Investment Thesis
Alarm.com demonstrates solid fundamental strength with double-digit profitability margins (13.1% net, 13.2% operating) and robust free cash flow generation of $137M, representing 13.6% of revenue. The company maintains a fortress balance sheet with minimal leverage (0.13x debt/equity), strong liquidity (1.92x current ratio), and substantial cash reserves of $960.6M, providing significant financial flexibility.
ALRM Strengths
- Strong profitability with 13.1% net margin and 13.2% operating margin demonstrating operational efficiency
- Exceptional free cash flow generation of $137M (13.6% FCF margin) with 89% conversion from operating cash flow, indicating high-quality earnings
- Conservative balance sheet with low leverage (0.13x debt/equity), $960.6M cash position, and 1.92x current ratio providing substantial financial cushion
- Solid returns on equity (15.6%) and assets (6.2%) indicating effective capital deployment
- Revenue growth of 7.6% YoY with diluted EPS growth of 7.4%, showing consistent profitability expansion alongside top-line growth
ALRM Risks
- Modest revenue growth rate of 7.6% YoY suggests mature market dynamics or competitive pressures in software/cloud services sector
- Net income growth of only 0.7% YoY despite 7.6% revenue growth indicates margin compression or operational headwinds
- Zero insider activity (Form 4 filings) in last 90 days may suggest limited management confidence, though could be timing-related
- Missing gross margin data and interest coverage metrics limit full visibility into cost structure and debt service capability
- Software-as-a-service (SIC 7372) sector faces intensifying competition and potential customer acquisition cost pressures
Key Metrics to Watch
- Revenue growth trajectory and year-over-year comparison for evidence of acceleration or deceleration
- Net margin expansion or contraction relative to operating margin to assess cost discipline
- Free cash flow consistency and conversion rate to ensure sustainable capital generation
- Debt/equity ratio stability to confirm maintenance of conservative leverage
- Customer retention and net revenue retention rates as indicators of competitive moat strength
ALRM Financial Metrics
ALRM Profitability Ratios
ALRM Balance Sheet & Liquidity
ALRM 5-Year Financial Trend
5-Year Trend Summary: Alarm.com Holdings, Inc.'s revenue has grown significantly by 35% over the 5-year period, indicating strong business expansion. The most recent EPS of $1.53 reflects profitable operations.
ALRM Growth Metrics (YoY)
ALRM Quarterly Performance
| Quarter | Revenue | Net Income | EPS |
|---|---|---|---|
| Q3 2025 | $240.5M | $35.1M | $0.65 |
| Q2 2025 | $233.8M | $32.5M | $0.62 |
| Q1 2025 | $223.3M | $23.4M | $0.44 |
| Q3 2024 | $221.9M | $19.4M | $0.37 |
| Q2 2024 | $223.9M | $15.6M | $0.30 |
| Q1 2024 | $209.7M | $14.2M | $0.28 |
| Q3 2023 | $216.1M | $18.1M | $0.35 |
| Q2 2023 | $212.8M | $10.8M | $0.21 |
Data sourced from SEC EDGAR 10-Q quarterly filings. Figures may represent quarterly or cumulative values.
ALRM Capital Allocation
ALRM SEC Filings
Access official SEC EDGAR filings for Alarm.com Holdings, Inc. (CIK: 0001459200)