Cloud Stocks: Alarm.com Expanding Products To Address Competition
I’m publishing this series to discuss a topic that I follow closely — cloud stocks, trends, strategy, acquisitions, and more. I like fundamentals-focused business building, and outline the principles of fundamentals-focused business building in my free Bootstrapping course.
According to Verified Market Research, the global smart home market was valued at $80.83 billion in 2019 and is estimated to grow at 14% CAGR to $207.88 billion market by 2027. Virginia-based Alarm.com (NASDAQ: ALRM) is cashing in on this growth by providing security solutions for smart homes and businesses.
Alarm.com recently reported its third quarter results. Q3 revenues grew 24.2% to $158.85 million. Adjusted net Income increased to $24.8 million, or $0.49 per share, surpassing the market’s estimates of $0.37.
By segment, SaaS and license revenue increased 17.9% to $100.1 million and hardware and other revenues grew 36.7% to $58.7 million.
For the fourth quarter, the company provided a forecast of SaaS and license revenues of $101.2-$101.4 million. It expects to end the current year with total revenues of $594-$604.2 million and an EPS of $1.57- $1.60. The market has forecast revenues of $559.25 million with an EPS of $1.47 for the year.
Alarm.com’s Expanding Products
During the quarter, Alarm.com announced the launch of its new device Flex I/O. Flex I/O is a security sensor that can run as a standalone unit, not requiring a connection to a control panel, hub, or WiFi network. While it can exist on its own, it also as the capability to be fully integrated into a previously existing multi-sensor control panel environment. It has been integrated with an LTE CAT-M and a cellular communication capability. By making it battery powered, Alarm.com allows for it to be deployed anywhere.
Flex I/O has been designed for both indoor and outdoor applications. It can take care of extended security and awareness to any location on the property, as well as other, more distant properties. It addresses new security use cases for the company. It expands its reach into areas where existing sensors and devices that are directly connected to the control panel via low-voltage wires are not enough. For instance, residential subscribers can now monitor driveway gates or pool gates, detached garages, remote storage units and other such locations. Similarly, within the commercial market, subscribers can leverage the service to create personalized alerts and use the event data on the sensors to trigger Alarm.com automation scenarios and video recordings.
In addition to Flex I/O, Alarm.com also announced its Smart Water Valve + Meter solution. The water alert solution can detect burst pipes, major leaks, and slow persistent drips by its two onboard flow sensors. Once an issue is detected, it can automatically shut off the water supply of the property. The solution also has the capability to be integrated with other water sensors that are deployed anywhere on the property.
Alarm.com has been investing in video and video analytics, the commercial security vertical, international markets, and IoT application opportunities to fully capitalize on the growth opportunities. During the last quarter, these growth initiatives accounted for 22.5% of its SaaS revenue and grew 42% over year. During the third quarter, 40% of its new subscribers opted to include video services with their systems.
Alarm.com offers a flexible integration service for partners to connect their products with the Alarm.com Platform. Platform Connect enables devices and partners to be integrated into the Alarm.com service to help offer its customers a single app experience. It allows flexible integration options through a multi-tiered API supporting direct integration, cloud-to-hardware integration, and cloud-to-cloud integration to the Alarm.com Platform. It does not, as yet, have an ISV-focused PaaS strategy. Read my recent article Cloud Stocks: Which SaaS Players Will Win in PaaS.
The smart home security product and services market is a highly competitive one. Competition comes from vendors with big pockets such as Alphabet through Google Nest and Comcast that offers home security services through its xFinity services. There are other comparatively smaller vendors as well such as Wyze and SimpliSafe that also offer hardware and secure home services.
Its stock is trading at $97.27 with a market capitalization of $4.78 billion. It hit a 52-week high of $108.67 earlier this month and a 52-week low of $32.00 in March last year.
Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article.
Looking For Some Hands-On Advice?
For entrepreneurs who want to discuss their specific businesses with me, I’m very happy to assess your situation during my free online 1Mby1M Roundtables, held almost every week. You can also connect with me during our Rendezvous meetups, and check out my Bootstrapping Course, our YouTube channel, podcast interviews with VCs and Founders.