Alarm.com Reports Second Quarter 2019 Results

Aug 08 2019


-- Second quarter SaaS and license revenue increased 16.0% year-over-year to $82.3 million --
-- Second quarter total revenue increased 16.4% year-over-year to $121.7 million --
-- Second quarter GAAP net income of $13.8 million, compared to $10.7 million for the second quarter of 2018 --
-- Second quarter non-GAAP adjusted EBITDA of $27.7 million, compared to $23.4 million for the second quarter of 2018 --

TYSONS, VA., August 8, 2019 -- Alarm.com Holdings, Inc. (Nasdaq: ALRM), the leading platform for the intelligently connected property, today reported financial results for its second quarter ended June 30, 2019. Alarm.com also provided its financial outlook for SaaS and license revenue for the third quarter of 2019 and increased its revenue guidance for the full year of 2019.

“We are pleased to report solid financial results for the second quarter," said Steve Trundle, President and CEO of Alarm.com. "Our global base of service provider partners continues to lead the market with the full range of Alarm.com’s connected property solutions in both the residential and commercial markets.”

Second Quarter 2019 Financial Results as Compared to Second Quarter 2018

SaaS and license revenue increased 16.0% to $82.3 million, compared to $71.0 million. SaaS and license revenue includes software license revenue of $11.0 million, compared to $10.2 million.
Total revenue increased 16.4% to $121.7 million, compared to $104.5 million.
GAAP net income was $13.8 million, or $0.27 per diluted share, compared to $10.7 million, or $0.22 per diluted share.
GAAP and non-GAAP results include a $3.3 million reversal of an impairment charge on a promissory note recorded in the fourth quarter of 2018 resulting in a reduction in general and administrative expense due to a payment received from a hardware supplier.
Non-GAAP adjusted EBITDA increased to $27.7 million, compared to $23.4 million.
Non-GAAP adjusted net income increased to $19.9 million, or $0.40 per diluted share, compared to $16.8 million or $0.34 per diluted share.

Balance Sheet and Cash Flow

Total cash and cash equivalents increased to $150.9 million as of June 30, 2019, compared to $146.1 million as of December 31, 2018. Cash and cash equivalents includes a payment of $7.4 million received in the second quarter of 2019 related to a promissory note with a hardware supplier.
For the quarter ended June 30, 2019, cash flows from operations was $22.9 million and free cash flow was $21.3 million, compared to cash flows from operations of $11.7 million and free cash flow of $8.6 million for the quarter ended June 30, 2018.

Recent Business Highlights

Won ESX Innovation Awards: Alarm.com’s Smart Signal and Enterprise Access Control earned industry awards for innovation. Enterprise Access Control was selected by judges for its streamlined management of employee access for multi-site businesses. Smart Signal was chosen in the consumer mobile apps category for helping expedite emergency responses as well as reducing false alarms.

Introduced New Connected Devices: Alarm.com expanded its integration with industry leading security panels to enable service providers to deliver Alarm.com’s services to a broader range of residential and commercial customers. The new panels include flagship products with touch-screen capabilities from Nortek, DSC, Interlogix and Qolsys. For the U.S. market, all of the security panels in Alarm.com’s ecosystem now offer LTE dual-path communications gateways. Alarm.com also added Z-Wave Plus devices from Cooper Eaton and Leviton to expand its selection of automation and lighting hardware with brands recognized in the home builder industry.

Enhanced Smarter Access Control: Alarm.com introduced a new controller device and expansion module to enable service providers to support larger installations of Smarter Access Control solution with less hardware. Alarm.com’s service providers can now offer a cost-effective solution to larger properties with more doors. The new devices also make larger access control installations easier and more efficient.

Financial Outlook

Alarm.com is providing its outlook for SaaS and license revenue for the third quarter of 2019 and is increasing its revenue guidance for the full year 2019.

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For the third quarter of 2019:

SaaS and license revenue is expected to be in the range of $83.7 million to $83.9 million.

For the full year of 2019:

SaaS and license revenue is expected to be in the range of $333.2 million to $333.7 million.
Total revenue is expected to be in the range of $460.2 million to $465.7 million, which includes anticipated hardware and other revenue in the range of $127.0 million to $132.0 million.
Non-GAAP adjusted EBITDA is expected to be in the range of $101.0 million to $103.0 million.
Non-GAAP adjusted net income is expected to be in the range of $70.0 million to $71.0 million, based on an estimated tax rate of 21.0%.
Based on an expected 50.5 million weighted average diluted shares outstanding, non-GAAP adjusted net income is expected to be $1.39 to $1.41 per diluted share.

Conference Call and Webcast Information

Alarm.com will host a conference call to discuss its second quarter 2019 financial results and its outlook for the third quarter and full year of 2019. A live audio webcast is scheduled to begin at 4:30 p.m. ET on August 8, 2019. To participate on the live call, analysts and investors should dial 866.588.3290 (U.S./Canada) or 262.558.6169 (International) at least ten minutes prior to the start time of the call. A telephonic replay of the call will be available through August 16, 2019 by dialing 855.859.2056 (U.S./Canada) or 404.537.3406 (International) and providing Conference ID: 4994317. Alarm.com will also offer a live and archived webcast of the conference call accessible on Alarm.com’s Investor Relations website at http://investors.alarm.com.

About Alarm.com Holdings, Inc.

Alarm.com is the leading platform for the intelligently connected property. Millions of consumers and businesses depend on Alarm.com's technology to manage and control their property from anywhere. Our platform integrates with a growing variety of Internet of Things (IoT) devices through our apps and interfaces. Our security, video, access control, intelligent automation, energy management, and wellness solutions are available through our network of thousands of professional service providers in North America and around the globe. Alarm.com's common stock is traded on Nasdaq under the ticker symbol ALRM. For more information, please visit www.alarm.com.

Non-GAAP Financial Measures

To supplement our consolidated selected financial data presented on a basis consistent with GAAP, this press release contains certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP adjusted income before income taxes, non-GAAP adjusted net income, non-GAAP adjusted income attributable to common stockholders before income taxes, non-GAAP adjusted net income attributable to common stockholders, non-GAAP adjusted net income per share and free cash flow. We have included non-GAAP measures in this press release because they are financial, operating or liquidity measures used by our management to (i) understand and evaluate our core operating performance and trends and generate future operating plans, (ii) make strategic decisions regarding the allocation of capital and investments in initiatives that are focused on cultivating new markets for our solutions and (iii) provide useful information to management about the amount of cash generated by the business after necessary capital expenditures. We also use certain non-GAAP financial measures, including adjusted EBITDA, as performance measures under our executive bonus plan. Further, we believe that these non-GAAP measures of our financial results provide useful information to investors and others in understanding and evaluating our results of operations, business trends and financial condition. While we believe the use of these non-GAAP measures provides useful information to investors and management in analyzing our financial performance, non-GAAP measures have inherent limitations in that they do not reflect all of the amounts and transactions that are included in our financial statements prepared in accordance with GAAP. Non-GAAP measures do not serve as an alternative to GAAP nor do we consider our non-GAAP measures in isolation, accordingly we present non-GAAP financial measures only in connection with GAAP results. We urge investors to consider non-GAAP measures only in conjunction with our GAAP financials and to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures, which are included in this press release.

We consider free cash flow to be a liquidity measure, which we define as cash flows from operating activities less purchases of property and equipment.

With respect to our expectations under “Financial Outlook” above, reconciliation of adjusted EBITDA and adjusted net income guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures, in particular, non-ordinary course litigation expense, acquisition-related expense and tax windfall adjustments can have unpredictable fluctuations based on unforeseen activity that is out of our control and/or cannot reasonably be predicted. We expect the above charges to have a significant and potentially highly variable impact on our future GAAP financial results.


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We exclude one or more of the following items from non-GAAP financial and operating measures:

Stock-based compensation expense: We exclude stock-based compensation expense, which relates to stock options and other forms of equity incentives primarily awarded to employees of Alarm.com, because they are non-cash charges that we do not consider when assessing the operating performance of our business. Additionally, the determination of stock-based compensation expense can be calculated using various methodologies and is dependent upon subjective assumptions and other factors that vary on a company by company basis. Therefore, we believe that excluding stock-based compensation from our non-GAAP financial measures improves the comparability of our results to the results of other companies in our industry.

Litigation expense: We exclude non-ordinary course litigation expense because we do not consider legal costs and settlement fees incurred in litigation and litigation-related matters of non-ordinary course lawsuits and other disputes, particularly costs incurred in ongoing intellectual property litigation, to be indicative of our core operating performance. We do not adjust for ordinary course legal expenses, including those expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

Acquisition-related expense: Included in operating expenses are incremental costs directly related to business and asset acquisitions. We exclude acquisition-related expense from our non-GAAP financial measures because we believe it is useful for investors to understand the effects of this transaction and its integration costs on our total operating expenses.

Depreciation expense: We record depreciation primarily for investments in property and equipment. We exclude depreciation in calculating adjusted EBITDA because we do not consider depreciation when we evaluate our ongoing business operations. For non-GAAP adjusted net income, non-GAAP adjusted net income attributable to common stockholders and non-GAAP adjusted net income per share, basic and diluted, we do not exclude depreciation.

Amortization expense: GAAP requires that operating expenses include the amortization of acquired intangible assets, which principally include acquired customer relationships, developed technology and trade names. We exclude amortization of intangibles from our non-GAAP financial measures because we do not consider amortization expense when we evaluate our ongoing business operations, nor do we factor amortization expense into our evaluation of potential acquisitions, or our measurement of the performance of those acquisitions. We believe that the exclusion of amortization expense enables the comparison of our performance to other companies in our industry as other companies may be more or less acquisitive than us and therefore, amortization expense may vary significantly by company based on their acquisition history.

Interest expense: We record interest expense primarily related to our debt facility. We exclude interest expense in calculating our adjusted EBITDA calculation. For non-GAAP adjusted net income, non-GAAP adjusted net income attributable to common stockholders and non-GAAP adjusted net income per share, basic and diluted, we do not exclude interest expense.

Other income, net: We exclude other income, net from our non-GAAP financial measures because we do not consider it part of our ongoing results of operations.

Income taxes: We exclude the impact related to our provision for income taxes from our adjusted EBITDA calculation. We do not consider this tax adjustment to be part of our ongoing results of operations.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by their use of terms and phrases such as “anticipate,” “expect,” “will,” “believe,” “continue,” “enable” and other similar terms and phrases, and such forward-looking statements include, but are not limited to, the statements regarding the continued success of the Company’s service provider partners and the Company’s future financial performance for the third quarter and full year 2019. The events described in these forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to: the Company’s ability to retain service provider partners and residential and commercial subscribers and grow sales, the Company’s ability to manage growth and execute on its business strategies, the effects of increased competition and evolving technologies, the Company’s ability to integrate acquired assets and businesses and to manage service provider partners, customers and employees, consumer demand for interactive security, video monitoring, intelligent automation, energy management and wellness solutions, the reliability of the Company’s network operations centers, the Company’s reliance on its service provider network to attract new customers and retain existing customers, the Company's dependence on its suppliers, the reliability of the Company’s hardware and wireless network suppliers, future financial prospects and enhanced United States tax, tariff, import/export restrictions, or other trade barriers, particularly tariffs from China as well as other risks and uncertainties discussed in the “Risk Factors” section of the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 9, 2019 and other subsequent filings the Company makes with the Securities and Exchange Commission from time to time. In addition, the forward-looking statements included in this press release represent the Company’s views and expectations as of the date hereof and are based on information currently available to the Company. The Company anticipates that subsequent events and developments may cause the Company’s views to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so except as required by

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law. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date hereof.


Investor Relations:
David Trone
Alarm.com
dtrone@alarm.com

Media Relations:
Matthew Zartman
Alarm.com

4

ALARM.COM HOLDINGS, INC.
Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)


 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 
 
 
 
 
 
SaaS and license revenue
$
82,334

 
$
70,968

 
$
162,389

 
$
138,956

Hardware and other revenue
39,326

 
33,520

 
71,606

 
58,288

Total revenue
121,660

 
104,488

 
233,995

 
197,244

Cost of revenue:
 
 
 
 
 
 
 
Cost of SaaS and license revenue
12,665

 
11,027

 
24,990

 
21,833

Cost of hardware and other revenue
31,891

 
25,461

 
58,516

 
43,032

Total cost of revenue
44,556

 
36,488

 
83,506

 
64,865

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
15,631

 
14,612

 
28,859

 
25,434

General and administrative
13,872

 
18,119

 
33,084

 
34,281

Research and development
28,418

 
21,521

 
54,914

 
41,898

Amortization and depreciation
5,138

 
5,238

 
10,366

 
10,263

Total operating expenses
63,059

 
59,490

 
127,223

 
111,876

Operating income
14,045

 
8,510

 
23,266

 
20,503

Interest expense
(786
)
 
(751
)
 
(1,607
)
 
(1,423
)
Other income, net
850

 
420

 
1,702

 
816

Income before income taxes
14,109

 
8,179

 
23,361

 
19,896

Provision for / (benefit from) income taxes
313

 
(2,554
)
 
555

 
(1,352
)
Net income
13,796

 
10,733

 
22,806

 
21,248

Income allocated to participating securities

 
(1
)
 

 
(4
)
Net income attributable to common stockholders
$
13,796

 
$
10,732

 
$
22,806

 
$
21,244

 
 
 
 
 
 
 
 
Per share information attributable to common stockholders:
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.29

 
$
0.23

 
$
0.47

 
$
0.45

Diluted
$
0.27

 
$
0.22

 
$
0.45

 
$
0.43

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
48,388,696

 
47,439,311

 
48,281,068

 
47,333,435

Diluted
50,283,990

 
49,497,088

 
50,244,384

 
49,406,444

 
 
 
 
 
 
 
 
Stock-based compensation expense included in operating expenses:
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Sales and marketing
$
471

 
$
319

 
$
851

 
$
554

General and administrative
1,781

 
1,481

 
3,048

 
2,509

Research and development
3,168

 
1,744

 
5,787

 
3,150

Total stock-based compensation expense
$
5,420

 
$
3,544

 
$
9,686

 
$
6,213


5

ALARM.COM HOLDINGS, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)


 
June 30,
2019
 
December 31, 2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
150,851

 
$
146,061

Accounts receivable, net
60,021

 
49,510

Inventory, net
23,895

 
22,990

Other current assets
33,724

 
9,502

Total current assets
268,491

 
228,063

Property and equipment, net
29,774

 
27,757

Intangible assets, net
72,181

 
79,067

Goodwill
63,591

 
63,591

Deferred tax assets
29,579

 
28,952

Operating lease right-of-use assets
27,745

 

Other assets
14,060

 
13,555

Total assets
$
505,421

 
$
440,985

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable, accrued expenses and other current liabilities
$
61,297

 
$
58,430

Accrued compensation
11,810

 
13,484

Deferred revenue
3,560

 
3,356

Operating lease liabilities
6,549

 

Total current liabilities
83,216

 
75,270

Deferred revenue
7,420

 
7,820

Long-term debt
65,000

 
67,000

Operating lease liabilities
35,503

 

Other liabilities
1,854

 
13,306

Total liabilities
192,993

 
163,396

Stockholders’ equity
 
 
 
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2019 and December 31, 2018.

 

Common stock, $0.01 par value, 300,000,000 shares authorized; 48,481,967 and 48,103,038 shares issued; and 48,481,390 and 48,102,081 shares outstanding as of June 30, 2019 and December 31, 2018, respectively.
485

 
481

Additional paid-in capital
353,131

 
341,139

Accumulated deficit
(41,188
)
 
(64,031
)
Total stockholders’ equity
312,428

 
277,589

Total liabilities and stockholders’ equity
$
505,421

 
$
440,985


6

ALARM.COM HOLDINGS, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

 
Six Months Ended 
 June 30,
Cash flows from operating activities:
2019
 
2018
Net income
$
22,806

 
$
21,248

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Provision for doubtful accounts
460

 
57

Reserve for product returns
(44
)
 
174

Provision for notes receivable
(3,319
)
 

Amortization on patents and tooling
334

 
512

Amortization and depreciation
10,366

 
10,263

Amortization of debt issuance costs
54

 
54

Amortization of operating lease right-of-use assets
2,938

 

Deferred income taxes
(627
)
 
(1,338
)
Stock-based compensation
9,686

 
6,213

Disposal of property and equipment

 
285

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(10,927
)
 
(12,150
)
Inventory
(905
)
 
(541
)
Other current and non-current assets
(4,709
)
 
(9,492
)
Accounts payable, accrued expenses and other current liabilities
(2,604
)
 
1,110

Deferred revenue
(196
)
 
(707
)
Operating lease liabilities
(604
)
 

Other liabilities
158

 
(484
)
Cash flows from operating activities
22,867

 
15,204

Cash flows used in investing activities:
 
 
 
Additions to property and equipment
(5,708
)
 
(6,131
)
Issuances or purchases of notes receivable
(20,061
)
 

Receipt of payment on notes receivable
7,400

 

Cash flows used in investing activities
(18,369
)
 
(6,131
)
Cash flows from financing activities:
 
 
 
Repayments of credit facility
(2,000
)
 
(2,000
)
Repurchases of common stock

 
(1
)
Issuances of common stock from equity based plans
2,292

 
2,558

Cash flows from financing activities
292

 
557

Net increase in cash and cash equivalents
4,790

 
9,630

Cash and cash equivalents at beginning of the period
146,061

 
96,329

Cash and cash equivalents at end of the period
$
150,851

 
$
105,959


7

ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures
(in thousands)
(unaudited)


 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Adjusted EBITDA:
 
 
 
 
 
 
 
Net income
$
13,796

 
$
10,733

 
$
22,806

 
$
21,248

Adjustments:
 
 
 
 
 
 
 
Interest expense and other income, net
(64
)
 
331

 
(95
)
 
607

Provision for / (benefit from) income taxes
313

 
(2,554
)
 
555

 
(1,352
)
Amortization and depreciation expense
5,138

 
5,238

 
10,366

 
10,263

Stock-based compensation expense
5,420

 
3,544

 
9,686

 
6,213

Litigation expense
3,112

 
6,117

 
8,649

 
9,388

Total adjustments
13,919

 
12,676

 
29,161

 
25,119

Adjusted EBITDA
$
27,715

 
$
23,409

 
$
51,967

 
$
46,367

 
 
 
 
 
 
 
 
Adjusted net income:
 
 
 
 
 
 
 
Net income, as reported
$
13,796

 
$
10,733

 
$
22,806

 
$
21,248

Provision for / (benefit from) income taxes
313

 
(2,554
)
 
555

 
(1,352
)
Income before income taxes
14,109

 
8,179

 
23,361

 
19,896

Adjustments:
 
 
 
 
 
 
 
Less: Other income, net
(850
)
 
(420
)
 
(1,702
)
 
(816
)
Amortization expense
3,403

 
3,797

 
6,934

 
7,617

Stock-based compensation expense
5,420

 
3,544

 
9,686

 
6,213

Litigation expense
3,112

 
6,117

 
8,649

 
9,388

Non-GAAP adjusted income before income taxes
25,194

 
21,217

 
46,928

 
42,298

Income taxes 1
(5,291
)
 
(4,456
)
 
(9,855
)
 
(8,883
)
Non-GAAP adjusted net income
$
19,903

 
$
16,761

 
$
37,073

 
$
33,415


1 Income taxes are calculated using a rate of 21.0% for each of the three and six months ended June 30, 2019 and 2018. The 21.0% effective tax rate for each of the three and six months ended June 30, 2019 and 2018 exclude the income tax effect on the non-GAAP adjustments and reflect the estimated long-term corporate tax rate.




8

ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures - continued
(in thousands, except share and per share data)
(unaudited)


 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Adjusted net income attributable to common stockholders:
 
 
 
 
 
 
 
Net income attributable to common stockholders, as reported
$
13,796

 
$
10,732

 
$
22,806

 
$
21,244

Provision for / (benefit from) income taxes
313

 
(2,554
)
 
555

 
(1,352
)
Income attributable to common stockholders before income taxes
14,109

 
8,178

 
23,361

 
19,892

Adjustments:
 
 
 
 
 
 
 
Less: Other income, net
(850
)
 
(420
)
 
(1,702
)
 
(816
)
Amortization expense
3,403

 
3,797

 
6,934

 
7,617

Stock-based compensation expense
5,420

 
3,544

 
9,686

 
6,213

Litigation expense
3,112

 
6,117

 
8,649

 
9,388

Non-GAAP adjusted income attributable to common stockholders before income taxes
25,194

 
21,216

 
46,928

 
42,294

Income taxes 1
(5,291
)
 
(4,456
)
 
(9,855
)
 
(8,882
)
Non-GAAP adjusted net income attributable to common stockholders
$
19,903

 
$
16,760

 
$
37,073

 
$
33,412


 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Adjusted net income per share:
 
 
 
 
 
 
 
Net income per share - basic, as reported
$
0.28

 
$
0.23

 
$
0.47

 
$
0.45

Provision for / (benefit from) income taxes
0.01

 
(0.05
)
 
0.02

 
(0.02
)
Income before income taxes
0.29

 
0.18

 
0.49

 
0.43

Adjustments:
 
 
 
 
 
 
 
Less: Other income, net
(0.02
)
 
(0.01
)
 
(0.04
)
 
(0.02
)
Amortization expense
0.07

 
0.08

 
0.14

 
0.16

Stock-based compensation expense
0.11

 
0.07

 
0.20

 
0.13

Litigation expense
0.07

 
0.13

 
0.18

 
0.20

Non-GAAP adjusted income before income taxes
0.52

 
0.44

 
0.97

 
0.90

Income taxes 1
(0.11
)
 
(0.09
)
 
(0.20
)
 
(0.19
)
Non-GAAP adjusted net income per share - basic
$
0.41

 
$
0.36

 
$
0.77

 
$
0.71

 
 
 
 
 
 
 
 
Non-GAAP adjusted net income per share - diluted
$
0.40

 
$
0.34

 
$
0.74

 
$
0.68

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic, as reported
48,388,696

 
47,439,311

 
48,281,068

 
47,333,435

Diluted, as reported 
50,283,990

 
49,497,088

 
50,244,384

 
49,406,444


1 Income taxes are calculated using a rate of 21.0% for each of the three and six months ended June 30, 2019 and 2018. The 21.0% effective tax rate for each of the three and six months ended June 30, 2019 and 2018 exclude the income tax effect on the non-GAAP adjustments and reflect the estimated long-term corporate tax rate.


9

ALARM.COM HOLDINGS, INC.
Reconciliation of Non-GAAP Measures - continued
(in thousands)
(unaudited)


 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Free cash flow:
 
 
 
 
 
 
 
Cash flows from operating activities
$
24,054

 
$
11,684

 
$
22,867

 
$
15,204

Additions to property and equipment
(2,746
)
 
(3,084
)
 
(5,708
)
 
(6,131
)
Non-GAAP free cash flow
$
21,308

 
$
8,600

 
$
17,159

 
$
9,073


10