Connected-home software provider Alarm.com (NASDAQ:ALRM) reported its second-quarter results after the market closed on Aug. 8. Growth accelerated compared to the first quarter, and profits surged, driven by both revenue growth and a sizable tax benefit. Alarm.com also boosted its guidance, calling for much higher non-GAAP earnings per share compared to its previous outlook. Here's what investors need to know about Alarm.com's second-quarter results.

Alarm.com results: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Change

Revenue

$86.0 million

$64.4 million

33.5%

Net income

$9.87 million

$1.87 million

428%

Non-GAAP EPS

$0.33

$0.15

120%

Data source: Alarm.com.

What happened with Alarm.com this quarter?

  • Software-as-a-service (SaaS) and license revenue grew 40% year over year to $58.9 million. This number includes a full quarter of revenue from Connect, which Alarm.com acquired from Icontrol earlier this year.
  • Hardware and other revenue jumped 20.7% year over year to $27.1 million.
  • Adjusted EBITDA was $15.9 million, up 31% from the prior-year period.
  • Cash flow from operations totaled $11.8 million during the quarter, up from $0.7 million during the second quarter of 2016.
  • Total cash and cash equivalents dropped to $68.9 million, down from $140.6 million at the end of 2016.
  • The company launched new indoor and outdoor residential video cameras during the second quarter, and integrated two new security panels into its platform.
  • Its Customer Connections program, which allows service provider partners to launch targeted communications campaigns with customers in an effort maximize the lifetime value of accounts, now boasts 1,400 service provider partners and 900,000 subscribers.
Alarm.com's app running on an iPhone, along with a cross-sectional drawing of a home marking smart devices that can be controlled by the app.

Image source: Alarm.com.

Alarm.com provided the following guidance for the third quarter and the full year:

  • Third-quarter SaaS and license revenue is expected between $60.6 million and $60.8 million, up 36.1% year over year at the midpoint.
  • Full-year SaaS and license revenue is expected between $233.3 million and $233.8 million, up 34.6% at the midpoint.
  • Full-year total revenue is expected between $326.3 million and $327.8 million, up 25.3% at the midpoint.
  • Full-year adjusted EBITDA is expected between $66.5 million and $67.3 million.
  • Full-year non-GAAP EPS is expected between $0.96 and $0.98, up from $0.65 in 2016.

What management had to say

Alarm.com President and CEO Steve Trundle commented on the quarter that "[w]e're pleased with our second quarter results and the continued performance of our service provider partners in the market. The market for connected property security, monitoring, and automation solutions continues to grow, and we further enhanced our video and commercial offerings in the second quarter."

Looking forward

Alarm.com's revenue growth accelerated compared to the first quarter, driven by SaaS and license sales. The bottom line was boosted by a tax benefit, although GAAP operating income soared 110% year over year thanks to higher revenue.

The company boosted its full-year guidance, adding a few million dollars to its revenue outlook and $0.22 per share to its non-GAAP EPS outlook. Earnings will grow much faster than revenue if Alarm.com hits its guidance, a positive trend especially for a small, fast-growing software company.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Alarm.com Holdings. The Motley Fool has a disclosure policy.