Alarm.com Q4 Net Income Falls on Higher Component, Shipping Costs

Higher hardware component and shipping costs drove a 42.7% net income decline to $9.1 million at Alarm.com in Q4, said the company Thursday. Revenue grew 18% to $195.3 million with software-as-a-service (SaaS) and licensing revenue growing 15.4% to $121.7 million, it said. The company instituted an 8%-9% price increase, which varied “dramatically” by SKU, said CEO Steve Trundle, on an earnings call. Customers have been in an “understanding kind of mode” on price increases “at the moment,” he said. Competitors also pushed through multiple price increases last year, “so I think most of our service providers were conditioned to expect something," he said; customers are now working through the process of increasing prices to their customers. Q4 gross margin was 11.1% vs. 15.2% in Q3; Trundle expects margins to return to 20%. Alarm.com had “solid demand" for its smart home technology in the quarter, with its home builder program a “bright spot,” Trundle said, saying 18 of the top builders use its systems, some standard in new home developments. He highlighted the company’s AI software for monitoring stations and Alarm response events, which provides a real-time determination to the monitoring station about the likelihood that the property owner will cancel an alarm, so operators can prioritize multiple alarm events. The company’s visual verification service provides critical information to public safety dispatchers, he said, and last year, it began deploying video analytics capabilities to deter break-ins. Upsells are a hardware growth driver, led by video camera sales that grew 36% year on year, he said. Trundle sees more room for growth because service providers have been focused on 3G upgrades “in terms of going back to the existing customers.” He also referenced upgrade opportunities with the company's smart water value and Flex sensor. Chief Financial Officer Steve Valenzuela said video analytics should raise dollar retention rates. Rates could see a “slight decline” due to 3G upgrades, he said. The Q1 outlook is for SaaS and license revenue ranging from $121.million to $121.2 million. For the year, it forecasts SaaS and license revenue of $508 million-$509 million and total revenue of $808 million-$819 million. Shares reached a 52-week low Friday at $60.70 before closing 5.5% lower at $65.23.