 31, 2025, as compared to 6,000 stock options for the same period in the prior year.

There were 21,715 stock options exercised during the three months ended March 31, 2025, as compared to 128,526 stock options for the same period in the prior year.

There was an aggregate of 63,072 restricted stock units without performance conditions granted to certain of our employees during the three months ended March 31, 2025, as compared to an aggregate of 88,150 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, 2025 and 2024.

There were 71,984 restricted stock units without performance conditions that vested during the three months ended March 31, 2025, as compared to 81,696 restricted stock units without performance conditions vested during the same period in the prior year.

There were 30,667 restricted stock units with performance conditions that vested during the three months ended March 31, 2025.

No restricted stock units with performance conditions vested during the three months ended March 31, 2024.

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

March 31, 2025 and 2024

Earnings Per Share

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net income $ 27,712 $ 23,404

2 unchanged sentences

Add back total interest expense, net of tax, attributable to convertible senior notes

3,234 593 5,301 1,774

Net income attributable to common stockholders - diluted (B) $ 31,195 $ 24,189

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Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Stock options 614,178 329,749

Restricted stock units — 61,150

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

Our redeemable noncontrolling interests relate to our 86 % equity ownership interest in OpenEye, our 85 % equity ownership interest in Noonlight and our 81 % equity ownership interest in CHeKT.

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

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.

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, 2024 and 2023.

We included 5,728,550 and 2,571,575 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 nine months ended September 30, 2024, respectively.

Additionally, we included $ 3.2 million and $ 5.3 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 nine months ended September 30, 2024, respectively, as compared to $ 0.6 million and $ 1.8 million for the same periods in the prior year.

We included 5,728,550 shares related to the 2029 Notes within the weighted average shares outstanding when calculating the diluted net income per share for the three months ended March 31, 2025.

Additionally, we included $ 3.2 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 months ended March 31, 2025, as compared to $ 0.6 million for the same period 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.

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

Significant Service Providers and Distributors

During the three months ended March 31, 2025, our 10 largest revenue service provider partners or distributors accounted for 46 % of our consolidated revenue, as compared to 48 % 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, 2025 and 2024.

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

Significant Service Providers and Distributors

During the three and nine months ended September 30, 2024, our 10 largest revenue service provider partners or distributors accounted for 46 % and 47 % of our consolidated revenue, respectively, as compared to 49 % and 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 nine months ended September 30, 2024 and 2023.

One service provider partner in the Alarm.com segment represented more than 10% of accounts receivable as of September 30, 2024 and December 31, 2023.

March 31, 2025 and 2024

No service provider partners represented more than 10% of accounts receivable as of March 31, 2025 and December 31, 2024.

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, 2024, we recorded a provision for income taxes of $ 6.7 million and $ 10.3 million, respectively, resulting in an effective income tax rate of 15.6 % and 10.1 % for those periods.

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 months ended September 30, 2024, our effective tax rate was below the 21.0% statutory rate primarily due to 2024 research and development tax credits claimed, the foreign derived intangible income deduction and a favorable true-up adjustment of our 2023 income tax provision estimate and amended prior year state income tax returns, partially offset by the impact of state taxes, foreign withholding taxes and other nondeductible expenses.

For the nine months ended September 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, the foreign derived intangible income deduction, 2024 research and development tax credits claimed, 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 September 30, 2023, 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 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 months ended March 31, 2025, we recorded a provision for income taxes of $ 7.3 million, resulting in an effective income tax rate of 20.9 %.

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, 2025, our effective tax rate was below the 21.0% statutory rate primarily due to 2025 research and development tax credits claimed 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, 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.

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 increased to $ 4.2 million as of September 30, 2024.

Our valuation allowance for state research and development tax credit carryforwards, net deferred tax assets of our EBS subsidiary and an unrealized U.S.

federal capital loss was $ 5.0 million as of December 31, 2024 and increased to $ 5.8 million as of March 31, 2025.

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 less than $ 0.1 million primarily due to a liability for research and development tax credits claimed, partially offset by the closure of the 2018 and 2019 Internal Revenue Service federal income tax return examination and the release of a state unrecognized tax benefit liability due to the statute of limitations expiration during the nine months ended September 30, 2024.

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.

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 and September 30, 2024.

We recorded a net increase to the unrecognized tax benefits liability of $ 0.6 million primarily due to a liability for research and development tax credits claimed during the three months ended March 31, 2025.

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.

Our condensed consolidated balance sheets included an accrual for total interest expense related to unrecognized tax benefits of $ 1.0 million and $ 0.9 million as of March 31, 2025 and December 31, 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 paid $ 0.6 million in additional federal taxes, including interest,

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

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.

As of September 30, 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.

As of March 31, 2025, 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 for the periods presented.

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 92 % and 93 % of our revenue, net of intersegment eliminations, for the three and nine months ended September 30, 2024, respectively, as compared to 93 % and 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)

September 30, 2024 and 2023

March 31, 2025 and 2024

Our Alarm.com segment represents our cloud-based platform and licenses and services on our non-hosted software platform for the intelligently connected property and related solutions that contributed 93 % of our revenue, net of intersegment eliminations, for the three months ended March 31, 2025, as compared to 94 % 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.

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

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 September 30, 2024

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

SaaS and license revenue $ 141,319 $ 17,957 $ — $ — $ 159,276

Hardware and other revenue

80,597 1,610 ( 817 ) ( 169 ) 81,221

Total revenue

221,916 19,567 ( 817 ) ( 169 ) 240,497

Operating income / (loss)

34,546 ( 1,277 ) ( 107 ) 32 33,194

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

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

4 unchanged sentences

221,697 18,042 ( 674 ) ( 243 ) 238,822

Cost of SaaS and license revenue 16,784 4,784 83 ( 83 ) 21,568

Cost of hardware and other revenue 55,885 1,766 ( 658 ) ( 327 ) 56,666

Total cost of revenue 72,669 6,550 ( 575 ) ( 410 ) 78,234

Selling and marketing expense 22,467 6,082 — — 28,549

General and administrative expense 24,837 2,164 — — 27,001

Research and development expense 60,684 7,683 — — 68,367

Amortization and depreciation expense 6,728 296 — — 7,024

Total operating expenses 114,716 16,225 — — 130,941

Operating income / (loss)

$ 34,312 $ ( 4,733 ) $ ( 99 ) $ 167 $ 29,647

Nine Months Ended September 30, 2023

Assets $ 2,133,644 $ 73,148 $ ( 129,250 ) $ ( 111 ) $ 2,077,431

Reconciliation of operating income to income before income taxes

Operating income $ 29,647

Interest expense ( 4,314 )

Interest income 12,371

Other expense, net ( 2,685 )

Income before income taxes $ 35,019

ALARM.COM HOLDINGS, INC.

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

March 31, 2025 and 2024

Three Months Ended March 31, 2024

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

4 unchanged sentences

210,223 13,883 ( 686 ) ( 137 ) 223,283

Cost of SaaS and license revenue 16,458 3,933 104 ( 67 ) 20,428

Cost of hardware and other revenue 55,570 1,270 ( 655 ) ( 98 ) 56,087

Total cost of revenue 72,028 5,203 ( 551 ) ( 165 ) 76,515

Selling and marketing expense 20,410 5,044 — — 25,454

General and administrative expense 28,285 1,011 — — 29,296

Research and development expense 58,842 7,114 — — 65,956

Amortization and depreciation expense 7,084 253 — — 7,337

Total operating expenses 114,621 13,422 — — 128,043

Operating income / (loss)

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

Alarm.com Other Intersegment Alarm.com Intersegment Other Total

Assets as of September 30, 2024 $ 2,018,782 $ 53,902 $ ( 101,676 ) $ ( 10 ) $ 1,970,998

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 $ 5.0 million and $ 15.4 million for the three and nine months ended September 30, 2024, respectively, as compared to $ 5.7 million and $ 17.8 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, 2024 and 2023.

Amortization and depreciation expense was $ 7.4 million and $ 21.3 million for the Alarm.com segment for the three and nine months ended September 30, 2024, respectively, as compared to $ 7.7 million and $ 22.7 million for the same periods in the prior year.

Amortization and depreciation expense was $ 0.2 million and $ 0.7 million for the Other segment for the three and nine months ended September 30, 2024, respectively, as compared to $ 0.2 million and $ 0.8 million for the same periods in the prior year.

Additions to property and equipment were $ 12.6 million and $ 18.4 million for the Alarm.com segment for the three and nine

ALARM.COM HOLDINGS, INC.

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

September 30, 2024 and 2023

months ended September 30, 2024, respectively, as compared to $ 2.1 million and $ 7.9 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 nine months ended September 30, 2024, respectively, as compared to $ 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, 2024 and 2023.

Substantially all of our long-lived assets were in North America as of September 30, 2024 and December 31, 2023.

Assets $ 1,538,429 $ 64,350 $ ( 115,786 ) $ ( 11 ) $ 1,486,982

Reconciliation of operating income to income before income taxes

Operating income $ 18,725

Interest expense ( 796 )

Interest income 8,540

Other expense, net ( 318 )

Income before income taxes $ 26,151

Our SaaS and license revenue for the Alarm.com segment included software license revenue of $ 4.7 million for the three months ended March 31, 2025, as compared to $ 5.2 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, 2025 and 2024.

Additions to property and equipment were $ 8.0 million for the Alarm.com segment for the three months ended March 31, 2025, as compared to $ 3.9 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, 2025 and 2024.

We derived substantially all revenue from North America for the three months ended March 31, 2025 and 2024.

Substantially all of our long-lived assets were in North America as of March 31, 2025 and December 31, 2024.

Subsequent Event

Investment in Service Provider Partner

On April 28, 2025, we paid $ 29.1 million in cash to purchase 24.7 % of the outstanding shares of Safe Streets USA, LLC.

We are still evaluating the accounting treatment for this investment, which will be finalized during the second quarter of 2025.

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