What changed in this filing

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Item 1A. Risk Factors

2025-08-07 compared with 2025-05-09 · 43 added, 37 removed, 922 unchanged (8% of the section changed)

22 unchanged sentences

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

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

federal, state and local laws and regulations, including relating to consumer protection, licensing, Internet

and data privacy, tax, tariff, sanctions, import/export restrictions or other trade barriers.

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

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See the "Non-GAAP Measures" section of Item 2.

"Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the limitations of non-GAAP adjusted EBITDA and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measurement, for the three months ended March 31, 2025 and 2024.

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

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

We continue to follow our previously implemented hybrid return to office plan that includes mandatory in-office workdays and voluntary remote workdays, which may make us more vulnerable to cyber-attacks and may create operational or

other challenges, any of which could harm our systems or our business.

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

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A significant portion of our hardware is produced outside the United States, including in Vietnam, Thailand and Taiwan.

government has announced several tariff framework agreements, and when the terms of such agreements are finalized, we will assess their potential impact on our business.

The ultimate impact of any tariffs will depend on various factors, including how long such tariffs remain in place, the ultimate levels of such tariffs and how other countries respond to the U.S.

Given these tariffs did not become effective until April 2025, there was no impact to our cost of hardware revenue for these new tariffs during the three months ended March 31, 2025.

We continue to monitor the changes in tariffs and consider whether we will pass through some or all of the cost of the tariffs to our customers consistent with our contractual rights.

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

Our revenue increased from $749.0 million in 2021 to $939.8 million in 2024 and increased from $223.3 million for the three months ended March 31, 2024 to $238.8 million for the three months ended March 31, 2025.

Our revenue increased from $749.0 million in 2021 to $939.8 million in 2024 and increased from $457.1 million for the six months ended June 30, 2024 to $493.1 million for the six months ended June 30, 2025.

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

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We intend to continue to invest in research and development, sales and marketing, and general and administrative functions and other areas to grow our business.

We are likely to recognize the costs associated with these increased investments earlier

than some of the anticipated benefits and the return on these investments may be lower, or may develop more slowly, than we expect, which could adversely affect our operating results.

We are likely to recognize the costs associated with these increased investments earlier than some of the anticipated benefits and the return on these investments may be lower, or may develop more slowly, than we expect, which could adversely affect our operating results.

If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities or develop new solutions or enhancements to our existing solutions and we may fail to satisfy subscriber and service provider partner requirements, maintain the quality of our solutions, execute on our business plan or respond to competitive pressures, which could result in our financial results suffering and a decline in our stock price.

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

We increased our number of full-time employees from 1,500 as of December 31, 2021 to 2,020 as of March 31, 2025.

We increased our number of full-time employees from 1,500 as of December 31, 2021 to 2,048 as of June 30, 2025.

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

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Federal Trade Commission, or the FTC, in addition to state consumer protection laws.

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

The FTC and the Federal Communications Commission have issued regulations that place restrictions on, among other things, unsolicited

automated telephone calls to residential and wireless telephone subscribers by means of automatic telephone dialing systems and the use of prerecorded or artificial voice messages.

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

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Our business relies heavily upon cellular telephone service to communicate signals.

Cellular telephone companies are currently regulated by both federal and state

Cellular telephone companies are currently regulated by both federal and state governments.

State-level privacy and data security laws in California and various other U.S.

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Amazon.com offers Amazon Home Services security packages with bundled equipment and professional installation, and Amazon Key, a security camera and smart lock integration feature.

Ring Inc., owned by Amazon.com, offers a connected video doorbell, video cameras and an integrated security system,

Ring Inc., owned by Amazon.com, offers a connected video doorbell, video cameras and an integrated security system, Ring Alarm.

Samsung's SmartThings offers a security system and a home automation and awareness hub.

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Our ability to keep our business operating is highly dependent on the proper and efficient operation of our network operations centers and data back-up systems, as well as the systems of the third-party technology providers we use to process certain information, such as video.

Although our network operations centers have back-up computer and power systems, if there is a catastrophic event, natural disaster, terrorist attack, security breach or other extraordinary event, we may be unable to provide our subscribers with uninterrupted monitoring service or may be unable to adequately protect confidential information and data from unauthorized access or loss.

Although our network operations centers have back-up computer and power systems,

if there is a catastrophic event, natural disaster, terrorist attack, security breach or other extraordinary event, we may be unable to provide our subscribers with uninterrupted monitoring service or may be unable to adequately protect confidential information and data from unauthorized access or loss.

Furthermore, because data back-up systems are susceptible to malfunctions and interruptions (including those due to equipment damage, power outages, human error, system or software updates, computer viruses, computer hacking, data corruption and a range of other hardware, software and network problems), we cannot guarantee that we will not experience data back-up failures in the future.

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A system disruption, shutdown, or loss of data may result in adverse publicity and therefore adversely affect the market's perception of the security and reliability of our services.

A cyber-attack may cause additional costs, such as investigative and remediation costs, and the costs of providing individuals and/or data owners with notice of the breach, legal fees and the costs of any additional fraud detection activities required by law, a court or a third-party.

A cyber-attack may cause additional costs, such as investigative and remediation costs, and the

costs of providing individuals and/or data owners with notice of the breach, legal fees and the costs of any additional fraud detection activities required by law, a court or a third-party.

Additionally, some of our customer contracts require us to indemnify customers from damages they may incur as a result of a breach of our networks and systems.

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In addition to the core operating environment of Alarm.com, we also have acquired businesses and subsidiaries that in some cases operate data infrastructure that is distinct from the Alarm.com operating environment, and therefore have distinct data security vulnerabilities.

The overall management of cybersecurity risk involves coordination between Alarm.com and our acquired

businesses and subsidiaries, and data security risks in these entities may be heightened where the technology platform is less mature than the Alarm.com core platform.

The overall management of cybersecurity risk involves coordination between Alarm.com and our acquired businesses and subsidiaries, and data security risks in these entities may be heightened where the technology platform is less mature than the Alarm.com core platform.

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

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We have several large hardware suppliers from which we procure hardware on a purchase order basis, including three key suppliers that supplied products and components of our inventory which collectively represented 49% of our hardware

revenue for the three months ended March 31, 2025 (31%, 10% and 8% of hardware revenue, respectively).

revenue for the six months ended June 30, 2025 (31%, 10% and 8% of hardware revenue, respectively).

The failure of any of these key suppliers or their subcomponent suppliers to deliver product on time or at the contracted price would materially and adversely affect our business, financial condition, cash flows and results of operations.

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We may incur significant costs in our efforts to engage in strategic transactions and these expenditures may not result in successful acquisitions.

In addition, we have equity investments in several entities and the accounting treatment applied to these investments varies depending on a number of factors, such as our percentage of ownership and the level of influence or control we have over the entity.

Because these entities are managed independently, their business decisions may differ from our interests and impact the value of our investments.

These entities may also be subject to litigation, regulatory actions, or other disputes, any of which could negatively impact their financial results and our share of income or the value of our investment.

If any of these entities experience significant losses, become subject to material litigation, or cease operations, our investments could be subject to impairment and the loss of a part or all of our investment value.

We expect that the consideration we might pay for any future acquisitions of technologies, assets or businesses could include stock, rights to purchase stock, cash or some combination of the foregoing.

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In June 2021, the European Commission adopted a new version of the SCCs, which we began using on September 27, 2021.

Moreover, the UK data protection regulator developed new SCCs for transferring personal data from the

UK that were finalized in March 2022, and we use the new UK SCCs with our current and future customers in the UK.

Moreover, the UK data protection regulator developed new SCCs for transferring personal data from the UK that were finalized in March 2022, and we use the new UK SCCs with our current and future customers in the UK.

In July 2023, the EU-U.S.

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In addition, the LGPD may subject us to regulatory fines by the Brazilian Data Protection Authority and increased commercial liabilities.

Since April 2018 we have offered a solution for certain service provider partners who may be subject to the Health Insurance Portability and Accountability Act of 1996, and its implementing regulations, or HIPAA, which regulates the use and disclosure of Protected Health Information, or PHI.

Protected Health Information, or PHI.

As a result, we are subject to HIPAA when PHI is accessed, created, maintained or transmitted through our solution by these service provider partners.

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

If our privacy and security policies or other safeguards for PHI are deemed to be in

noncompliance by the United States Department of Health and Human Services, or HHS, we may be subject to litigation, regulatory investigations or other liabilities.

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

In the event of a breach of PHI that we hold, we may be subject to governmental fines, individual claims under state privacy laws governing personal health information, remediation expenses and/or harm to our reputation.

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Certain of our service provider partner agreements currently, and may in the future, provide minimum service level commitments regarding items such as uptime, functionality or performance.

If we are unable to meet the stated service level

commitments for these service provider partners or suffer extended periods of service unavailability, we are or may be contractually obligated to provide these service provider partners with credits for future services, provide services at no cost or pay other penalties, which could adversely impact our revenue.

If we are unable to meet the stated service level commitments for these service provider partners or suffer extended periods of service unavailability, we are or may be contractually obligated to provide these service provider partners with credits for future services, provide services at no cost or pay other penalties, which could adversely impact our revenue.

We have incurred such penalties in the past, which have reduced our revenue.

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

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

other debt issuance costs.

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

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

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

As of March 31, 2025, we had $248.3 million of goodwill and identifiable intangible assets.

As of June 30, 2025, we had $244.8 million of goodwill and identifiable intangible assets.

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

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and other countries could increase our tax liability and adversely affect our after-tax profitability.

For example, 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.

For example, on July 4, 2025, OBBBA was enacted in the United States.

The OBBBA includes a broad range of tax provisions that may impact the timing and the magnitude of certain key tax deductions, including the permanent reinstatement of the full domestic research and development expenditure deduction in the year such costs are incurred, the 100% first-year bonus depreciation deduction and various international tax changes.

Further, 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.

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This undertaxed profits safe harbor transition rule will apply to us through our year ending December 31, 2025.

In June 2025, the OECD Group of Seven countries issued a statement that it had reached a shared understanding with the United States Department of Treasury that U.S.

parented companies would be exempt from the Pillar Two undertaxed profits rule and the income inclusion rule.

The OECD has not released any rules that would implement this shared understanding.

While we do not currently expect the Pillar Two minimum tax directive to have a material impact on our effective tax rate or operations, our analysis is ongoing as the OECD (and many countries) continue to release additional guidance and implement legislation.

To the extent additional changes take place in the countries in which we operate, it is possible that these legislative

changes and efforts may increase uncertainty and have an adverse impact on our effective tax rates or operations.

To the extent additional changes take place in the countries in which we operate, it is possible that these legislative changes and efforts may increase uncertainty and have an adverse impact on our effective tax rates or operations.

We will continue to monitor and evaluate new legislation and guidance, which could change our current assessment.

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

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

Our company has direct government interactions and in several cases uses third-party representatives, including dealers, for regulatory compliance,

sales and other purposes in a variety of countries.

These factors increase our anti-corruption risk profile.

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Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations, could also result in decreased use of our platforms and solutions, or in our decreased ability to export or sell our platforms and solutions to existing or potential service provider partners with international operations.

Any decreased use of our platforms and solutions or

limitation on our ability to export or sell our platforms and solutions would likely adversely affect our business, financial condition, cash flows and results of operations.

Any decreased use of our platforms and solutions or limitation on our ability to export or sell our platforms and solutions would likely adversely affect our business, financial condition, cash flows and results of operations.

In addition, our software contains encryption technologies, certain types of which are subject to U.S.

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

Revenue in countries outside of North America accounted for 6% and 5% of our total revenue for the three months ended March 31, 2025 and 2024.

Revenue in countries outside of North America accounted for 6% and 5% of our total revenue for the six months ended June 30, 2025 and 2024, respectively.

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

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

In addition, we currently have a limited portfolio of issued patents compared to our larger competitors, and therefore may not be able to effectively utilize our

intellectual property portfolio to assert defenses or counterclaims in response to patent infringement claims or litigation brought against us by third parties.

In addition, we currently have a limited portfolio of issued patents compared to our larger competitors, and therefore may not be able to effectively utilize our intellectual property portfolio to assert defenses or counterclaims in response to patent infringement claims or litigation brought against us by third parties.

Further, litigation may involve patent holding companies or other adverse patent owners who have no relevant products or revenues and against which our potential patents provide no deterrence, and many other potential litigants have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them.

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Pursuant to our amended and restated certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

(1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws or (4) any action asserting a claim governed by the internal affairs doctrine.

governed by the internal affairs doctrine.

Notwithstanding the foregoing, this choice of forum provision will not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts have exclusive jurisdiction.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors