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Alarm.com (ALRM) Q3 Earnings Top Estimates, Raises 2017 View

Zacks

Alarm.com Holdings, Inc. ALRM reported adjusted third-quarter 2017 earnings of 27 cents per share, surpassing the Zacks Consensus Estimate of 19 cents.

During the quarter, the company expanded its portfolio of video cameras to tap a wide range of commercial customers. It expanded its platform to intensify customer engagement and retention. It added two-way audio functionality to its indoor residential cameras. Also, Alarm.com released updates on both its mobile and Apple TV applications.

The company also made considerable progress with its Customer Connection program, aimed at increasing upsell and retention. It added several pre-configured campaigns to help service providers increase up-sells and referrals and boost consumer engagement.

On the training side, dealer participation in the Alarm.com academy rose 140% over the last year.


Notably, on a year-to-date basis, the company's shares have gained 68.3%, outperforming the industry’s growth of 6.0%.

Revenues

Alarm.com reported total net revenues of $90 million in the third quarter, reflecting an increase of 4.6% sequentially and 32.6% year over year. The increase was driven by strength in both the revenue segments.

Also, revenues surpassed the Zacks Consensus Estimate of $83 million.

Revenue Segments

SaaS and license revenue: Revenues in this segment increased 39% year over year to $61.9 million. It accounted for 69% of the third quarter revenues. The revenue figure includes contribution from Connect acquired in March this year. The revenue renewal rate remained at 93% in the third quarter, consistent with the second quarter.

Hardware and other: Revenues in this segment increased 20.8% year over year to $28 million and contributed the remaining 31% of total revenues. This increase was driven by strong sales of video cameras which were introduced in the second quarter.

Operating Results

Gross margin was 64.6%, up 350 bps year over year. The increase was driven by a favorable mix and higher revenues.

Alarm.com’s operating expenses of $23.4 million decreased 8.3% year over year. The operating income was $10.1 million compared to $2.8 million in the year ago-quarter.

Also, non-GAAP adjusted EBITDA increased to $19.5 million in the third quarter, reflecting an increase of 65% from the year-ago quarter.

GAAP net income was $15.1 million or 31 cents per share, increasing from the year-ago figure of $2.6 million or 5 cents. Pro forma net income was $13.3 million or 27 cents per share, up from $9.3 million or 19 cents from the year-ago quarter.

Balance Sheet & Cash Flow

Alarm.com exited the quarter with cash, cash equivalents and short-term investments of roughly $84.6 million, up from $68.9 million in the prior quarter. Accounts receivables were $41.2 million, slightly down from $42 million in the last quarter.

The company’s debt balance was $72 million in the third quarter, down from $72.7 million in the prior quarter.

During the quarter, cash flow from operations was $13.8 million, while free cash flow was $11.9 million.

Guidance

For the upcoming fourth quarter, the company expects SaaS and license revenues to be in the range of $63.7-$63.9 million.

For full-year 2017, management expects its SaaS and license revenues to be in the range of $234.8-$235 million compared with its previous expectations of $233.3-$233.8 million. Also, the company expects total revenues to be in the range of $332.8-$334 million, up from the prior guidance of $326.3-$327.8 million. For 2017, the Zacks Consensus Estimate is pegged at $329 million.

For 2017, non-GAAP adjusted earnings per share are expected to be in the range of $0.87-$0.88. The Zacks Consensus Estimate is pegged at 97 cents.

Alarm.com Holdings, Inc. Price, Consensus and EPS Surprise

Alarm.com Holdings, Inc. Price, Consensus and EPS Surprise | Alarm.com Holdings, Inc. Quote

Zacks Rank & Other Key Picks

Currently, Alarm.com carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are NVIDIA Corporation NVDA and SMART Global Holdings, Inc. SGH, each sporting a Zacks Rank #1 (Strong Buy), while Applied Materials, Inc. AMAT, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for NVIDIA Corporation, SMART Global and Applied Materials is projected to be 11.2%, 15.0% and 17.1%, respectively.

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