Security

Alarm.com Connected Property Business and Financials Examined

In this Research Note, we examine Alarm.com, a US provider of physical security, intelligent automation and energy management solutions for the smart home and commercial real estate. This analysis is based on their 2021 and Q1-2022 financial results, 10K Report, investor presentations, M&A and diversification strategy. Alarm.com, founded in 2000, became a public company in June 2015 on Nasdaq under the ticker symbol ALRM. In its IPO filing, Alarm.com reported that the substantial majority of its 2.3 million subscribers were in the smart home sector. Today, Alarm.com positions itself as “the leading SaaS platform for the intelligently connected property.”  The company has expanded their business for commercial enterprise customers with video analytics and shotgun detection technology and diversified its offering for the smart home with smart thermostats and flexible grid services.  The company goes to market through a network of service provider partners who both physically and technologically install and maintain their systems in homes and businesses. They have over 10,900 service […]

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In this Research Note, we examine Alarm.com, a US provider of physical security, intelligent automation and energy management solutions for the smart home and commercial real estate. This analysis is based on their 2021 and Q1-2022 financial results, 10K Report, investor presentations, M&A and diversification strategy.

Alarm.com, founded in 2000, became a public company in June 2015 on Nasdaq under the ticker symbol ALRM. In its IPO filing, Alarm.com reported that the substantial majority of its 2.3 million subscribers were in the smart home sector.

Today, Alarm.com positions itself as “the leading SaaS platform for the intelligently connected property.”  The company has expanded their business for commercial enterprise customers with video analytics and shotgun detection technology and diversified its offering for the smart home with smart thermostats and flexible grid services. 

The company goes to market through a network of service provider partners who both physically and technologically install and maintain their systems in homes and businesses. They have over 10,900 service provider partners and 8.4 million subscribers. The company has around 1,500 employees.

Alarm.com Holdings, Inc. reported solid financial results for its fourth quarter and full-year ended December 31, 2021 with the company gaining 21.2% in annual revenue to $749 million from $618.0 million in 2020. SaaS and license revenue increased 17% to $460.4 million in 2021 from $393.3 million in 2020. Alarm.com primarily addresses the North American market: 3% of 2021 revenues originate from international regions, with a goal to grow international markets further.

Alarm.com’s M&A strategy is focused to date on small targets, technology and tuck-in acquisitions with 7 transactions since 2017.

Their diversification strategy already led them to the acquisition of distributed energy resource management solutions (DERMS) provider, EnergyHub, in 2013. Nearly 700,000 grid-edge devices are connected to EnergyHub’s platform, the largest fleet of grid-edge devices of any DERMS provider in North America. These devices include smart thermostats, electric vehicle charging equipment, solar and storage systems, and other connected device categories.

In March 2022, EnergyHub announced the acquisition of Packetized Energy, a startup founded in 2016. Packetized Energy’s Nimble platform leverages algorithms to maximize grid service value from DERs while simultaneously ensuring that customers get the energy they need, when they need it.

Alarm.com’s 2021 10K report stated that Energy Hub had acquired certain assets of developed technology from an unrelated party in December 2021 for $5.3 million. Memoori believes this transaction is the Packetized Energy deal, which will advance Alarm.com’s load-shaping energy management solution, Mercury DERMS, allowing additional devices to participate in utility programs that reduce or shift power consumption during peak demand periods. 

Source: Alarm.com Investor Deck, 24 February 2022.

In December 2020, Alarm.com acquired Shooter Detection Systems, LLC (SDS) for $26.6 million in cash. SDS, a US startup founded in 2013, provides an indoor gunshot detection solution through the Guardian Indoor Active Shooter Detection System, which uses a combination of acoustic and infrared sensors and proprietary algorithms to detect gunshots and communicate shooting incident details to building occupants and security teams. SDS's Guardian System is currently being used in locations across the United States, protecting US federal and state government buildings, schools, airports and other transportation hubs, and entertainment facilities. The acquisition of SDS technology expands Alarm.com’s suite of interactive cloud-based video, access control, intrusion and automation solutions, enabling partners to outfit commercial and enterprise customers with the indoor gunshot detection solution.

OpenEye, a US provider of cloud-managed video surveillance solutions for the commercial market, was announced as a majority-stake acquisition in April 2019. Alarm.com acquired 85% of OpenEye for a total consideration of $67.0 million. In Q1-2022, OpenEye deployed a new video analytics platform optimized to support the requirements of its large-scale enterprise commercial customers. The platform provides a development environment for enhancing OpenEye’s video surveillance as a service with advanced video analytics capabilities. The first deployed capability identifies people and reduces false motion events caused by background movement and other image noise to provide highly accurate activity detection. 

With its strong SaaS business model, Alarm.com recently increased its revenue guidance for the full year of 2022 based upon current management expectations. Total revenue is expected to be in the range of $822.7 million to $853.3 million. 

This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.

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