Alarm.com reported Q2 growth in hardware sales was mainly due to an increase in security camera sales, as well as an uptick in sales of thermostats and system enhancement modules. Alarm.com (Nasdaq: ALRM) posted second-quarter earnings adjusted for non-recurring items of 34 cents per share, beating the Zacks Consensus Estimate of 26 cents per share. This compares to earnings per share of 33 cents the same period a year ago.
SaaS and license revenue in the quarter increased 20.4 percent from the same period last year to $71 million. This includes Connect software license revenue of approximately $10.2 million for the second quarter compared to $8.5 million for the same period the prior year.
This is the first full quarter for Connect revenue and the comparable year-ago period since the company closed the acquisition of the Connect line of business from iControl Networks in 2017.
“Our SaaS and license revenue visibility remains high with a revenue renewal rate of 94 percent in the second quarter, at the high end of our historical range of 92 percent to 94 percent,” Alarm.com CFO Steve Valenzuela said during an earnings call with investors Tuesday.
The company reported hardware and other revenues in the quarter was $33.5 million, compared to $27.1 million for Q2 2017. The growth in hardware sales was attributed mainly to an increase in security camera sales, as well as an uptick in sales of thermostats and system enhancement modules.
“Q2 is typically our strongest quarter for hardware sales going into the summer selling season,” Valenzuela said.
Alarm.com Forecasts Strong Q3
Total revenue of $104.5 million for the second quarter increased 21.5 percent from Q217, surpassing the Zacks Consensus Estimate by 10.31 percent. This marked the first time in Alarm.com’s history that it exceeded $100 million in total revenue.
SaaS and license gross margin for the second quarter was 84.5 percent and was consistent with the company’s gross margin in the sequential quarter, and down slightly from the same quarter last year, Valenzuela said.
Hardware gross margin was 24 percent for the second quarter compared to 21 percent for the same quarter the year prior. Hardware margins are expected to moderate in the future, consistent with the company’s historical range of 20 percent to 22 percent, he said.
GAAP net income increased to $10.7 million during the quarter, compared to $9.9 million in the year-ago quarter. Non-GAAP adjusted net income increased to $60.8 million, compared to $10.7 million for the period the prior year.
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The company reported total cash and cash equivalents increased to $106 million as of June 30, compared to $96.3 million as of December 31, 2017. Cash flows from second-quarter operations were $11.7 million, compared to $11.8 million the same period the prior year.
The company is forecasting Q3 SaaS and license revenue of $72.2 million to $72.4 million. It is increasing expectations for full year 2018 SaaS and license revenue to be between $286 million to $286.5 million, up from the prior outlook for SaaS and license revenue of $284 million to $284.5 million.
“We are also raising our guidance for total revenue for 2018 to $388 million to $390.5 million, up from our prior guidance of $381.5 million to $383.5 million,” Valenzuela said. “This includes our increased guidance for hardware and other revenue of $102 million to $104 million, compared to our prior guidance of $97.5 million to $99 million.”
Alarm.com shares have added about 17.9 percent since the beginning of the year versus the S&P 500’s gain of 6.6 percent, according to Zacks.
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