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Home security and automation software provider Alarm.com (NASDAQ:ALRM) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 4.4% year on year to $233.8 million. The company expects the full year's revenue to be around $926 million, in line with analysts' estimates. It made a GAAP profit of $0.62 per share, improving from its profit of $0.30 per share in the same quarter last year.
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Alarm.com (ALRM) Q2 CY2024 Highlights:
- Revenue: $233.8 million vs analyst estimates of $227.3 million (2.9% beat)
- EPS: $0.62 vs analyst estimates of $0.38 (64% beat)
- The company slightly lifted its revenue guidance for the full year from $922.8 million to $926 million at the midpoint
- EBITDA guidance for the full year is $166 million at the midpoint, in line with analyst expectations
- Gross Margin (GAAP): 65.2%, up from 61.4% in the same quarter last year
- Free Cash Flow of $20.97 million, down 55.2% from the previous quarter
- Billings: $235.5 million at quarter end, up 4.6% year on year
- Market Capitalization: $3.23 billion
Founded in 2000 as a business unit within MicroStrategy, Alarm.com (NASDAQ:ALRM) is a software-as-a-service platform that enables users to control their security systems and smart home appliances from a single app.
Vertical SoftwareSoftware is eating the world, and while a large number of solutions such as project management or video conferencing software can be useful to a wide array of industries, some have very specific needs. As a result, vertical software, which addresses industry-specific workflows, is growing and fueled by the pressures to improve productivity, whether it be for a life sciences, education, or banking company.
Sales GrowthAs you can see below, Alarm.com's 9.7% annualized revenue growth over the last three years has been weak, and its sales came in at $233.8 million this quarter.
Alarm.com's quarterly revenue was only up 4.4% year on year, which might disappoint some shareholders. However, its revenue increased $10.52 million quarter on quarter, a strong improvement from the $2.95 million decrease in Q1 CY2024. This is a sign of acceleration of growth and very nice to see indeed.
Looking ahead, analysts covering the company were expecting sales to grow 4.9% over the next 12 months before the earnings results announcement.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Alarm.com has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company's free cash flow margin averaged 18.4% over the last year, quite impressive for a software business.
Alarm.com's free cash flow clocked in at $20.97 million in Q2, equivalent to a 9% margin. The company's cash profitability regressed as it was 7 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren't a big deal because investment needs can be seasonal, but we'll be watching to see if the trend extrapolates into future quarters.
Key Takeaways from Alarm.com's Q2 Results We enjoyed seeing Alarm.com exceed analysts' billings expectations this quarter. We were also glad its revenue outperformed Wall Street's estimates. Overall, we think this was still a solid quarter with some key areas of upside. Despite this, shares traded down 2.4% to $64.04 immediately following the results.
