Alarmcom Holdings Inc
For the period ended Dec 31, 2024. Filed Feb 20, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 20, 2025
ALRM$65.03-3.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-22.
0001459200-24-000008
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-20.
0001459200-25-000004
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 190 previous paragraphs and 200 current paragraphs.
106 unchanged; 68 reworded; 16 added; 15 removed; 1 previous and 10 current paragraphs rearranged.
Tables are not compared: 19 previous and 21 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
Alarm.com has established a global network of trusted service provider partners who distribute our solutions to their customers. Our service provider partners represent a diverse range of independent businesses, and are experts at selling, installing and supporting our technology. They depend on the Alarm.com platform for connected property technology and to operate and manage their businesses efficiently.
Current report
On January 30, 2025, we entered into a senior secured loan agreement with a 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.
Current report
On February 10, 2025, Alarm.com Incorporated acquired 81% of the issued and outstanding shares of capital stock of 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.
Current report
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. We are currently evaluating the accounting treatment of this acquisition and are in the process of completing the preliminary purchase price allocation of the assets acquired and liabilities assumed.
Current report
Other (Expense) / Income, Net
Current report
Provision for Income Taxes
Current report
Other (Expense) / Income, Net
Current report
Provision for Income Taxes
Current report
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):
Current report
On January 30, 2025, we entered into a senior secured loan agreement with a 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.
Current report
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. We are currently evaluating the accounting treatment of this acquisition and are in the process of completing the preliminary purchase price allocation of the assets acquired and liabilities assumed.
Current report
Convertible Senior Notes - 2026
Current report
Convertible Senior Notes - 2029 Notes
Current report
We used $63.1 million of the net proceeds from the 2029 Notes to pay the cost of the capped call transactions described below and used $75.0 million to repurchase 1,117,068 shares of our common stock concurrently with the pricing of the 2029 Notes, which was separately authorized by our board of directors. We 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.
Current report
Capped Call – 2029 Notes
Current report
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. The cap price of the capped call transactions is initially $134.28 per share of our common stock, which represents a premium of 100% over the closing price of our common stock on the Nasdaq Global Select Market on May 28, 2024, and is subject to certain adjustments under the terms of the capped call transactions. The exercise price is $87.28 per share of common stock, subject to customary anti-dilution adjustments that mirror corresponding adjustments for the 2029 Notes.
Removed paragraphs (15)
Previous report
On October 27, 2022, we filed a demand for arbitration of a dispute arising under the Patent Cross License Agreement between Alarm.com and Vivint executed in November 2013. Vivint had stopped paying license fees to Alarm.com under the agreement. Vivint had been paying the required license fees to Alarm.com since the agreement was executed in November 2013. As a result of Vivint’s refusal to pay license fees under the agreement, which began during the fourth quarter of 2022, SaaS and license revenue and total revenue through December 31, 2023 were lower by approximately $6.0 million on a quarterly basis. Quarterly earnings and cash flow through December 31, 2023 were also impacted by the aforementioned $6.0 million, plus additional legal fees. On December 21, 2023, Alarm.com and Vivint agreed to settle all outstanding litigation between the parties and to enter into a long-term intellectual property license agreement under which Alarm.com will license to Vivint its intellectual property portfolio.
Previous report
Other Income / (Expense), Net
Previous report
Provision for / (Benefit from) Income Taxes
Previous report
The $17.4 million decrease in cost of revenue in 2023 as compared to 2022 was the result of a $29.4 million, or 11%, decrease in cost of hardware and other revenue and a $12.0 million, or 16%, increase in cost of SaaS and license revenue. Our cost of software license revenue included within cost of SaaS and license revenue increased $0.1 million to $0.6 million during 2023 as compared to $0.5 million during 2022. The cost of hardware and other revenue for the Alarm.com segment decreased $27.5 million in 2023 as compared to 2022 primarily due to a decrease in the number of hardware units shipped, a decrease in inventory component costs and a decrease in costs for freight shipments. The cost of SaaS and license revenue for the
Previous report
Other Income / (Expense), Net
Previous report
Provision for / (Benefit from) Income Taxes
Previous report
The following table presents our revenue, inter-segment revenue and operating expenses by segment (in thousands):
Previous report
If we enter into contracts that contain multiple promised services, we evaluate which of the promised services represent separate performance obligations based on whether or not the promised services are distinct and whether or not the services are separable from other promises in the contract. If these criteria are met, then we allocate the transaction price to the performance obligations using the relative stand-alone selling price method at contract inception. In determining the relative estimated selling prices, we consider market conditions, entity-specific factors and information about the customer or class of customer. Any discount within the contract is allocated proportionately to all of the separate performance obligations in the contract unless the terms of discount relate specifically to the entity’s efforts to satisfy some but not all of the performance obligations.
Previous report
Fair Value Measurements
Previous report
The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.
Previous report
We previously maintained a subsidiary long-term incentive plan and recorded a liability based on the potential cash payment contingent upon meeting certain financial milestones related to the agreement established with certain employees of one of our subsidiaries. During 2021 and until the termination of the subsidiary long-term incentive plan in May of 2022, we estimated the fair value of the liability by using a Monte Carlo simulation model which involves several Level 3 unobservable inputs. Concurrent with the termination of the subsidiary long-term incentive plan, we granted performance-based restricted stock units to those employees who previously participated in the subsidiary long-term incentive plan. We accounted for the termination of the subsidiary long-term incentive plan and concurrent grant of performance-based restricted stock units as a modification of the original subsidiary long-term incentive plan. As a result, no further estimates related to the subsidiary long-term incentive plan were necessary as of December 31, 2023. See the Stock-Based Compensation section below for details on the judgment required in determining the probable outcome of performance conditions related to performance-based restricted stock units.
Previous report
Accounting estimates are also used for the contingent consideration liability related to the potential earn-out payment from 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. 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. The contingent consideration liability was valued with Level 3 unobservable inputs, including the probability of expected achievement of the performance targets. 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. We did not make any material changes in the accounting methodology used to determine the fair value of the contingent consideration liability for the year ended December 31, 2023. We do not expect any material changes in the near term to the underlying assumptions used to determine the significant unobservable inputs used to calculate the fair value of the contingent consideration and, if changes in these assumptions occur, we do not expect those changes to have a material impact on our general and administrative operating expenses.
Previous report
On October 27, 2022, we filed a demand for arbitration of a dispute arising under the Patent Cross License Agreement between Alarm.com and Vivint executed in November 2013. Vivint had stopped paying license fees to Alarm.com under the agreement. Vivint had been paying the required license fees to Alarm.com since the agreement was executed in November 2013. As a result of Vivint’s refusal to pay license fees under the agreement, which began during the fourth quarter of 2022, cash flows from operating activities through December 31, 2023 were lowered by approximately $6.0 million on a quarterly basis, plus additional legal fees. On December 21, 2023, Alarm.com and Vivint agreed to settle all outstanding litigation between the parties and to enter into a long-term intellectual property license agreement under which Alarm.com will license to Vivint its intellectual property portfolio.
Previous report
On January 31, 2024, the U.S. House of Representatives passed H.R. 7024, which, among other provisions, would retroactively change the effective date of the requirement to capitalize Section 174 domestic research and development expenditures from January 1, 2022 to January 1, 2026. Foreign research and development expenditures would continue to be capitalized and amortized over 15 years as of January 1, 2022. If the bill is passed by the Senate and signed into law by the President as currently drafted, the bill would allow us to receive a partial refund of the 2022 Section 174 federal income tax paid, the amount and timing of which cannot be estimated at this time. Any state impact would depend on the relevant individual state laws.
Previous report
For 2022, cash flows from operating activities were $56.9 million, compared to $103.2 million for 2021. This $46.3 million decrease in cash flows from operating activities was due to a $38.3 million decrease in non-cash and other reconciling items and a $12.4 million decrease in cash from operating assets and liabilities, partially offset by a $4.4 million increase in net income. The $38.3 million decrease in non-cash and other reconciling items was primarily due to a $44.9 million change in deferred income taxes, which was driven by an increase in estimated taxable income during 2022 pursuant to the capitalization requirements under Section 174 of the Internal Revenue Code, as compared to 2021. The decrease in non-cash and other reconciling items during 2022 as compared to 2021 was also due to a $12.7 million decrease in amortization of the debt discount and debt issuance costs related to the adoption of Accounting Standards Update, or ASU, 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity," for the 2026 Notes. These decreases in non-cash and other reconciling items were partially offset by a $14.0 million increase in stock-based compensation resulting from additional grants of restricted stock units during 2022 as well as an increase in the changes to the provision for credit losses and reserve for product returns of $4.1 million during 2022 as compared to 2021. The $12.4 million decrease in cash from operating assets and liabilities was primarily due to a $8.9 million change in inventory resulting from an increase in purchased inventory as we seek to reduce risks and uncertainties in our supply chain as well as a $6.5 million change in accounts payable, accrued expenses and other liabilities primarily due to differences in the timing of disbursements during 2022 as compared to 2021.
Reworded paragraphs (68)
Previous wording
Alarm.com is the leading platform for the intelligently connected property. Our cloud-based platform offers an expansive suite of 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. During 2023, our platforms processed more than 325 billion data points generated by over 150 million connected devices. We believe this scale of subscribers, connected devices and data operations makes us the leader in the connected property market.
Current wording
Alarm.com is the leading platform for the intelligently connected property. Our cloud-based platform offers an expansive suite of 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. During 2024, our platforms processed more than 345 billion data points generated by over 160 million connected devices. We believe this scale of subscribers, connected devices and data operations makes us the leader in the connected property market.
Previous wording
Our solutions are delivered through an established network of trusted service providers, who are experts at selling, installing and supporting our solutions. We primarily generate SaaS and license revenue through our service provider partners, who resell these services and pay us monthly fees. These service provider contracts typically have an initial term of one year, with subsequent renewal terms of one year. Our service provider partners have indicated that they typically have three to five-year service contracts with residential and commercial property owners who use our solutions. We also generate hardware and other revenue, primarily from our service provider partners and distributors. Our hardware sales include connected devices that enable our services, such as video cameras, video recorders, gunshot detection sensors, gateway modules and smart thermostats. We believe our network of service providers and the length of our service relationships with residential and commercial property owners, combined with our robust SaaS platforms and over 20 years of operating experience, contribute to a compelling business model.
Current wording
Alarm.com primarily generates SaaS and license revenue through our service provider partners, who resell our services and pay us monthly fees. Contracts with our service provider partners typically have an initial term of one year, with subsequent renewal terms of one year. Our service provider partners have indicated that they typically have three to five-year service contracts with residential and commercial property owners who use our solutions. We also generate hardware and other revenue, primarily from our service provider partners and distributors. Our hardware sales include connected devices that enable our services, such as video cameras, video recorders, gunshot detection sensors, gateway modules and smart thermostats. We believe our network of service providers and the length of our service relationships with residential and commercial property owners, combined with our robust SaaS platforms and over 20 years of operating experience, contribute to a compelling business model.
Previous wording
The Alarm.com platform enables our service provider partners to deploy our interactive security, video monitoring, intelligent automation, access control, energy management and wellness solutions as stand-alone offerings or as combined solutions to address the needs of a broad range of customers.
Current wording
The Alarm.com platform enables our service provider partners to address the needs of a broad range of residential and commercial customers. They can deploy interactive security, video monitoring, property automation, access control, energy management, gunshot detection, water management, vehicle and fleet management, and wellness and personal safety solutions as stand-alone offerings or as integrated solutions.
Previous wording
We primarily generate SaaS and license revenue, our largest source of revenue, through our service provider partners who resell our services and pay us monthly fees. Our service provider partners sell, install and support Alarm.com solutions that enable residential and commercial property owners to intelligently secure, connect, control and automate their properties. Our subscribers consist of all of the properties maintained by those residential and commercial property owners to which we are delivering at least one of our solutions. We derive a portion of our revenue from licensing our intellectual property to third parties on a per customer basis. SaaS and license revenue represented 65%, 62% and 61% of our revenue in 2023, 2022 and 2021, respectively.
Current wording
Alarm.com primarily generates SaaS and license revenue, our largest source of revenue, through our service provider partners, who resell our services and pay us monthly fees. Our service provider partners sell, install and support Alarm.com solutions that enable residential and commercial property owners to intelligently secure, connect, control and automate their properties. Our subscribers consist of all of the properties maintained by those residential and commercial property owners to which we are delivering at least one of our solutions. We derive a portion of our revenue from licensing our intellectual property to third parties on a per customer basis. SaaS and license revenue represented 67%, 65% and 62% of our revenue in 2024, 2023 and 2022, respectively.
Previous wording
We also generate SaaS and license revenue from monthly fees charged to service providers on a per subscriber basis for access to our non-hosted software platform, or Software platform. The non-hosted software for interactive security, automation and related solutions is typically deployed and operated by the service provider in its own network operations center. Software license revenue represented 3%, 3% and 4% of our revenue in 2023, 2022 and 2021, respectively.
Current wording
We also generate SaaS and license revenue from monthly fees charged to service providers on a per subscriber basis for access to our non-hosted software platform, or Software platform. The non-hosted software for interactive security, automation and related solutions is typically deployed and operated by the service provider in its own network operations center. Software license revenue represented 2%, 3% and 3% of our revenue in 2024, 2023 and 2022, respectively.
Previous wording
We also generate revenue from the sale of many types of hardware, including video cameras, video recorders, cellular radio modules, smart thermostats, image sensors, gunshot detection sensors and other peripherals, that enable our solutions. Our hardware and other revenue also includes our revenue from the sale of perpetual licenses that provide our customers in the commercial market the right to use our video surveillance software for an indefinite period of time in exchange for a one-time license fee. Additionally, our hardware and other revenue includes our revenue from the sale of licenses that provide our customers the right to use our gunshot detection solution in exchange for license fees. Hardware and other revenue represented 35%, 38% and 39% of our revenue in 2023, 2022 and 2021, respectively. We typically expect hardware and other revenue to fluctuate as a percentage of total revenue.
Current wording
We also generate revenue from the sale of many types of hardware, including video cameras, video recorders, cellular radio modules, smart thermostats, image sensors, gunshot detection sensors and other peripherals, that enable our solutions. Our hardware and other revenue also includes our revenue from the sale of perpetual licenses that provide our customers in the commercial market the right to use our video surveillance software for an indefinite period of time in exchange for a one-time license fee. Additionally, our hardware and other revenue includes our revenue from the sale of licenses that provide our customers the right to use our gunshot detection solution in exchange for license fees. Hardware and other revenue represented 33%, 35% and 38% of our revenue in 2024, 2023 and 2022, respectively. We typically expect hardware and other revenue to fluctuate as a percentage of total revenue.
Previous wording
•SaaS and license revenue increased 9% to $569.2 million in 2023 from $520.4 million in 2022. SaaS and license revenue increased 13% to $520.4 million in 2022 from $460.4 million in 2021. Software license revenue decreased to $23.2 million in 2023 from $26.8 million in 2022. Software license revenue decreased to $26.8 million in 2022 from $32.3 million in 2021.
Current wording
•SaaS and license revenue increased 11% to $631.2 million in 2024 from $569.2 million in 2023. SaaS and license revenue increased 9% to $569.2 million in 2023 from $520.4 million in 2022. Software license revenue decreased to $20.3 million in 2024 from $23.2 million in 2023. Software license revenue decreased to $23.2 million in 2023 from $26.8 million in 2022.
Previous wording
•Total revenue increased 5% to $881.7 million in 2023 from $842.6 million in 2022. Total revenue increased 12% to $842.6 million in 2022 from $749.0 million in 2021.
Current wording
•Total revenue increased 7% to $939.8 million in 2024 from $881.7 million in 2023. Total revenue increased 5% to $881.7 million in 2023 from $842.6 million in 2022.
Previous wording
•Net income increased 44% to $80.3 million in 2023 from $55.6 million in 2022. Net income increased 9% to $55.6 million in 2022 from $51.2 million in 2021. Net income attributable to common stockholders increased 44% to $81.0 million in 2023 from $56.3 million in 2022. Net income attributable to common stockholders increased 8% to $56.3 million in 2022 from $52.3 million in 2021.
Current wording
•Net income increased 52% to $122.5 million in 2024 from $80.3 million in 2023. Net income increased 44% to $80.3 million in 2023 from $55.6 million in 2022. Net income attributable to common stockholders increased 53% to $124.1 million in 2024 from $81.0 million in 2023. Net income attributable to common stockholders increased 44% to $81.0 million in 2023 from $56.3 million in 2022.
Previous wording
•Non-GAAP adjusted EBITDA, a non-GAAP measurement of operating performance, increased to $154.0 million in 2023 from $146.8 million in 2022. Non-GAAP adjusted EBITDA increased to $146.8 million in 2022 from $142.5 million in 2021.
Current wording
•Non-GAAP adjusted EBITDA, a non-GAAP measurement of operating performance, increased to $176.2 million in 2024 from $154.0 million in 2023. Non-GAAP adjusted EBITDA increased to $154.0 million in 2023 from $146.8 million in 2022.
Previous wording
Please see Non-GAAP Measures below in this section of this Annual Report for a discussion of the limitations of non-GAAP adjusted EBITDA (a non-GAAP measure) and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measure, for the years ended December 31, 2023, 2022 and 2021.
Current wording
Please see Non-GAAP Measures below in this section of this Annual Report for a discussion of the limitations of non-GAAP adjusted EBITDA (a non-GAAP measure) and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable measurement in accordance with GAAP, for the years ended December 31, 2024, 2023 and 2022.
Previous wording
Information about current period and prior period acquisitions that may affect the comparability of our historical financial information is included in Item 1. Business – Governance – Corporate Information. Information about the 2026 Notes issued in January 2021 and the related interest expense as well as changes in costs for freight shipments and inventory component costs, which may affect the comparability of historical financial information, is disclosed in the Comparison of Years Ended December 31, 2023 to December 31, 2022 section below within Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations."
Current wording
Information about current period and prior period acquisitions that may affect the comparability of our historical financial information is included in Item 1. Business – Governance – Corporate Information. Information about the 2029 Notes and the related interest expense as well as changes in legal costs, which may affect the comparability of historical financial information, is disclosed in the Comparison of Years Ended December 31, 2024 to December 31, 2023 section below within Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations."
Previous wording
We believe there is significant opportunity to expand our international business, as 4% of our total revenue during the year ended December 31, 2023 originated from customers located outside of North America. Our products are currently localized and available in over 50 countries outside of North America. On January 18, 2023, we acquired 100% of the issued and outstanding shares of capital stock of 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.
Current wording
We believe there is significant opportunity to expand our international business, as 6% of our total revenue during the year ended December 31, 2024 originated from customers located outside of North America. Our products are currently localized and available in over 50 countries outside of North America. On November 22, 2024, we acquired certain assets of Kapacity.io to help accelerate deployment of a cloud-based demand response platform internationally for our EnergyHub subsidiary.
Previous wording
The global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of the Macroeconomic Conditions. These Macroeconomic Conditions have and may continue to create supply chain disruptions, inventory disruptions, and fluctuations in economic growth, including fluctuations in employment rates, inflation, energy prices and consumer sentiment. It remains difficult to assess or predict the ultimate duration and economic impact of the Macroeconomic Conditions. Prolonged uncertainty with respect to the Macroeconomic Conditions could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.
Current wording
The global economy, credit markets and financial markets have and may continue to experience significant volatility as a result of the Macroeconomic Conditions. These Macroeconomic Conditions have and may continue to create tariffs, supply chain disruptions, inventory disruptions, and fluctuations in economic growth, including fluctuations in employment rates, inflation, energy prices and consumer sentiment. It remains difficult to assess or predict the ultimate duration and economic impact of the Macroeconomic Conditions. Prolonged uncertainty with respect to the Macroeconomic Conditions could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.
Previous wording
Non-GAAP adjusted EBITDA is a non-GAAP measure that represents our net income before interest expense, interest income, certain activity within other income / (expense), net, provision for / (benefit from) income taxes, amortization and depreciation expense, stock-based compensation expense, acquisition-related expense, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation. We do not consider these items to be indicative of our core operating performance. The non-cash items include amortization and depreciation expense, amortization of debt discount and debt issuance costs for the 2026 Notes included in interest expense and stock-based compensation expense related to restricted stock units and other forms of equity compensation, including, but not limited to, the sale of common stock. We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.
Current wording
Non-GAAP adjusted EBITDA is a non-GAAP measure that represents our net income before interest expense, interest income, certain activity within other (expense) / income, net, provision for income taxes, amortization and depreciation expense, stock-based compensation expense, acquisition-related expense, legal costs and settlement fees incurred and received in connection with non-ordinary course litigation and other disputes, particularly costs involved in ongoing intellectual property litigation. We do not consider these items to be indicative of our core operating performance. The non-cash items include amortization and depreciation expense; amortization of debt issuance costs for the January 20, 2021 issuance of $500.0 million aggregate principal amount of 0% convertible senior notes due January 15, 2026, or the 2026 Notes, included in interest expense; amortization of debt issuance costs for the May 31, 2024 issuance of $500.0 million aggregate principal amount of 2.25% convertible senior notes due June 1, 2029, or the 2029 Notes, included in interest expense; and stock-based compensation expense related to restricted stock units and other forms of equity compensation, including, but not limited to, the sale of common stock. We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.
Previous wording
We record interest expense primarily related to our 2026 Notes. We exclude interest expense in calculating non-GAAP adjusted EBITDA because we believe the exclusion of interest expense will provide for more meaningful information about our financial performance. We exclude interest income and certain activity within other income / (expense), net including gains, losses or impairments on investments and other assets, gains on settlement fees and losses on the early extinguishment of debt, when applicable, from non-GAAP adjusted EBITDA because we do not consider it part of our ongoing results of operations. We exclude the impact related to our provision for / (benefit from) income taxes from non-GAAP adjusted EBITDA because we do not consider this tax adjustment to be part of our ongoing results of operations.
Current wording
We record interest expense primarily related to our 2026 Notes and 2029 Notes. We exclude interest expense in calculating non-GAAP adjusted EBITDA because we believe the exclusion of interest expense will provide for more meaningful information about our financial performance. We exclude interest income and certain activity within other (expense) / income, net including gains, losses or impairments on investments without readily determinable fair values and other assets, gains and losses from equity method investments, gains on settlement fees and losses on the early extinguishment of debt, when applicable, from non-GAAP adjusted EBITDA because we do not consider it part of our ongoing results of operations. We exclude the impact related to our provision for income taxes from non-GAAP adjusted EBITDA because we do not consider this tax adjustment to be part of our ongoing results of operations.
Previous wording
Our cost of SaaS and license revenue primarily includes the amounts paid to wireless network providers and, to a lesser extent, the costs of running our network operations centers which are expensed as incurred, as well as patent and royalty costs in connection with technology licensed from third-party providers and amounts paid to distributed energy resource providers. Our cost of SaaS and license revenue also includes our cost of software license revenue, which primarily includes the payroll and payroll-related costs of the department dedicated to providing service exclusively to those service providers that host the Software platform. Our cost of hardware and other revenue primarily includes cost of raw materials, tooling, freight shipments and amounts paid to our third-party manufacturer for production and fulfillment of our cellular radio modules and image sensors, and procurement costs for our video cameras, video recorders, smart thermostats and gunshot detection sensors, which we purchase from an original equipment manufacturer, and other devices. Cost of hardware and other revenue also includes material costs and labor cost related to our employees who manufacture hardware for oursuite of IoT solutions. Additionally, our cost of hardware and other revenue includes royalty costs in connection with technology licensed from third-party providers.
Current wording
Our cost of SaaS and license revenue primarily includes the amounts paid to wireless network providers and, to a lesser extent, the costs of running our network operations centers which are expensed as incurred, as well as patent and royalty costs in connection with technology licensed from third-party providers and amounts paid to distributed energy resource providers. Our cost of SaaS and license revenue also includes our cost of software license revenue, which primarily includes the payroll and payroll-related costs of the department dedicated to providing service exclusively to those service providers that host the Software platform. As of December 31, 2024 and 2023, we had 74 and 77 employees who manufacture hardware for oursuite of IoT solutions, respectively. Our cost of hardware and other revenue primarily includes cost of raw materials, tooling, freight shipments and amounts paid to our third-party manufacturer for production and fulfillment of our cellular radio modules and image sensors, and procurement costs for our video cameras, video recorders, smart thermostats and gunshot detection sensors, which we purchase from an original equipment manufacturer, and other devices. Cost of hardware and other revenue also includes material costs and labor cost related to our employees who manufacture hardware for oursuite of IoT solutions. Additionally, our cost of hardware and other revenue includes royalty costs in connection with technology licensed from third-party providers.
Previous wording
Since 2019, the U.S. government has implemented and imposed significant changes to U.S. trade policy with respect to China. Tariffs have subjected certain Alarm.com products manufactured overseas to additional import duties of up to 25%. The amount of the import tariff and the number of products subject to tariffs have changed numerous times based on action by the U.S. government. Approximately one-fifth to one-half of the hardware products that we sell to our service provider partners are imported from China and could be subject to increased tariffs. While the additional import duties resulted in an increase to our cost of hardware revenue, these import duties had a modest impact on hardware revenue margins. If tariffs are increased or are expanded to apply to more of our products, such actions may increase our cost of hardware revenue and reduce our hardware revenue margins in the future. We continue to monitor the changes in tariffs.
Current wording
Since 2019, the U.S. government has implemented and imposed significant changes to U.S. trade policy with respect to China. Tariffs have subjected certain Alarm.com products manufactured overseas to additional import duties of up to 25%. The amount of the import tariff and the number of products subject to tariffs have changed numerous times based on action by the U.S. government. Less than one-third of the hardware products that we sell to our service provider partners are imported from China and could be subject to increased tariffs. While the additional import duties resulted in an increase to our cost of hardware revenue, these import duties had a modest impact on hardware revenue margins. If tariffs are increased or are expanded to apply to more of our products, such actions may increase our cost of hardware revenue and reduce our hardware revenue margins in the future. We continue to monitor the changes in tariffs.
Previous wording
Our costs of hardware revenue increased during the second half of 2021 primarily due to an increase in costs for freight shipments, including expedited shipping costs, as well as an increase in inventory component costs. We currently expect our hardware revenue margins in 2024 to approximate the hardware revenue margins experienced during 2023.
Current wording
We currently expect our hardware revenue margins in 2025 to approximate the hardware revenue margins experienced during 2024.
Previous wording
Our operating expenses consist of sales and marketing, general and administrative, research and development and amortization and depreciation expenses. Salaries, bonuses, stock-based compensation, benefits and other personnel related costs are the most significant components of each of these expense categories, excluding amortization and depreciation. We include stock-based compensation expense in connection with the grant of restricted stock units and other forms of equity compensation, including equity compensation with performance conditions, in the applicable operating expense category based on the respective equity award recipient’s function (sales and marketing, general and administrative or research and development). We grew from 1,733 employees as of January 1, 2023 to 1,989 employees as of December 31, 2023, including 77 employees who manufacture hardware for oursuite of IoT solutions. We expect to continue to hire new employees to support the projected future growth of our business.
Current wording
Our operating expenses consist of sales and marketing, general and administrative, research and development and amortization and depreciation expenses. Salaries, bonuses, stock-based compensation, benefits and other personnel related costs are the most significant components of each of these expense categories, excluding amortization and depreciation. We include stock-based compensation expense in connection with the grant of restricted stock units and other forms of equity compensation, including equity compensation with performance conditions, in the applicable operating expense category based on the respective equity award recipient’s function (sales and marketing, general and administrative or research and development). We grew from 1,989 employees as of January 1, 2024 to 2,010 employees as of December 31, 2024. We expect to continue to hire new employees to support the projected future growth of our business.
Previous wording
The number of employees in sales and marketing functions increased from 511 as of January 1, 2023 to 565 as of December 31, 2023. We expect to continue to invest in our sales and marketing activities to expand our business both domestically and internationally and we expect to increase our marketing expense in 2024 as compared to 2023. We intend to increase the size of our sales force and our service provider partner support team to provide additional support to our existing service provider partner base to drive their productivity in selling our solutions as well as to enroll new service provider partners in North America and in international markets.
Current wording
The number of employees in sales and marketing functions increased from 565 as of January 1, 2024 to 572 as of December 31, 2024. We expect to continue to invest in our sales and marketing activities to expand our business both domestically and internationally and we expect to increase our marketing expense in 2025 as compared to 2024. We intend to increase the size of our sales force and our service provider partner support team to provide additional support to our existing service provider partner base to drive their productivity in selling our solutions as well as to enroll new service provider partners in North America and in international markets.
Previous wording
The number of employees in general and administrative functions increased from 218 as of January 1, 2023 to 229 as of December 31, 2023. Excluding intellectual property litigation and acquisition-related expense, we expect general and administrative costs to increase prospectively as our business grows. This includes cost increases related to human resources, accounting, finance, and legal personnel, additional external legal, audit fees and other expenses associated with regulations governing public companies. While somewhat unpredictable, we also expect to continue to incur costs related to litigation involving intellectual property. See the section of this Annual Report titled "Legal Proceedings" for additional information regarding litigation matters.
Current wording
The number of employees in general and administrative functions increased from 229 as of January 1, 2024 to 237 as of December 31, 2024. Excluding intellectual property litigation and acquisition-related expense, we expect general and administrative costs to increase prospectively as our business grows. This includes cost increases related to human resources, accounting, finance, and legal personnel, additional external legal, audit fees and other expenses associated with regulations governing public companies. While somewhat unpredictable, we also expect to continue to incur costs related to litigation involving intellectual property. See the section of this Annual Report titled "Legal Proceedings" for additional information regarding litigation matters.
Previous wording
The number of employees in research and development functions increased from 1,004 as of January 1, 2023 to 1,118 as of December 31, 2023. Our research and development efforts are focused on innovating new features and enhancing the functionality of our platforms and the solutions we offer to our service provider partners and subscribers. We will also continue to invest in efforts to extend our platforms to adjacent markets and internationally to maintain our leadership position in the development of intelligently connected property technology, and continued enhancement of our Partner Services Platform, a comprehensive suite of enterprise-grade business management solutions for our service provider partners.
Current wording
The number of employees in research and development functions increased from 1,118 as of January 1, 2024 to 1,127 as of December 31, 2024. Our research and development efforts are focused on innovating new features and enhancing the functionality of our platforms and the solutions we offer to our service provider partners and subscribers. We will also continue to invest in efforts to extend our platforms to adjacent markets and internationally to maintain our leadership position in the development of intelligently connected property technology, and continued enhancement of our Partner Services Platform, a comprehensive suite of enterprise-grade business management solutions for our service provider partners.
Previous wording
We record interest expense associated with our 2026 Notes and acquired debt. Interest expense in 2024 is expected to remain relatively consistent with the interest expense in 2023.
Current wording
We record interest expense associated with our 2026 Notes, 2029 Notes and acquired debt. Interest expense in 2025 is expected to increase as compared to 2024 due to the issuance of the 2029 Notes.
Previous wording
Other income / (expense), net primarily consists of non-operating and miscellaneous expense and income.
Current wording
Other (expense) / income, net primarily consists of non-operating and miscellaneous expense and income.
Previous wording
We are subject to U.S. federal, state and local income taxes as well as foreign income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. As a result, we recognize tax liabilities based on estimates of whether additional taxes will be due. Our effective tax rates were below the 21.0% statutory rate primarily due to research and development tax credits claimed and the foreign derived intangible income deduction, partially offset by the impact of state taxes, foreign withholding taxes, federal estimated tax payment interest expense, other nondeductible expenses and, for 2023, a stock-based compensation tax shortfall. We recognize stock-based compensation tax shortfalls and excess tax windfall benefits on a discrete basis during the quarter in which they occur, and we anticipate our effective tax rate will vary from quarter to quarter depending on our stock price as well as the vesting and exercises of various forms of equity compensation under our equity incentive plans each period, including restricted stock units and stock options.
Current wording
We are subject to U.S. federal, state and local income taxes as well as foreign income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. As a result, we recognize tax liabilities based on estimates of whether additional taxes will be due. For the year ended December 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 and tax windfall benefits from employee stock-based compensation, partially offset by the impact of state taxes, foreign withholding taxes and other nondeductible expenses. We recognize stock-based compensation tax shortfalls and excess tax windfall benefits on a discrete basis during the quarter in which they occur, and we anticipate our effective tax rate will vary from quarter to quarter depending on our stock price as well as the vesting and exercises of various forms of equity compensation under our equity incentive plans each period, including restricted stock units and stock options.
Previous wording
The $39.1 million increase in total revenue in 2023 as compared to 2022 was the result of a $48.8 million, or 9%, increase in our SaaS and license revenue and a $9.7 million, or 3%, decrease in our hardware and other revenue. Our software license revenue included within SaaS and license revenue decreased $3.6 million to $23.2 million in 2023 as compared to $26.8 million during 2022, primarily due to the result of the continuing transition of customers from non-hosted software to our cloud based hosted platform. The SaaS and license revenue for the Alarm.com segment increased $36.5 million in 2023 as compared to 2022 primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2022. The increase in SaaS and license revenue for the Alarm.com segment includes the impact from Vivint license revenue of $16.6 million in 2022 that did not occur in 2023. The SaaS and license revenue for our Other segment increased $12.3 million in 2023 as compared to 2022 primarily due to an increase in sales of our energy management and demand response solutions as well as our property management solution. The decrease in hardware and other revenue in 2023 as compared to 2022 was primarily from the $7.3 million decrease in hardware and other revenue, net of intersegment eliminations, for the Alarm.com segment arising from a decrease in the volume of cellular radio modules sold due to the shut down of 3G and CDMA wireless networks in 2022 by certain cellular carriers, as well as a decrease in the volume of thermostats and video cameras sold. Hardware and other revenue, net of intersegment eliminations, in our Other segment decreased $2.4 million, in 2023 as compared to 2022 primarily due to an decreased sales related to our property management and Heating, Ventilation and Air Conditioning solutions.
Current wording
The $58.1 million increase in total revenue in 2024 as compared to 2023 was the result of a $62.0 million, or 11%, increase in our SaaS and license revenue and a $3.9 million, or 1%, decrease in our hardware and other revenue. Our software license revenue included within SaaS and license revenue decreased $2.9 million to $20.3 million in 2024 as compared to $23.2 million during 2023, primarily due to the result of the continuing transition of customers from non-hosted software to our cloud based hosted platform. The SaaS and license revenue for the Alarm.com segment increased $49.8 million in 2024 as compared to 2023 primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2023, as well as an increase in our license revenue. The SaaS and license revenue for our Other segment increased $12.2 million in 2024 as compared to 2023 primarily due to an increase in sales of our energy management and demand response solutions as well as our property management solution. The decrease in hardware and other revenue in 2024 as compared to 2023 was primarily from the $3.3 million decrease in hardware and other revenue, net of intersegment eliminations, for the Alarm.com segment arising from a decrease in the volume of cameras sold. Hardware and other revenue, net of intersegment eliminations, in our Other segment decreased $0.6 million, in 2024 as compared to 2023 primarily due to decreased sales related to our property management solution.
Previous wording
Alarm.com segment increased $8.5 million in 2023 as compared to 2022 primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers. The cost of hardware and other revenue for the Other segment decreased $1.9 million in 2023 as compared to 2022 primarily due to a decrease in the number of hardware units shipped, a decrease in inventory component costs and a decrease in costs for freight shipments. The cost of SaaS and license revenue for the Other segment increased $3.5 million in 2023 as compared to 2022 primarily due to an increase in sales of our energy management and demand response solutions, which drove a corresponding increase in amounts paid to distributed energy resource providers.
Current wording
The $1.0 million increase in cost of revenue in 2024 as compared to 2023 was the result of a $3.6 million, or 4%, increase in cost of SaaS and license revenue and a $2.6 million, or 1%, decrease in cost of hardware and other revenue. Our cost of software license revenue included within cost of SaaS and license revenue remained relatively consistent at $0.6 million during 2024 and 2023. The cost of SaaS and license revenue for the Alarm.com segment increased $0.3 million in 2024 as compared to 2023 primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers. The cost of SaaS and license revenue for the Other segment increased $3.3 million in 2024 as compared to 2023 primarily due to an increase in sales of our energy management and demand response solutions, which drove a corresponding increase in amounts paid to distributed energy resource providers.The cost of hardware and other revenue for the Alarm.com segment decreased $2.1 million in 2024 as compared to 2023 primarily due to a decrease in the number of hardware units shipped. The cost of hardware and other revenue for the Other segment decreased $0.5 million in 2024 as compared to 2023 primarily due to a decrease in the number of hardware units shipped.
Previous wording
Cost of hardware and other revenue as a percentage of hardware and other revenue was 77% in 2023 and 83% in 2022. The decrease in cost of hardware and other revenue as a percentage of hardware and other revenue in 2023 as compared to 2022 is primarily due to a decrease in inventory component and freight shipment costs, price increases we have implemented on some of our products as well as a reflection of the mix of product sales during the periods. Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 15% and 14% in 2023 and 2022, respectively. The increase in cost of SaaS and license revenue as a percentage of SaaS and license revenue in 2023 as compared to 2022 is a reflection of the mix of sales of services during the periods. Cost of software license revenue as a percentage of software license revenue was 3% and 2% in 2023 and 2022, respectively.
Current wording
Cost of hardware and other revenue as a percentage of hardware and other revenue was 77% in 2024 and 2023. Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 14% and 15% in 2024 and 2023, respectively. The decrease in cost of SaaS and license revenue as a percentage of SaaS and license revenue in 2024 as compared to 2023 is a reflection of the mix of sales and services during the periods. Cost of software license revenue as a percentage of software license revenue was 3% in 2024 and 2023.
Previous wording
The $7.5 million increase in sales and marketing expense in 2023 as compared to 2022 was primarily due to a $7.2 million increase in personnel and related costs for our Alarm.com segment, attributable in part to increases in the headcount for our sales team to support our growth, partially offset by a $3.1 million decrease in marketing expense, including advertising cost. Personnel and related costs includes salary, benefits, stock-based compensation and travel expenses. Sales and marketing expense for our Alarm.com segment also increased by $1.0 million in 2023 as compared to 2022 due to an increase in our expenses for external consultants. Sales and marketing expense from our Other segment increased $1.7 million in 2023 as compared to 2022, primarily due to increases in personnel and related costs, attributable in part to increases in the headcount for our sales team. The overall number of employees in our sales and marketing teams increased from 511 as of December 31, 2022 to 565 as of December 31, 2023.
Current wording
The $11.0 million increase in sales and marketing expense in 2024 as compared to 2023 was primarily due to a $3.7 million increase in personnel and related costs for our Alarm.com segment, attributable in part to increases in the headcount for our sales team to support our growth, and a $3.5 million increase in marketing expense for our Alarm.com segment. These increases in sales and marketing expense for our Alarm.com segment were partially offset by a $0.7 million decrease in our expenses for external consultants in 2024 as compared to 2023. Sales and marketing expense from our Other segment increased $4.8 million in 2024 as compared to 2023, primarily due to increases in personnel and related costs, attributable in part to increases in the headcount for our sales team. The overall number of employees in our sales and marketing teams increased from 565 as of December 31, 2023 to 572 as of December 31, 2024.
Previous wording
The $6.2 million increase in general and administrative expense in 2023 as compared to 2022 was primarily due to a $2.4 million increase in personnel and related costs for our Alarm.com segment and a $2.0 million increase in our expenses for external consultants. Additionally, the provision for credit losses increased $1.6 million, rent expense increased $0.9 million and insurance-related costs increased $0.4 million for our Alarm.com segment in 2023 as compared to 2022. General and administrative expenses from our Other segment decreased by $2.1 million during 2023 as compared to 2022, primarily due to a $1.3 million decrease in the provision for credit losses and a $0.7 million decrease in personnel and related costs. The overall number of employees in general and administrative functions increased from 218 as of December 31, 2022 to 229 as of December 31, 2023.
Current wording
The $4.1 million decrease in general and administrative expense in 2024 as compared to 2023 was primarily due to a $16.1 million decrease in legal costs for our Alarm.com segment related to intellectual property litigation. This decrease in general and administrative expense was partially offset by a $4.0 million increase in the provision for credit losses related to a loan we previously provided to an affiliated entity of one of our distribution partners, a $3.9 million increase in expenses related to a program to help our service providers resell our solutions and hardware to our subscribers, a $1.1 million increase in personnel and related costs, a $0.9 million increase in rent expense and a $0.7 million increase in recruiting costs and in 2024 as compared to 2023. General and administrative expenses from our Other segment increased by $1.5 million during 2024 as compared to 2023, primarily due to an increase in personnel and related costs. The overall number of employees in general and administrative functions increased from 229 as of December 31, 2023 to 237 as of December 31, 2024.
Previous wording
The $26.5 million increase in research and development expense in 2023 as compared to 2022 was primarily due to a $20.2 million increase in personnel and related costs for our Alarm.com segment, attributable in part to an increase in headcount of employees in research and development functions as well as a $1.8 million increase in our expenses for external consultants. Research and development expense from our Other segment increased by $4.5 million in 2023 as compared to 2022 primarily due to an increase in our personnel and related costs. The overall number of employees in research and development functions increased from 1,004 as of December 31, 2022 to 1,118 as of December 31, 2023.
Current wording
The $10.8 million increase in research and development expense in 2024 as compared to 2023 was primarily due to a $5.7 million increase in personnel and related costs for our Alarm.com segment, attributable in part to an increase in headcount of employees in research and development functions as well as a $2.4 million increase in our expenses for external consultants. Research and development expense from our Other segment increased by $3.3 million in 2024 as compared to 2023 primarily due to an increase in our personnel and related costs. The overall number of employees in research and development functions increased from 1,118 as of December 31, 2023 to 1,127 as of December 31, 2024.
Previous wording
Amortization and depreciation increased $0.6 million in 2023 as compared to 2022, primarily due to the intangible assets that were acquired in connection with the purchase of EBS on January 18, 2023.
Current wording
Amortization and depreciation decreased $2.3 million in 2024 as compared to 2023, primarily due to changes in amortization expense related to the intangible assets we previously acquired.
Previous wording
Interest expense increased $0.3 million in 2023 as compared to 2022, primarily due to the interest expense incurred on the assumed debt from the acquisition of EBS on January 18, 2023.
Current wording
Interest expense increased $8.0 million in 2024 as compared to 2023, primarily due to the interest expense and amortization of the debt issuance costs related to the 2029 Notes.
Previous wording
Interest income increased $21.0 million in 2023 as compared to 2022, primarily due to an increase in interest income earned on cash and cash equivalents from higher interest rates during the year ended December 31, 2023.
Current wording
Interest income increased $17.6 million in 2024 as compared to 2023, primarily due to an increase in interest income earned on cash and cash equivalents from higher amounts of cash and cash equivalents and higher average interest rates during 2024 as compared to 2023. The increase in interest income was partially offset by a $0.5 million reduction to interest income for the reversal of payable in kind interest associated with a subordinated credit agreement with an affiliated entity of one of our distribution partners during 2024, which did not occur during 2023.
Previous wording
Other income / (expense), net increased $4.7 million in 2023 as compared to 2022, primarily due to a gain recorded from the settlement of a legal matter, partially offset by an increase in non-operating and miscellaneous expenses.
Current wording
Other (expense) / income, net decreased $7.3 million in 2024 as compared to 2023, primarily due to a gain recorded from the settlement of a legal matter in 2023 that did not occur in 2024 as well as an increase in non-operating and miscellaneous expenses.
Previous wording
The provision for / (benefit from) income taxes increased $16.5 million in 2023 as compared to 2022. Our effective tax rate was 17.9% in 2023 as compared to 1.7% in 2022. The increase in the provision for / (benefit from) income taxes was primarily due to an increase in income before income taxes, foreign withholding taxes, a stock-based compensation tax shortfall and a decrease in research and development tax credits.
Current wording
The provision for income taxes increased $1.8 million in 2024 as compared to 2023. Our effective tax rate was 13.6% in 2024 as compared to 17.9% in 2023. The increase in the provision for income taxes was primarily due to the increase in income before income taxes, partially offset by an increase in our research and development income tax credits and windfall benefits from employee stock-based compensation.
Previous wording
A comparison of the years ended December 31, 2022 and 2021 has been omitted from this Form 10-K, but may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 24, 2023.
Current wording
A comparison of the years ended December 31, 2023 and 2022 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 22, 2024.
Previous wording
We have two reportable segments: Alarm.com and Other. Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that contributed 93%, 94% and 95% of our revenue, net of intersegment eliminations, for the years ended December 31, 2023, 2022 and 2021, respectively. Our Other segment is focused on researching, developing and offering residential and commercial automation solutions and energy management products and services in adjacent markets. The consolidated subsidiaries that make up our Other segment are in the investment stage and have incurred significant operating expenses relative to their revenue.
Current wording
We have two reportable segments: Alarm.com and Other. Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that contributed 92%, 93% and 94% of our revenue, net of intersegment eliminations, for the years ended December 31, 2024, 2023 and 2022, respectively. Our Other segment is focused on researching, developing and offering residential and commercial automation solutions and energy management products and services in adjacent markets. The consolidated subsidiaries that make up our Other segment are in the investment stage and have incurred significant operating expenses relative to their revenue.
Previous wording
Our Alarm.com segment increased from 1,563 employees as of January 1, 2023 to 1,776 employees as of December 31, 2023. Our Other segment increased from 170 employees as of January 1, 2023 to 213 employees as of December 31, 2023. Inter-segment revenue includes sales of hardware between our segments.
Current wording
Our Alarm.com segment decreased from 1,776 employees as of January 1, 2024 to 1,773 employees as of December 31, 2024. Our Other segment increased from 213 employees as of January 1, 2024 to 237 employees as of December 31, 2024. Inter-segment revenue includes sales of hardware between our segments.
Showing the first 40 of 68 pairs. Open the source sections for the rest.
Rearranged current paragraphs (10)
Current report — wording carried from elsewhere
On May 31, 2024, we issued $500.0 million aggregate principal amount of 2.25% convertible senior notes due June 1, 2029, in a private placement to qualified institutional buyers, or the 2029 Notes. The terms of the 2029 Notes are governed by an Indenture, or the 2029 Indenture, by and between Alarm.com Holdings, Inc. and U.S. Bank Trust Company, National Association, as trustee. The 2029 Notes are senior unsecured obligations that bear interest at a rate of 2.25% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2024, and the principal amount of the 2029 Notes will not accrete. We received proceeds from the issuance of the 2029 Notes of $485.2 million, net of $14.8 million of transaction fees and other debt issuance costs.
Current report — wording carried from elsewhere
We may redeem for cash, all or any portion of the 2029 Notes (subject to the partial redemption limitation described below), at our option, on or after June 7, 2027, at a redemption price equal to 100% of the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, if the last reported sale price of our common stock has been at least 130% of the conversion price for the 2029 Notes then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. If we redeem less than all the 2029 Notes, at least $75.0 million aggregate principal amount of the 2029 Notes must be outstanding and not subject to redemption as of the relevant redemption notice date. No sinking fund is provided for the 2029 Notes.
Current report — wording carried from elsewhere
The 2029 Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding January 1, 2029, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2024 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the 2029 Notes on each applicable trading day; (2) during the five business day period immediately after any ten consecutive trading day period in which, for each trading day of that period, the trading price per $1,000 principal amount of 2029 Notes for such trading day was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the 2029 Notes on each such trading day; (3) if we call any or all of the 2029 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the 2029 Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events as set forth in the 2029 Indenture.
Current report — wording carried from elsewhere
On or after January 1, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date of the 2029 Notes, holders of the 2029 Notes may convert all or any portion of their 2029 Notes at any time, regardless of the foregoing conditions. Upon conversion, we may satisfy our conversion obligation by paying or delivering, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. It is our current intent to settle the principal amount of the 2029 Notes with cash. The initial conversion rate for the 2029 Notes is 11.4571 shares of our common stock per $1,000 principal amount of 2029 Notes, which is equivalent to an initial conversion price of $87.28 per share of our common stock, subject to adjustment under certain circumstances in accordance with the terms of the 2029 Indenture. In addition, following certain corporate events that occur prior to the maturity date of the 2029 Notes or if we deliver a notice of redemption in respect of some or all of the 2029 Notes, we will, under certain circumstances, increase the conversion rate of the 2029 Notes for a holder who elects to convert its 2029 Notes (or any portion thereof) in connection with such a corporate event or convert its 2029 Notes called (or deemed called) for redemption during the related redemption period (as defined in the 2029 Indenture), as the case may be.
Current report — wording carried from elsewhere
If we undergo a fundamental change (as defined in the 2029 Indenture), subject to certain exceptions and except as described in the 2029 Indenture, holders may require us to repurchase for cash all or any portion of their 2029 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2029 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.
Current report — wording carried from elsewhere
The 2029 Indenture includes customary covenants and sets forth certain events of default after which the 2029 Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving us after which the 2029 Notes become automatically due and payable.
Current report — wording carried from elsewhere
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 and received proceeds of $485.2 million, net of $14.8 million of transaction fees and other debt issuance costs. The 2029 Notes are discussed in more detail above under "Convertible Senior Notes - 2029 Notes."
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
The $19.7 million increase in cash from operating assets and liabilities was primarily due to differences in the timing of disbursements and the collection of receipts, partially offset by a $12.4 million change in inventory purchased in 2024 as compared to 2023. The $8.5 million increase in non-cash and other reconciling items was primarily due to a $13.2 million change in deferred income taxes, which was primarily driven by the capitalization and amortization of research and development expenditures under Section 174, as well as a $4.0 million increase in the provision for credit losses on notes receivable related to a loan we provided to an affiliated entity of one of our distribution partners in 2024. These increases in non-cash and other reconciling items were partially offset by a $6.0 million decrease in stock-based compensation and a $2.3 million decrease in amortization and depreciation expense in 2024 as compared to 2023 as well as a $1.4 million inventory write-down in 2023 that did not occur in 2024.
Current report — wording carried from elsewhere
For 2024, cash flows used in investing activities was $24.7 million, compared to $26.0 million in 2023. The $1.3 million decrease in cash used in investing activities was primarily due to the $9.7 million paid to purchase 100% of the issued and outstanding shares of capital stock of EBS Spółka z ograniczoną odpowiedzialnością, or EBS, net of cash acquired, and the $5.9 million paid to purchase certain assets from Vintra, Inc., or Vintra, including direct transaction costs, in 2023 which did not occur in 2024. These decreases in cash used in investing activities were partially offset by a $9.3 million increase in purchases of investments in unconsolidated entities, a $2.6 million increase in purchases of equipment, $1.4 million paid to purchase certain assets of Kapacity.io in 2024 which did not occur in 2023 as well as a $0.9 million increase in payments related to capitalized software development costs in 2024 as compared to 2023.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
For 2022, cash flows used in investing activities was $68.3 million, compared to $20.4 million in 2021. The $47.9 million increase in cash used in investing activities was primarily due to the $31.9 million paid to purchase 85% of the issued and outstanding shares of capital stock of Noonlight and the $21.8 million paid for developable land during 2022, which did not occur during 2021. These increases in cash used in investing activities were partially offset by $4.4 million paid for developed technology in 2021, which did not occur during 2022.