The Platform for the Connected Home and Business February 2018
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Safe harbor statement Forward-Looking Statements This presentation contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical fact contained in this presentation, including, but not limited to, statements regarding our possible or expected future results of operations, our financial position, our business strategy, our product development plans, including product and feature releases and related benefits, our competitive position, addressable markets, industry trends, potential growth opportunities, our ability to successfully expand in existing markets including internationally, our ability to attract new subscribers, development and growth in our partner ecosystem, and our future financial performance, including our target financial model and expected future revenue, are forward-looking statements. Any such statements are not guarantees of future performance, but are based on our assumptions, expectations and beliefs as of the date of this presentation and are subject to substantial risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ materially from those expressed or implied in any forward-looking statement. Investors should not place undue reliance on our forwardlooking statements. For more information about factors that may cause our actual results to differ materially from these forward-looking statements, please refer to the reports we file with the Securities and Exchange Commission (the SEC ) from time to time, including our most recent Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 28, 2018, our most recent Quarterly Report on 10-Q for the quarter ended September 30, 2017, filed with the SEC on November 9, 2017 and our subsequent filings with the SEC. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. The information in this presentation on new products, features or functionality is intended to outline our general product direction. The information on new products, features, and functionality is not a commitment, promise or legal obligation to deliver any feature or functionality. The development, release, and timing of any features or functionality described for our products remains at our sole discretion.
Non-GAAP Financial Measures This presentation also contains certain non-GAAP financial measures as defined by the SEC rules. These non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. As required by Regulation G, we have provided a reconciliation of those measures to their most directly comparable GAAP measures, which is available in the Appendix slides to this presentation. Please refer to our November 8, 2017 press release for information as to why we believe these non-GAAP financial measures are useful to investors and others in assessing our operating results. We urge investors not to rely on any single financial measure to evaluate our business.
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Company Overview Market Opportunity
AGENDA
Alarm.com Solution Competitive Advantages Growth Drivers Financial Overview
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COMPANY OVERVIEW • Founded in 2000 • IPO in June 2015; NASDAQ: ALRM • Go-to-market via 7,000+ service provider partners
• 5.5 million+ subscribers Smart Home and Business Solutions to intelligently protect, monitor and manage properties worldwide
• Connect business acquired in March 2017 • 784 employees
Note: Data as of December 31, 2017 4
Key Investment Highlights Large & Growing Market
SaaS Recurring Revenue Model
Market Leader & Innovator
Strong Growth & Profitable
5
Market Leading Innovation
6
Largest Platform for Intelligently Connected Properties
5.5
+ Million Subscribers
80
50
+ Billion Data Points in the last year alone
+ Millions of Connected Devices
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This might be the smartest and safest house in Greater Washington
Alarm.com’s Business Intelligence service that helps its dealer partners lower attrition
Alarm.com’s enterprise services support the end-to-end needs of Smart Home Security Dealers.
We are making the video camera smarter
One of the coolest integrations we saw was all the smart home stuff you can control through Alarm.com.
FEATURED IN: 8
MARKET OPPORTUNITY
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Security: TOP SMART HOME CONSUMER BENEFIT 41%
Personal and family security Energy/resource management
16%
Property loss protection
16%
Indoor convenience
13%
Smart Home Considerations: Who installs, integrates and supports a security-centric smart home system?
Source: Business Insider, 2016
Who can create and manage a tightly controlled ecosystem for these devices to work well together?
How can the data from these devices be leveraged?
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Home Security Market - 2016 ACCOUNT TYPES (North American households)
SMART HOME SECURITY • Controlled and managed via mobile apps • High subscriber value and engagement
8 million smart home security
14 million traditional security
TRADITIONAL SECURITY • Controlled and managed locally • Limited capabilities and low engagement
Source: Parks Associates
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Projected Home Security Market in 2021 ACCOUNT TYPES
SMART HOME ADOPTION
(North American households)
DRIVEN BY THE SECURITY CHANNEL
16 million smart home security
10 million
• Nearly two-thirds of smart home devices are attached to a centralized controller provided by a security company
traditional security
Source: Parks Associates
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Residential Security Projected to Grow Globally
55%
45%
48%
52%
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ALARM.COM SOLUTION
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Unified Experience
Intelligent Solutions Security
Access
Video
Energy
Lights
Garage
Water
Internet of Things Ecosystem
Advanced Cloud Platform 15
Interactive security
INTELLIGENT
Energy management
Video monitoring
SOLUTIONS
Intelligent automation 16
Go to Market Strategy Residential ~22 million homes in the US have monitored home security (Parks Associates)
7,000+ Service Provider Partners
Commercial ~4 million commercial buildings in the US are less than 10,000 square feet (EIA)
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Comprehensive Platform for Our Service Providers Sales & Marketing
Installation & Support
Customer Acquisition
Customer Service
Business Intelligence Retention & Upsell
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Partner First Analytics Descriptive to Prescriptive Analytics Integrated into Dealer Tools Maximize Customer Engagement and Account Quality
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COMPETITIVE ADVANTAGES
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Competitive Advantages DIY, RETAIL PRODUCTS
SMART HOME SECURITY PLATFORMS
Point products
Limited service and functionality
Analytics platform and data-driven services
Basic device integrations
Closed device ecosystems
Open device ecosystem
Difficult to install and maintain
Lack support tools and resources
Trusted service provider network and support services
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GROWTH DRIVERS
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Compelling growth drivers
Add more subscribers! (Currently 5.5 million+)
Upsell and cross sell existing subscribers (Smart Home Products & Services)
Add New Service Providers!
(Currently 7,000+)
Expand Commercial through existing dealer base
Grow International
Add Verticals Property Mgmt. & Vacation Rental, Demand Response, Wellness, Etc.
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Growth Opportunities
1.4B-1.5B
5.3%
households worldwide
Global smart home penetration
Global Markets
Commercial Services
Property Management
Alarm.com services are available
Energy Management
Targeted future expansion
Source: United Nations Statistical Division
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Growth Opportunities Global Markets
~4 million target properties in US
High penetration of traditional services
Commercial Services
2015 Property Management
2017 Energy Management
200%
Source: U.S. Energy Information Agency
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Growth Opportunities
27 million Multi-family units
16 million Single-family rental households
~1 million Vacation rental properties
Global Markets
Commercial Services
High Growth Potential for Untapped Vacation Rental and Property Management Markets
Property Management
Energy Management
Source: National Multifamily Housing Council, Urban Institute, and Wall Street Journal
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Growth Opportunities Global Markets
Commercial Services
Property Management
>4 million smart thermostats sold in 2015
>32 million smart thermostats in 2020
Energy Management
Source: Navigant Research
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FINANCIAL OVERVIEW
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Q4’17 Snapshot – Continued Strong Execution Year-over-Year Growth SaaS & LICENSE REVENUE
ADJUSTED EBITDA (NON-GAAP)
TOTAL REVENUE
GROSS MARGIN
NET INCOME (NON-GAAP)
LTM FREE CASH FLOW
Current data represents results as of fiscal quarter ended December 31, 2017. Free cash flow defined as operating cash flows less Cap Ex. 29
Consistent Revenue Growth ($ in millions)
$103
$87 $68
$56 $236
$47 $41
$55 2012
$83
2013
$111
2014
SaaS and License Revenue
$141
2015
$174
2016
2017
Hardware and Other Revenue 30
Track Record of Profitability (Non-GAAP) ($ in millions) 21%
22% 17%
19% 16%
21%
$72
$49 $34 $28
$28
2013
2014
$21
2012
Note: We define Adjusted EBITDA as net income before interest and other income / (expense), net, provision for income taxes, amortization and depreciation expense, stock-based compensation expense, acquisition-related expense and legal costs incurred in connection with non-ordinary course litigation, particularly costs involved in ongoing intellectual property litigation.
2015
2016
Adj. EBITDA
2017
Adj. EBITDA margin
31
Key Financial Highlights Scale
• • • •
Growing
• Strong compound annual revenue growth • TAM expanding with Smart Home Adoption
Recurring
• High SaaS and license recurring revenue model • SaaS and license revenue renewal rate of 93%
Profitable
• Strong cash flow and profitable • Increased operating leverage as business scales • Favorable unit Economics: CLTV/CAC ratio of 5.8 LTM; payback of S&M in 12 months
Highly scalable platform 5.5 million+ subscribers 80 million+ connected devices 50 billion+ data points processed in 2017
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APPENDIX
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Supplemental Financial Data
Alarm.com Holdings, Inc. Supplemental Financial Data | Fiscal Year Ended December 31 | ($ in thousands)
Supplemental Financial Data: SaaS and license revenue Hardware and other revenue Total revenue Cost of SaaS and license revenue Cost of hardware and other revenue Total cost of revenue
$236,283 102,654 338,937
Q1 2016 $40,012 19,031 59,043
Q2 2016 $42,010 22,413 64,423
Q3 2016 $44,630 23,216 67,846
Q4 2016 $46,888 22,906 69,794
Q1 2017 $50,226 23,968 74,194
Q2 2017 $58,928 27,060 85,988
Q3 2017 $61,924 28,038 89,962
Q4 2017 $65,205 23,588 88,793
30,229 69,151
35,610 80,578
6,781 14,335
7,211 17,972
7,787 18,579
8,450 18,265
8,092 18,543
8,500 21,335
9,545 22,288
9,473 18,412
2015
2016
2017
$140,936 67,952 208,888
$173,540 87,566 261,106
25,722 51,652 77,374
99,380
116,188
21,116
25,183
26,366
26,715
26,635
29,835
31,833
27,885
Sales and marketing General and administrative Research and development Amortization and depreciation
32,240 35,473 40,002 5,808
38,980 57,926 44,272 6,490
43,490 55,396 72,755 17,734
8,976 13,129 9,970 1,591
9,851 14,191 10,777 1,613
10,705 14,804 11,477 1,659
9,448 15,802 12,048 1,627
10,314 15,375 14,521 2,864
11,899 13,450 20,062 4,846
10,426 12,974 19,257 5,071
10,851 13,597 18,915 4,953
Total operating expenses
113,523
147,668
189,375
33,666
36,432
38,645
38,925
43,074
50,257
Operating income Interest expense Other income / (expense), net Income before income taxes Provision for income taxes Net income Stock-based compensation expense data: Sales and marketing General and administrative Research and development Total stock-based compensation expense As a percent of revenue: Cost of SaaS and license revenue as a percentage of SaaS and license revenue Cost of hardware and other revenue as a percentage of hardware and other revenue Sales and marketing General and administrative Research and development Amortization and depreciation Total operating expenses Operating income Net income
17,991 (178) (348)
14,058 (190) 513
33,374 (2,199) 1,066
4,261 (41) 111
2,808 (47) 88
2,835 (49) 139
4,154 (53) 175
4,485 (216) 237
47,728
48,316
5,896 (674) 137
10,401 (658) 342
12,592 (651) 350
17,465 5,697 $11,768
14,381 4,227 $10,154
32,241 2,990 $29,251
4,331 1,593 $2,738
2,849 976 $1,873
2,925 358 $2,567
4,276 1,300 $2,976
4,506 543 $3,963
5,359 (4,506) $9,865
10,085 (5,018) $15,103
12,291 11,971 $320
$372 2,486 1,266 $4,124
$536 1,430 2,035 $4,001
$561 2,638 4,214 $7,413
$141 227 484 $852
$151 236 555 $942
$130 444 512 $1,086
$114 523 484 $1,121
$113 569 631 $1,313
$65 755 1,095 $1,915
$181 584 1,141 $1,906
$202 730 1,347 $2,279
18%
17%
15%
17%
17%
17%
18%
16%
14%
15%
15%
76%
79%
78%
75%
80%
80%
80%
77%
79%
79%
78%
15% 17% 19% 3%
15% 22% 17% 2%
13% 16% 21% 5%
15% 22% 17% 3%
15% 22% 17% 3%
16% 22% 17% 2%
14% 23% 17% 2%
14% 21% 20% 4%
14% 16% 23% 6%
12% 14% 21% 6%
12% 15% 21% 6%
54%
57%
56%
57%
57%
57%
56%
58%
58%
53%
54%
9%
5%
10%
7%
4%
4%
6%
6%
7%
12%
14%
6%
4%
9%
5%
3%
4%
4%
5%
11%
17%
0%
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Investor Data Sheet (1/3) Alarm.com Holdings, Inc. Select Financial Data | Fiscal Year End December 31, | ($ in thousands)
SaaS and license rev enue
$140,936
$173,540
$236,283
Q1 2016 $40,012
Hardware and other rev enue Total revenue
67,952 208,888
87,566 261,106
102,654 338,937
19,031 59,043
22,413 64,423
23,216 67,846
22,906 69,794
23,968 74,194
27,060 85,988
28,038 89,962
23,588 88,793
25,722 51,652
30,229 69,151
35,610 80,578
6,781 14,335
7,211 17,972
7,787 18,579
8,450 18,265
8,092 18,543
8,500 21,335
9,545 22,288
9,473 18,412
77,374
99,380
116,188
21,116
25,183
26,366
26,715
26,635
29,835
31,833
27,885
$11,768 $(0.30)
$10,154 $0.21
$29,251 $0.59
$2,738 $0.06
$1,873 $0.04
$2,567 $0.05
$2,976 $0.06
$3,963 $0.08
$9,865 $0.20
$15,103 $0.31
$320 $0.01
24,108,362
47,875,522
49,153,948
47,303,896
47,523,187
48,319,952
48,025,847
48,758,774
49,000,553
49,259,701
49,341,091
$128,358
$140,634
$96,329
$135,845
$134,164
$135,050
$140,634
$63,150
$68,916
$84,640
$96,329
$34,370
$49,034
$71,628
$10,823
$12,079
$11,821
$14,311
$14,103
$15,881
$19,478
$22,166
20,577
31,138
45,104
6,124
7,132
9,260
9,057
7,822
10,654
13,335
13,030
common stockholders 7,066 31,126 45,095 6,119 7,130 9,257 9,055 7,821 10,651 13,330 Adjusted EBITDA, adjusted net income and adjusted net income attributable to common stockholders are non-GAAP financial measures - see nex t page for reconciliation to GAAP.
13,030
Statement of Operations Data:
Cost of SaaS and license rev enue Cost of hardware and other rev enue Total cost of revenue Net income Net income (loss) per share, diluted Weighted-av erage common shares outstanding - diluted Balance Sheet Data (as of): Cash and cash equiv alents
2015
2016
2017
Q2 2016 $42,010
Q3 2016 $44,630
Q4 2016 $46,888
Q1 2017 $50,226
Q2 2017 $58,928
Q3 2017 $61,924
Q4 2017 $65,205
Non-GAAP financial measures1 : Adjusted EBITDA
1 1
Adjusted net income Adjusted net income attributable to 1
1
35
Investor Data Sheet (2/3) Alarm.com Holdings, Inc. Non-GAAP Reconciliations | Fiscal Year Ended December 31 | ($ in thousands) Adjusted EBITDA: Net income Adjustments: Interest ex pense and other income / (ex pense), net Prov ision for income tax Amortization and depreciation ex pense Stock-based compensation ex pense Acquisition-related ex pense Litigation ex pense Total adjustments Adjusted EBITDA Adjusted net income: Net income, as reported Prov ision for income tax Income before income tax es Adjustments: Other income / (ex pense), net Amortization ex pense Stock-based compensation ex pense Acquisition-related ex pense Litigation ex pense Non-GAAP adjusted income before income tax es Income tax 1 Non-GAAP adjusted net income Non-GAAP adjusted net income per share - diluted
$29,251
Q1 2016 $2,738
Q2 2016 $1,873
Q3 2016 $2,567
Q4 2016 $2,976
Q1 2017 $3,963
Q2 2017 $9,865
Q3 2017 $15,103
Q4 2017 $320
(323) 4,227 6,490 4,001 11,098 13,387 38,880 $49,034
1,133 2,990 17,734 7,413 5,895 7,212 42,377 $71,628
(70) 1,593 1,591 852 570 3,549 8,085 $10,823
(41) 976 1,613 942 2,040 4,676 10,206 $12,079
(90) 358 1,659 1,086 3,187 3,054 9,254 $11,821
(122) 1,300 1,627 1,121 5,301 2,108 11,335 $14,311
(21) 543 2,864 1,313 3,648 1,793 10,140 $14,103
537 (4,506) 4,846 1,915 1,973 1,251 6,016 $15,881
316 (5,018) 5,071 1,906 221 1,879 4,375 $19,478
301 11,971 4,953 2,279 53 2,289 21,846 $22,166
$11,768 5,697 17,465
$10,154 4,227 14,381
$29,251 2,990 32,241
$2,738 1,593 4,331
$1,873 976 2,849
$2,567 358 2,925
$2,976 1,300 4,276
$3,963 543 4,506
$9,865 (4,506) 5,359
$15,103 (5,018) 10,085
$320 11,971 12,291
348 2,151 4,124 100 6,347 30,535
(513) 1,750 4,001 11,098 13,387 44,104
(1,066) 12,282 7,413 5,895 7,212 63,977
(111) 498 852 570 3,549 9,689
(88) 435 942 2,040 4,676 10,854
(139) 435 1,086 3,187 3,054 10,548
(175) 382 1,121 5,301 2,108 13,013
(237) 1,493 1,313 3,648 1,793 12,516
(137) 3,530 1,915 1,973 1,251 13,891
(342) 3,682 1,906 221 1,879 17,431
(350) 3,577 2,279 53 2,289 20,139
(9,958) $20,577 $0.27
(12,966) $31,138 $0.65
(18,873) $45,104 $0.92
(3,565) $6,124 $0.13
(3,722) $7,132 $0.15
(1,288) $9,260 $0.19
(3,956) $9,057 $0.19
(4,694) $7,822 $0.16
(3,237) $10,654 $0.22
(4,096) $13,335 $0.27
(7,109) $13,030 $0.26
2015
2016
2017
$11,768
$10,154
526 5,697 5,808 4,124 100 6,347 22,602 $34,370
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Investor Data Sheet (3/3) Alarm.com Holdings, Inc. Non-GAAP Reconciliations | Fiscal Year Ended December 31 | ($ in thousands) Adjusted net income attributable to common stockholders: Net income (loss) attributable to common stockholders, as reported Provision for income taxes Income (loss) attributable to common stockholders before taxes Adjustments: Dividends paid to participating securities
2015
2016
($7,219) $10,142 5,697 (1,522)
4,227 14,369
2017
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
$29,238
2016 $2,733
2016 $1,871
2016 $2,564
2016 $2,974
2017 $3,960
2017 $9,860
2017 $15,097
2017 $320
2,990 32,228
1,593 4,326
976 2,847
358 2,922
1,300 4,274
543 4,503
(4,506) 5,354
(5,018) 10,079
11,971 12,291
18,987
—
—
—
—
—
—
—
—
—
—
Other income / (expense), net Amortization expense
348 2,151
(513) 1,750
(1,066) 12,282
(111) 498
(88) 435
(139) 435
(175) 382
(237) 1,493
(137) 3,530
(342) 3,682
(350) 3,577
Stock-based compensation expense Acquisition-related expense
4,124 100
4,001 11,098
7,413 5,895
852 570
942 2,040
1,086 3,187
1,121 5,301
1,313 3,648
1,915 1,973
1,906 221
2,279 53
Litigation expense Non-GAAP adjusted income attributable to common stockholders before
6,347
13,387
7,212
3,549
4,676
3,054
2,108
1,793
1,251
1,879
2,289
income taxes
30,535
44,092
63,964
9,684
10,852
10,545
13,011
12,513
13,886
17,425
20,139
(9,958) (13,511)
(12,966) —
(18,869) —
(3,565) —
(3,722) —
(1,288) —
(3,956) —
(4,692) —
(3,235) —
(4,095) —
(7,109) —
$7,066
$31,126
$45,095
$6,119
$7,130
$9,257
$9,055
$7,821
$10,651
13,330
$13,030
1
Income tax Less: income allocated to participating securities Non-GAAP adjusted net income attributable to common stockholders
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Security
Access
Video
Energy
Lights
Garage
Water
One Intelligent Platform
Users prefer these Smart Home applications over DIY device specific apps 2 01 6
R E P O R T 38