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Alarm.com Holdings, Inc.

Alarm.com Holdings, Inc.ALRMEarnings & Financial Report

Nasdaq · Information Technology · Services-Prepackaged Software

Alarm.com, Inc. is an American technology company that provides cloud-based services for remote control, home automation, and alarm monitoring services. The company was founded in 2000 as a spinoff from MicroStrategy. The company is based in Tysons, Virginia.

What changed in Alarm.com Holdings, Inc.'s 10-K — 2022 vs 2023

Top changes in Alarm.com Holdings, Inc.'s 2023 10-K

547 paragraphs added · 594 removed · 440 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

120 edited+33 added−24 removed105 unchanged
We believe that our leading position in our space is an indicator that we have developed a trusted brand with service providers and consumers for innovative and reliable technology and service. Our iOS and Android mobile apps have each been downloaded millions of times and both apps consistently have impressive user ratings. ◦ Commitment to Innovation.
We believe our leading position in our space is an indicator that we have developed a trusted brand with service providers and consumers for innovative and reliable technology and service. Our iOS and Android mobile apps have each been downloaded millions of times and both apps consistently have impressive user ratings. ◦ Commitment to Innovation.
We believe the principal competitive factors in the connected property market include the following: • simplicity and ease of use; • ability to offer persistent awareness, control, and intelligent automation; • breadth of features and functionality provided; • flexibility of the solutions and ability to personalize for the individual consumer; • compatibility with a wide selection of third-party devices; • pricing, affordability, and accessibility; • sales reach and local installation and support capabilities; and 16 • brand awareness and reputation.
We believe the principal competitive factors in the connected property market include the following: • simplicity and ease of use; • ability to offer persistent awareness, control, and intelligent automation; • breadth of features and functionality provided; • flexibility of the solutions and ability to personalize for the individual consumer; • compatibility with a wide selection of third-party devices; • pricing, affordability, and accessibility; • sales reach and local installation and support capabilities; and • brand awareness and reputation.
We provide a broad suite of marketing and sales tools and resources for our service provider partners, including our MobileSales app, co-brandable landing pages, mobile optimized websites with integrated lead capture, social media, videos, images, collateral, direct mail and event materials. 10 • Alarm.com Academy. We offer comprehensive in-person training programs to our service provider partners.
We provide a broad suite of marketing and sales tools and resources for our service provider partners, including our MobileSales app, co-brandable landing pages, mobile optimized websites with integrated lead capture, social media, videos, images, collateral, direct mail and event materials. • Alarm.com Academy. We offer comprehensive in-person training programs to our service provider partners.
Remote Toolkit enables our service provider partners to remotely configure, support 11 and upgrade their customers' hardware or software, eliminating the cost of an in-person service call for many routine support issues. In addition, we believe our service provider partners can generate more revenue from each subscriber by providing services beyond traditional security. ◦ Broad Device Interoperability.
Remote Toolkit enables our service provider partners to remotely configure, support and upgrade their customers' hardware or software, eliminating the cost of an in-person service call for many routine support issues. In addition, we believe our service provider partners can generate more revenue from each subscriber by providing services beyond traditional security. ◦ Broad Device Interoperability.
The Alarm.com platform enables our service provider partners to deploy our interactive security, video monitoring, intelligent automation, access control, energy management and wellness solutions as stand-alone offerings or as combined solutions to address the needs of a broad range of customers. 4 Subscriber Solutions Interactive Security Interactive security is the entry point for most of our smart home and business subscribers.
The Alarm.com platform enables our service provider partners to deploy our interactive security, video monitoring, intelligent automation, access control, energy management and wellness solutions as stand-alone offerings or as combined solutions to address the needs of a broad range of customers. Subscriber Solutions Interactive Security Interactive security is the entry point for most of our smart home and business subscribers.
OpenEye offers Video Surveillance as a Service, or VSaaS, as well as cameras, recorders and other peripherals designed for video applications, and supports enterprise-level requirements such as advanced forensic video search, point of sale system integration and customer site mapping, as well as large-scale camera deployments. Key benefits of the OpenEye solution include: ◦ Intelligent Cloud Architecture.
OpenEye software offers Video Surveillance as a Service, or VSaaS, as well as cameras, recorders and other peripherals designed for video applications, and supports enterprise-level requirements such as advanced forensic video search, point of sale system integration and customer site mapping, as well as large-scale camera deployments. Key benefits of the OpenEye solution include: ◦ Intelligent Cloud Architecture.
The device can also detect burst pipes, major leaks, and wasteful slow persistent drips, and can respond by informing the property owners of opportunities to reduce water waste, or as needed, by automatically shutting off the water supply to quickly protect properties from damage. Our commitment extends to the buildings in which our employees work.
The device can also detect burst pipes, major leaks, and wasteful slow persistent drips, and can respond by informing the property owners of opportunities to reduce water waste, or as needed, by automatically shutting off the water supply to quickly protect properties from damage. 17 Our commitment extends to the buildings in which our employees work.
Video Monitoring and Video Analytics Our video monitoring solution can provide a direct live-view into a property, identify and capture footage of critical events and provide visual peace of mind. We offer indoor and outdoor video cameras for residential and commercial properties at varying price points so that our service providers can engage a range of consumers with our services.
Video Monitoring and Video Analytics Our video monitoring solution can provide a direct live-view into a property, identify and capture footage of critical events and provide visual peace of mind. We offer indoor and outdoor video cameras for residential and commercial properties at varying price points so our service providers can engage a range of consumers with our services.
Integrated with Alarm.com’s Smart Water Valve + Meter and Water Dragon devices, our solution can monitor water usage, detect both low- and high-volume leaks, alert the subscriber about conditions that can lead to frozen and burst pipes, intelligently manage humidity levels and notify homeowners if a sump pump fails.
Integrated with Alarm.com’s Smart Water Valve + Meter and Water Dragon devices, our solution can monitor water usage, detect both low- and high-volume leaks, alert the subscriber about conditions that can lead to frozen and burst pipes, intelligently manage 6 humidity levels and notify homeowners if a sump pump fails.
OpenEye’s hybrid architecture intelligently combines local recording with managed cloud services. It provides long-term storage of high-resolution video, low bandwidth consumption and a full suite of centralized management capabilities that include remote viewing, administration and health reporting for deployments that can include thousands of video cameras. 8 ◦ Video Analytics Platform .
OpenEye’s hybrid architecture intelligently combines local recording with managed cloud services. It provides long-term storage of high-resolution video, low bandwidth consumption and a full suite of centralized management capabilities that include remote viewing, administration and health reporting for deployments that can include thousands of video cameras. ◦ Video Analytics Platform .
Supporting third-party cameras facilitates adoption of our commercial video solution by reducing the barriers to entry for small and medium-sized businesses that want to benefit from our intelligently integrated solutions without the cost of replacing existing installed cameras. 7 ◦ Commercial Video Analytics. Business Activity Analytics can help improve and optimize business operations.
Supporting third-party cameras facilitates adoption of our commercial video solution by reducing the barriers to entry for small and medium-sized businesses that want to benefit from our intelligently integrated solutions without the cost of replacing existing installed cameras. ◦ Commercial Video Analytics. Business Activity Analytics can help improve and optimize business operations.
Both devices can identify low and high-volume water leaks and constantly monitor overall water use and current usage rates in homes and businesses. Deep integration with the 14 Alarm.com platform leverages intelligence and insights to help reduce the risk of losses from water emergencies, while also improving water conservation efforts.
Both devices can identify low and high-volume water leaks and constantly monitor overall water use and current usage rates in homes and businesses. Deep integration with the Alarm.com platform leverages intelligence and insights to help reduce the risk of losses from water emergencies, while also improving water conservation efforts.
We believe our sales and marketing approach enables us to expand our breadth of service providers, provide highly customized services and scale quickly. 15 Service Provider Support We support the full suite of software and hardware products on the Alarm.com platform through a highly trained and experienced team of professionals based in the United States.
We believe our sales and marketing approach enables us to expand our breadth of service providers, provide highly customized services and scale quickly. Service Provider Support We support the full suite of software and hardware products on the Alarm.com platform through a highly trained and experienced team of professionals based in the United States.
In the future, we, or our service providers or subscribers, may be the subject of legal proceedings alleging that our solutions or underlying technology infringe or violate the intellectual property rights of others. Environmental, Social and Corporate Governance Matters Environmental To operate long-term, we need to ensure that our local communities and the natural environment are thriving.
In the future, we, or our service providers or subscribers, may be the subject of legal proceedings alleging our solutions or underlying technology infringe or violate the intellectual property rights of others. Environmental, Social and Corporate Governance Matters Environmental To operate long-term, we need to ensure our local communities and the natural environment are thriving.
Capabilities such as advanced forensic video search, point of sale system integration and customer site mapping address the specific needs of enterprise-level subscribers and allow loss prevention officers, business analysts and other IT resources to employ video as a key operational and management tool. ◦ Large-Scale Video Deployments.
Capabilities such as advanced forensic video search, point of sale system integration and customer site mapping address the specific needs of enterprise-level subscribers and allow loss prevention officers, business analysts and other IT resources to employ video as a key operational and management tool. 8 ◦ Large-Scale Video Deployments.
Nevertheless, our competitors may have substantially greater financial, technical and other resources, greater brand recognition, larger sales and marketing budgets and broader distribution channels than we do. Our Intellectual Property Our success and ability to compete effectively depend in part on our ability to protect our proprietary technology and to establish and adequately protect our intellectual property rights.
Nevertheless, our competitors may have substantially greater financial, technical and other resources, greater brand recognition, larger sales and marketing budgets and broader distribution channels than we do. 16 Our Intellectual Property Our success and ability to compete effectively depend in part on our ability to protect our proprietary technology and to establish and adequately protect our intellectual property rights.
The Alarm.com mobile app includes customizable scenes buttons that can assist in increasing the potential for energy efficiency by adjusting multiple devices in the property with a single command. For example, a homeowner can turn on the fan, 17 raise or lower shades, turn on or off lights and adjust the thermostat with a single command.
The Alarm.com mobile app includes customizable scenes buttons that can assist in increasing the potential for energy efficiency by adjusting multiple devices in the property with a single command. For example, a homeowner can turn on the fan, raise or lower shades, turn on or off lights and adjust the thermostat with a single command.
We believe that our network of service providers and the length of our service relationships with residential and commercial property owners, combined with our robust SaaS platforms and over 20 years of operating experience, contribute to a compelling business model. We have experienced significant growth since our company's inception in 2000.
We believe our network of service providers and the length of our service relationships with residential and commercial property owners, combined with our robust SaaS platforms and over 20 years of operating experience, contribute to a compelling business model. We have experienced significant growth since our company's inception in 2000.
Remote temperature sensors enable a subscriber to manage comfort in a specific area within their property. For example, a homeowner can set a desired temperature for a child's nursery to improve the child’s comfort. 6 Subscribers can easily customize detailed schedules and rules to have the right temperature in the right location at the right time. ◦ Energy Usage Monitoring.
Remote temperature sensors enable a subscriber to manage comfort in a specific area within their property. For example, a homeowner can set a desired temperature for a child's nursery to improve the child’s comfort. Subscribers can easily customize detailed schedules and rules to have the right temperature in the right location at the right time. ◦ Energy Usage Monitoring.
We also provide a doorbell video camera solution that supports two-way audio with guests at the door, as well as video management software and cameras for enterprise commercial applications through our OpenEye business. 5 The capabilities associated with our video monitoring solution include: ◦ Video Analytics.
We also provide a doorbell video camera solution that supports two-way audio with guests at the door, as well as video management software and cameras for enterprise commercial applications through our OpenEye business. The capabilities associated with our video monitoring solution include: ◦ Video Analytics.
The On-Site Wrap Up feature within the MobileTech application helps technicians keep track of and record the tasks they are required to complete during a service call to a customer property. Service providers can establish standard actions for technicians and monitor 9 implementation.
The On-Site Wrap Up feature within the MobileTech application helps technicians keep track of and record the tasks they are required to complete during a service call to a customer property. Service providers can establish standard actions for technicians and monitor implementation.
The Smart Water Valve + Meter can automatically shut off the property’s water supply when a leak is detected. Water Dragon is an easy-to-install option that clamps onto the main water line and uses ultrasonic technology to detect unexpected water activity.
The Smart Water Valve + Meter can automatically shut off the property’s 14 water supply when a leak is detected. Water Dragon is an easy-to-install option that clamps onto the main water line and uses ultrasonic technology to detect unexpected water activity.
We offer training, tools and other resources to help our service provider partners fully leverage the breadth and depth of our platforms. ◦ Expanded Set of Value-Added Services. We provide value-added services to our service provider partners, including training, marketing, installation and support tools and business intelligence analytics.
We offer training, tools and other resources to help our service provider partners fully leverage the breadth and depth of our platforms. 11 ◦ Expanded Set of Value-Added Services. We provide value-added services to our service provider partners, including training, marketing, installation and support tools and business intelligence analytics.
We intend to leverage our status as a trusted provider to drive consumer interest in our offerings and enable our service provider partners to upgrade their legacy security customers to our connected property solutions. ◦ Continue to invest in our platforms.
We intend to leverage our 12 status as a trusted provider to drive consumer interest in our offerings and enable our service provider partners to upgrade their legacy security customers to our connected property solutions. ◦ Continue to invest in our platforms.
We believe that we compete favorably with respect to each of these factors. Additionally, we believe that our cloud-based software platforms, intelligently connected property solutions, and proven scalability help further differentiate us from competitors.
We believe we compete favorably with respect to each of these factors. Additionally, we believe our cloud-based software platforms, intelligently connected property solutions, and proven scalability help further differentiate us from competitors.
Further corporate governance information, including our corporate governance guidelines and board committee charters, is also available on our investor relations website under the heading "Corporate Governance." The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 19
Further corporate governance information, including our corporate governance guidelines and board committee charters, is also available on our investor relations website under the heading "Corporate Governance." The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. 20
OpenEye’s video analytics platform is optimized to support the requirements of its large-scale enterprise commercial customers. It can identify people and reduce false motion events caused by background movement and other image noise to provide highly accurate activity detection. Subscribers can create more actionable activity alerts to respond to incidents and quickly find associated video recordings. ◦ Enterprise-Level Capabilities.
OpenEye’s video analytics platform is optimized to support the requirements of its large-scale enterprise commercial customers. It can identify people and reduce false motion events caused by background movement and other image noise to provide highly accurate activity detection. Subscribers can create more actionable activity alerts to respond to incidents and quickly find associated video recordings.
T he Guardian system from Shooter Detection Systems includes proprietary, dual-mode gunshot sensors that are installed inside the subscriber's property to help protect people against active shooter threats. Each gunshot sensor uses a dual-mode detection technology that combines acoustic sensors with specialized infrared flash detectors. Proprietary gunshot detection software algorithms maximize detection and minimize false positives.
The Guardian system from Shooter Detection Systems includes proprietary, dual-mode gunshot sensors that are installed inside the subscriber's property to help protect people against active shooter threats. Each gunshot sensor uses a dual-mode detection technology that combines acoustic sensors with specialized infrared flash detectors. Proprietary gunshot detection software algorithms maximize detection and minimize false positives.
Commercial subscribers can intelligently monitor customer and employee activity, including occupancy tracking, people counting, queue monitoring, crowd gathering and heat mapping. Real-time notifications and activity reporting can help streamline customer flows, reduce wait times, measure the effectiveness of marketing campaigns and enforce occupancy and social distancing limits.
Commercial subscribers can intelligently monitor customer and employee activity, including occupancy tracking, people counting, queue monitoring, crowd gathering and heat mapping. Real-time notifications and activity reporting can help streamline customer flows, reduce wait times, measure the effectiveness of marketing campaigns and enforce occupancy limits.
According to the Barnes Buchanan 2023 Security Alarm Industry Overview and Update report, the top 5 dealers represented approximately 35% of all industry recurring monthly revenue in 2022. The distribution of revenue among our service provider partners is reflective of the industry overall.
According to the Barnes Buchanan 2024 Security Alarm Industry Overview and Update report, the top 5 dealers represented approximately 35% of all industry recurring monthly revenue in 2022. The distribution of revenue among our service provider partners is reflective of the industry overall.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA from net income, the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP, for the years ended December 31, 2022, 2021 and 2020.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the limitations of non-GAAP adjusted EBITDA and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP, for the years ended December 31, 2023, 2022 and 2021.
ITEM 1. BUSINESS Overview Alarm.com is the leading platform for the intelligently connected property. Our cloud-based platform offers an expansive suite of Internet of Things, or IoT, solutions that address opportunities in the residential, multi-family, small business and enterprise commercial markets.
ITEM 1. BUSINESS Overview Alarm.com is the leading platform for the intelligently connected property. Our cloud-based platform offers an expansive suite of Internet of Things, or IoT, solutions addressing opportunities in the residential, multi-family, small business and enterprise commercial markets.
Perimeter Guard enhances our Business Activity Analytics solution with a layer of proactive deterrence against would-be intruders. Perimeter Guard can identify a person and automatically respond with audible alerts and flashing LED lights that inform the person that they are being monitored. ◦ Smarter Access Control.
Perimeter Guard enhances our Business Activity Analytics solution with a layer of proactive deterrence against would-be intruders. Perimeter Guard can identify a person and automatically respond with audible alerts and flashing LED lights that inform the person that they are being monitored.
We also have, and may be required to seek, licenses under patents or intellectual property rights owned by third parties, including open-source software and other commercially available software. We also rely on several registered and unregistered trademarks to protect our brand.
We also have, and may be required to seek in the future, licenses under patents or intellectual property rights owned by third parties, including open-source software and other commercially available software. We also rely on several registered and unregistered trademarks to protect our brand.
Subscribers select periods when they want their system to monitor activity in their property and then either automatically arm or disarm the system. Intelligently automating the security system enhances customer security and drives further user engagement with our smart home systems. ◦ Flex IO .
Subscribers select periods when they want their system to monitor activity in their property and then either automatically arm or disarm the system. Intelligently automating the security system enhances customer security and drives further user engagement with our smart home systems. ◦ Wellness.
We believe there is an opportunity to significantly increase the adoption of our solutions as more residential and commercial property owners adopt intelligently connected property solutions and as the major technology trends of mobile access, the IoT, big data and cloud technology continue to create opportunities to connect people with their properties in new ways.
We believe there is an opportunity to significantly increase the adoption of our solutions as more residential and commercial property owners adopt intelligently connected property solutions and as the major technology trends of mobile access, the IoT, cloud technology and artificial intelligence continue to create opportunities to connect people with their properties in new ways.
All of our modules, designed by our device engineering team and manufactured in the United States by a contract manufacturing partner, provide a dedicated and fully managed two-way cellular connection between the subscriber’s property and our cloud platforms.
All of our modules and gateways, designed by our device engineering team and manufactured in the United States by a contract manufacturing partner, provide a dedicated and fully managed two-way cellular connection between the monitored property and our cloud platforms.
Our reputation is strengthened through our network of over 11,000 service provider partners, who have significant expertise in the delivery of our SaaS platforms and suite of solutions. Benefits to Service Provider Partners: ◦ New Revenue Generation Opportunities.
Our reputation is strengthened through our network of service provider partners, who have significant expertise in the delivery of our SaaS platforms and suite of solutions. Benefits to Service Provider Partners: ◦ New Revenue Generation Opportunities.
Market Opportunity Our addressable market consists of both residential and commercial properties. Our residential subscribers are typically owners of single-family homes and our commercial subscribers often include retail businesses, restaurants, schools and universities, commercial facilities and professional offices.
Market Opportunity Our addressable market consists of both residential and commercial properties. Our residential subscribers are typically owners of single-family homes and our commercial subscribers include retail businesses, restaurants, schools and universities, commercial facilities, national chains and professional offices.
Our demand response programs manage over 900,000 connected devices for more than 60 energy utilities in North America. These programs support energy utilities as they pursue aggressive clean energy goals. Our lineup of smart thermostats and intelligent energy management solutions can automatically adjust to reduce energy waste in residential and commercial properties.
Our demand response programs manage over 1.2 million connected devices for more than 60 energy utilities in North America. These programs support energy utilities as they pursue aggressive clean energy goals. Our lineup of smart thermostats and intelligent energy management solutions can automatically adjust to reduce energy waste in residential and commercial properties.
Commercial users can create automated schedules to secure a property and automatically adjust the thermostat at a specified time. Our Smart Water Valve + Meter device is part of a comprehensive water management solution. Two on-board flow sensors monitor water usage to facilitate water conservation behavior.
Commercial users can create automated schedules to secure a property and automatically adjust the thermostat at a specified time. Our Smart Water Valve + Meter and Water Dragon devices are part of a comprehensive water management solution. Two on-board flow sensors monitor water usage to facilitate water conservation behavior.
These features help to increase accuracy of installations, decrease time spent on-site and reduce support calls and return visits, which saves subscribers and service providers money while increasing subscriber satisfaction. ▪ On-Site Wrap Up.
These features help to increase accuracy of installations, decrease time spent on-site and reduce support calls and return visits, which saves subscribers and service providers money while increasing subscriber satisfaction. ▪ Gopher Info.
Our platforms utilize a highly secure, highly reliable, dedicated cellular connection which mitigates common vulnerabilities of systems that are connected via the phone line or wired networks, such as cut phone lines or broadband connectivity issues. ◦ Intelligent and Actionable. Our platforms aggregate real-time, multi-point data about property activity and system status.
Our platforms utilize a highly secure, highly reliable, dedicated cellular connection which mitigates common vulnerabilities of security systems that are connected via a wired network, such as cut lines or broadband connectivity issues. ◦ Intelligent and Actionable. Our platforms aggregate real-time, multi-point data about property activity and system status.
Today, our products are currently localized and available in approximately 50 countries outside of North America, including Argentina, Australia, Chile, Colombia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and Uruguay. We intend to continue to grow our number of international subscribers by strengthening our presence in existing markets and expanding to additional markets. ◦ Expand into the commercial market segment.
Today, our products are currently localized and available in over 50 countries outside of North America, including Argentina, Australia, Chile, Colombia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and Uruguay. We intend to continue to grow our number of international subscribers by strengthening our presence in existing markets and expanding to additional markets.
We continue to make significant investments in innovative research and development. Our investment has resulted in 712 issued patents as of December 31, 2022 and numerous patent applications pending which we believe can help ensure that our technology remains competitively differentiated and legally protected.
We continue to make significant investments in innovative research and development. Our investment resulted in hundreds of issued patents as of December 31, 2023 and numerous patent applications pending which we believe can help ensure our technology remains competitively differentiated and legally protected.
As a pioneer in connected home and business solutions, we have made significant investments in building our platforms for over 20 years. We intend to continue to invest heavily to add 12 additional innovative offerings and broaden our suite of solutions.
As a pioneer in connected home and business solutions, we have made significant investments in building our platforms for over 20 years. We intend to continue to invest heavily to add additional innovative offerings and broaden our suite of solutions and opportunities in residential, commercial and global markets.
Growth Strategy We intend to maintain our leadership position by continuing to develop and deploy innovative technologies and by expanding our ecosystem of partners. Our key growth strategies include: ◦ Drive SaaS and license revenue growth by expanding the solutions that our service providers deploy.
Growth Strategy We intend to maintain our leadership position and expand into new market opportunities by continuing to develop and deploy innovative technologies and by expanding our ecosystem of partners. Our key growth strategies include: ◦ Drive SaaS and license revenue growth by expanding the solutions our service providers deploy.
Home builders can rapidly deploy a full-range of our smart home solutions in new communities and model homes, while minimizing risks and costs by depending on our nationwide network of service provider partners for hardware installation and ongoing support. Benefits of Our Solutions Residential and commercial properties are ripe for reinvention.
Home builders can rapidly deploy a full-range of our smart home solutions in new communities and model homes, while minimizing risks and costs by depending on our nationwide network of service provider partners for hardware installation and ongoing support.
Substantially all of the assets acquired consisted of developed technology. We believe the acquisition of the developed technology will continue to advance our load-shaping energy management solution allowing additional devices to participate in utility programs that reduce or shift power consumption during peak demand periods.
Substantially all of the assets acquired consisted of developed technology. We believe the acquisition of the developed technology will continue to advance our load-shaping energy management solution allowing additional devices to participate in utility programs that reduce or shift power consumption during peak demand periods. 19 • On April 21, 2023, we acquired certain assets of Vintra, Inc., or Vintra.
We also believe that the combination of our solutions and our service provider partners’ expertise is the most effective way to drive mass market adoption of the intelligently connected property. The traditional security and home automation market is highly fragmented with up to approximately 15,000 security service providers nationally.
We also believe that the combination of our solutions and our service provider partners’ expertise is the most effective way to drive mass market adoption of the intelligently connected property. The traditional security and home automation market is highly fragmented.
ADT LLC represented greater than 15% but not more than 20% of our revenue in each of 2020, 2021 and 2022. Subscribers Our platforms currently support millions of residential and commercial subscribers. We define the number of subscribers as the number of residential or commercial properties to which we are delivering at least one of our solutions.
ADT LLC represented greater than 15% but not more than 20% of our revenue in each of 2021, 2022 and 2023. Subscribers We define subscribers as residential or commercial properties to which we are delivering at least one of our solutions.
Additionally, we offer online courses through a learning management system, enabling our service provider partners to access training on the full suite of Alarm.com solutions anytime. • Customer Connections. We help our service provider partners maximize the value of existing accounts by offering targeted in-app messaging and e-mail communications to existing subscribers.
Additionally, we offer online courses through a learning management system, enabling our service provider partners to access training on the full suite of Alarm.com solutions anytime. • System Upgrades. Our Customer Connections solution is designed to maximize the value of existing accounts by offering targeted in-app and e-mail-based upgrade offers to existing subscribers.
Our permission-based online portal provides account management, sales, marketing, training and support tools. Through this portal, our service provider partners can activate and manage their Alarm.com customer accounts, order equipment, access invoices and billing, remotely program customer systems, obtain sales and marketing services and engage in training. ◦ Service Dashboard.
Through this portal, our service provider partners can activate and manage their Alarm.com customer accounts, order equipment, access invoices and billing, remotely program customer systems, obtain sales and marketing services and engage in training. ◦ Service Dashboard.
A subscriber who subscribes to one of our service level packages as well as one or more of our a la carte add-ons is counted as one subscriber. Our number of subscribers does not include the customers of our service provider partners to whom we license our intellectual property, as they do not utilize one of our SaaS platforms.
A single property for which we are providing one of our service level packages as well as one or more of our a la carte add-ons is counted as one subscriber. Our subscribers do not include the customers of our service provider partners to whom we license our intellectual property, as they do not utilize one of our SaaS platforms.
Subscribers can seamlessly connect to our services to control and monitor their security systems, as well as to IoT devices including door locks, garage doors, thermostats and video cameras, through our family of mobile apps, websites and engagement platforms like voice control through Siri Shortcuts, Amazon Echo and Google Home, wearable devices like the Apple Watch and TV applications such as Apple TV and Amazon Fire TV.
Subscribers can seamlessly connect to our services to control and monitor their security systems, as well as to IoT devices including door locks, garage doors, thermostats and video cameras, through our family of mobile apps, websites and engagement platforms like voice control through Siri Shortcuts, Amazon Echo and Google Home, wearable devices like the Apple Watch and TV applications such as Apple TV and Amazon Fire TV. 4 The capabilities associated with this solution include: ◦ Real-Time Alerts and Always-On Monitoring.
We believe the acquisitions of the IPR&D will further our commitment to make significant investments in innovative research and development in the intelligently connected property market to broaden our suite of solutions as well as strengthen our smart intercom capability.
We believe the acquisitions of the IPR&D will further our commitment to make significant investments in innovative research and development in the intelligently connected property market to broaden our suite of solutions as well as strengthen our smart intercom capability. • In December of 2021, we acquired certain assets from an unrelated party.
We also generated net income attributable to common stockholders of $56.3 million, $52.3 million and $77.9 million in 2022, 2021 and 2020, respectively, as well as Adjusted EBITDA, a non-GAAP metric, of $146.8 million, $142.5 million and $125.3 million in 2022, 2021 and 2020, respectively. See the "Non-GAAP Measures" section of Item 7.
We also generated net income attributable to common stockholders of $81.0 million, $56.3 million and $52.3 million in 2023, 2022 and 2021, respectively, as well as non-GAAP adjusted EBITDA of $154.0 million, $146.8 million and $142.5 million in 2023, 2022 and 2021, respectively. See the "Non-GAAP Measures" section of Item 7.
Our intelligently connected property solutions provide a wealth of benefits to our subscribers and our service provider partners. Benefits to Subscribers: ◦ Single Connected Platform. Our cloud-based platforms provide subscribers with a single point of integrated control across a diverse ecosystem of IoT devices. Solutions are easily personalized to suit the individual subscriber’s needs. ◦ Reliable Network Communications.
Our cloud-based platforms provide subscribers with a single point of integrated control across a diverse ecosystem of IoT devices. Solutions are easily personalized to suit the individual subscriber’s needs. ◦ Reliable Network Communications.
We continue to broaden our intellectual property portfolio and file patent applications and as of December 31, 2022, we had 268 pending utility patent applications and 41 pending provisional patent applications filed in the United States. We also had three pending international patent applications and 234 international patent applications pending under the Patent Cooperation Treaty.
We continue to broaden our intellectual property portfolio and file patent applications and as of December 31, 2023, we had 210 pending utility patent applications and six pending provisional patent applications filed in the United States. We also had 152 pending international patent applications and 17 international patent applications pending under the Patent Cooperation Treaty.
Government Regulations Our business, operations and service provider partners are subject to various U.S. federal, state and local consumer protection laws, licensing regulation and other laws and regulations, and to similar laws and regulations in the other countries in which we operate.
In addition, we regularly conduct employee surveys to gauge employee engagement and identify areas of focus. Government Regulations Our business, operations and service provider partners are subject to various U.S. federal, state and local consumer protection laws, licensing regulation and other laws and regulations, and to similar laws and regulations in the other countries in which we operate.
We generated total revenue of $842.6 million, $749.0 million and $618.0 million in 2022, 2021 and 2020, respectively. Our SaaS and license revenue was $520.4 million, $460.4 million and $393.3 million in 2022, 2021 and 2020, respectively, representing a compound annual growth rate of 15.0%.
We generated total revenue of $881.7 million, $842.6 million and $749.0 million in 2023, 2022 and 2021, respectively. Our SaaS and license revenue was $569.2 million, $520.4 million and $460.4 million in 2023, 2022 and 2021, respectively, representing a compound annual growth rate of 11.2%.
Our solutions are sold, installed, and serviced by a network of independent licensed, professional service provider partners. Our channel network currently consists of over 11,000 active service provider partners, including smaller local providers, larger regional providers and national service providers with thousands of employees.
Our solutions are sold, installed, and serviced by a network of independent licensed, professional service provider partners. Our channel network of active service provider partners includes smaller local providers, larger regional providers and national service providers.
To accomplish these objectives, we rely on a combination of patent, trademark, copyright and trade secret laws in the United States and other jurisdictions, as well as license agreements, confidentiality agreements and other contractual protections.
To accomplish these objectives, we rely on a combination of patent, trademark, copyright and trade secret laws in the United States and other jurisdictions, as well as license agreements, confidentiality agreements and other contractual protections. As of December 31, 2023, we owned 761 issued United States utility patents, one issued United States design patent and 152 issued international patents.
In addition, we plan to continue to expand our network of service provider partners. ◦ Upgrade traditional security customers to our solutions. We believe there is a significant opportunity for our service provider partners to expand adoption of our connected solutions within their customer base.
We believe there is a significant opportunity for our service provider partners to expand adoption of our connected solutions within their customer base.
Subscribers can securely access live video feeds through the web and mobile apps at any time. ◦ Secure Cloud Storage . Video clips are uploaded to our cloud-based storage system for secure storage and remote viewing. ◦ Video Alerts . Smart clips can be automatically sent via SMS, push notifications or email as soon as they are recorded.
Video clips are uploaded to our cloud-based storage system for secure storage and remote viewing. ◦ Video Alerts . Smart clips can be automatically sent via SMS, push notifications or email as soon as they are recorded.
We have 34 registered trademarks in the United States, including Alarm.com and the Alarm.com logo and design, 12 registered trademarks in Canada, seven in the United Kingdom and six in the European Union, among others.
We have 39 registered trademarks in the United States, including Alarm.com and the Alarm.com logo and design, 11 registered trademarks in Canada, nine in the United Kingdom and seven in the European Union.
In March of 2020, we acquired certain additional assets from two separate unrelated parties. Substantially all of the assets acquired in September 2019 and March 2020 consisted of in-process research and development, or IPR&D.
Substantially all of the assets acquired in September 2019 and March 2020 consisted of in-process research and development, or IPR&D.
All of these video products and SVRs are specified to our platforms through proprietary software. ◦ Alarm.com Smart Thermostats . Our Smart Thermostats combine elegant design, sophisticated cloud services and advanced energy management features. They were designed by our Building36 and device engineering teams to work in concert with other devices in the connected property.
Our Smart Thermostats combine elegant design, sophisticated cloud services and advanced energy management features. They were designed by our Building36 and device engineering teams to work in concert with other devices in the connected property.
Our OpenEye enterprise commercial video management solution complements the Alarm.com for Business platform and extends our market to address the unique requirements of large, enterprise commercial and national account customers such as universities, banks, national retail chains and property management companies.
OpenEye expands our market opportunity to address the unique requirements of large, enterprise commercial and national account customers such as universities, banks, national retail chains and property management companies.
Leveraging advanced algorithms, our Smarter Access Control solution intelligently learns the activity patterns of users and access points for single or multiple property installations, detects unexpected events and alerts the subscriber of the irregular activity. Alarm.com for Business subscribers can also use Smarter Access Control for COVID-19 contact tracing.
Leveraging advanced algorithms, our Smarter Access Control solution intelligently learns the activity patterns of users and access points for single or multiple property installations, detects unexpected events and alerts the subscriber of the irregular activity. 7 ◦ Cell Connector .
We expect competition to continue from existing competitors as well as potential new market entrants in the interactive security, video monitoring, intelligent automation and energy management markets.
Our Competition The market in which we participate for connected property solutions is fragmented, highly competitive and constantly evolving. We expect competition to continue from existing competitors as well as potential new market entrants in the interactive security, video monitoring, intelligent automation and energy management markets.
We offer high-quality support to our service providers via phone, web ticketing and email. With every interaction, our team is committed to exceptional customer satisfaction and industry-leading response times. We use a tiered structure to efficiently escalate and resolve issues of varying complexity and to scale our support organization as we grow.
With every interaction, our team is committed to exceptional customer satisfaction and industry-leading response times. We use a tiered structure to efficiently escalate and resolve issues of varying complexity and to scale our support organization as we grow. Our staff is multilingual and we continue to grow our language capabilities to support our international expansion.
Smarter business security powered by Alarm.com is supported by our authorized service provider partners from start to finish, with installation, configuration and technical support included.
Smarter business security powered by Alarm.com is supported by our authorized service provider partners from start to finish, with installation, configuration and technical support included. Our OpenEye subsidiary offers enterprise commercial video management solutions that complement the Alarm.com for Business platform.
With alerts about changes in behavior that can indicate emerging quality of life issues, family members and homecare and senior living providers can address issues before they escalate and deliver more efficient care.
Our technology intelligently monitors quality of life through a suite of connected sensors and devices, and delivers proactive insights into activities of daily living. With alerts about changes in behavior that can indicate emerging quality of life issues, family members and homecare and senior living providers can address issues before they escalate and deliver more efficient care.
The integration further unifies intrusion, access control and video solutions to offer a more intelligent and convenient way to manage and secure commercial properties. Shooter Detection Systems expands the platform capabilities we provide to the commercial security market. Our multi-sensor solution provides highly accurate indoor gunshot detection to help alert employees and the public against active shooter threats.
The integration further unifies intrusion, access control and video solutions to offer a more intelligent and convenient way to manage and secure commercial properties. Shooter Detection Systems, or SDS, expands the platform capabilities we provide to the commercial security market.
We regularly pioneer technical advances in this space, including the expansion of our deployment of security services hardware with 4G LTE and LTE CAT-M cellular network connections.
We offer cellular communications modules that are tightly integrated with security system control panels, sensors and other devices. We also offer fully integrated cellular gateways. We regularly pioneer technical advances in this space, including the expansion of our deployment of security services hardware with 4G LTE and LTE CAT-M cellular network connections.
The solution uses a dual-mode detection technology that combines acoustic sensors with specialized infrared flash detectors, in tandem with proprietary gunshot detection software algorithms to maximize detection without driving false positives.
Our multi-sensor solution provides highly accurate indoor gunshot detection to help alert employees, the public and emergency services about active shooter threats. The solution uses a dual-mode detection technology that combines acoustic sensors with specialized infrared flash detectors, in tandem with proprietary gunshot detection software algorithms to maximize detection without driving false positives.
This market includes the residential and commercial property owners who subscribe to our services, the hardware partners who manufacture devices that integrate with our platforms and the service provider partners who install and maintain our solutions.
Our Solutions and Integrated Platforms Our solutions are designed to make both residential and commercial properties safer, smarter and more efficient. Our technology platforms support property owners who subscribe to our services, the hardware partners who manufacture devices that integrate with our platforms and the service provider partners who install and maintain our solutions.
In addition to primary care, these additional remote healthcare benefits include physical therapy, mental health services and health coaching. We also provide free access to an app that promotes wellness through meditation and provides employees with hundreds of guided exercises for meditation, sleep, focus and movement.
We also provide free access to an app that promotes wellness through meditation and provides employees with hundreds of guided exercises for meditation, sleep, focus and movement.
We primarily support our service provider partners. Our service provider partners, in turn, support their customers, who are our subscribers. To that end, subscribers occasionally reach us directly with support needs and we either assist the subscriber directly or, when appropriate, route the subscriber to the appropriate service provider partner for additional assistance.
To that end, subscribers occasionally reach us directly with support needs and we either assist the subscriber directly or, when appropriate, route the subscriber to the appropriate service provider partner for additional assistance. 15 We offer high-quality support to our service providers via phone, chat, web ticketing and email.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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For the same reason, you should not consider our recent revenue growth and changes in Adjusted EBITDA or results of one quarter as indicative of our future performance. See the "Non-GAAP Measures" section of Item 7.
For the same reason, you should not consider our recent revenue growth and changes in non-GAAP adjusted EBITDA or results of one quarter as indicative of our future performance. See the "Non-GAAP Measures" section of Item 7.
If a malfunction or 27 security breach results in a wider or sustained disruption, it could have a material adverse effect on our reputation, business, financial condition, cash flows or results of operations. Failure to maintain the security of our information and technology networks, including information relating to our service provider partners, subscribers and employees, could adversely affect us.
If a malfunction or security breach results in a wider or sustained disruption, it could have a material adverse effect on our reputation, business, financial condition, cash flows or results of operations. 27 Failure to maintain the security of our information and technology networks, including information relating to our service provider partners, subscribers and employees, could adversely affect us.
As a result, our revenue could be reduced by: • any decline in demand for our connected property solutions; • the failure of our connected property solutions to achieve continued market acceptance; • the introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our connected property solutions; • technological innovations or new communications standards that our connected property solutions do not address; and • our inability to release enhanced versions of our connected property solutions on a timely basis.
As a result, our revenue could be reduced by: • any decline in demand for our connected property solutions; • the failure of our connected property solutions to achieve continued market acceptance; • the introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our connected property solutions; • technological innovations or new communications standards our connected property solutions do not address; and • our inability to release enhanced versions of our connected property solutions on a timely basis.
We are working with our suppliers to secure components and materials to account for the continued longer lead times and limited availability, but we cannot assure you that our efforts will be successful or that demand for our hardware products will continue at the same level.
We are working with our suppliers to secure components and materials to account for the continued longer lead times and limited availability, but we cannot assure you our efforts will be successful or that demand for our hardware products will continue at the same level.
Any failure on our part to comply with encryption or other applicable export control requirements could result in financial penalties or other sanctions under the U.S. export regulations, including restrictions on future export activities, which could harm our business and operating results.
Any failure on our part to comply with encryption or other applicable export control requirements could result in financial penalties or other sanctions under the U.S. export regulations, including restrictions on future export activities, which could harm our business and operating results.
We received proceeds from the issuance of the 2026 Notes of $484.3 million, net of $15.7 million of transaction fees and other debt issuance costs.
We received proceeds from the issuance of the 2026 Notes of $484.3 million, net of $15.7 million of transaction fees and other debt issuance costs.
The market price of our common stock may decline regardless of our operating performance, resulting in the potential for substantial losses for our stockholders, and may fluctuate significantly in response to numerous factors, many of which are beyond our control, including the factors listed below and other factors described in this "Risk Factors" section: • actual or anticipated fluctuations in our financial condition and operating results; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • ratings changes by any securities analysts who follow our company; • variance in our financial performance from expectations of securities analysts; • announcements by us or our competitors of significant business developments, technical innovations, acquisitions or new solutions; • changes in the prices of our platforms and solutions; • changes in our projected operating and financial results; • changes in laws or regulations applicable to our platforms and solutions or marketing techniques, or our industry in general; • our involvement in any litigation, including any lawsuits threatened or filed against us; • repurchases of our common stock under the stock repurchase program authorized by our board of directors or our sale of our common stock or other securities in the future; 46 • changes in senior management or key personnel; • trading volume of our common stock; • changes in the anticipated future size and growth rate of our market; and • general economic, regulatory and market conditions in the United States and abroad as well as the uncertainty resulting from current Macroeconomic Conditions.
The market price of our common stock may decline regardless of our operating performance, resulting in the potential for substantial losses for our stockholders, and may fluctuate significantly in response to numerous factors, many of which are beyond our control, including the factors listed below and other factors described in this "Risk Factors" section: • actual or anticipated fluctuations in our financial condition and operating results; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • ratings changes by any securities analysts who follow our company; • variance in our financial performance from expectations of securities analysts; • announcements by us or our competitors of significant business developments, technical innovations, acquisitions or new solutions; • changes in the prices of our platforms and solutions; • changes in our projected operating and financial results; • changes in laws or regulations applicable to our platforms and solutions or marketing techniques, or our industry in general; • our involvement in any litigation, including any lawsuits threatened or filed against us; • repurchases of our common stock under the stock repurchase program authorized by our board of directors or our sale of our common stock or other securities in the future; • changes in senior management or key personnel; • trading volume of our common stock; • changes in the anticipated future size and growth rate of our market; and • general economic, regulatory and market conditions in the United States and abroad as well as the uncertainty resulting from the current Macroeconomic Conditions.
These acquisitions and any other acquisitions we may complete in 34 the future will give rise to certain risks, including: • incurring higher than anticipated capital expenditures and operating expenses; • failing to assimilate and integrate the operations and personnel or failing to retain the key personnel of the acquired company or business; • failing to retain customers and service providers and other third-party business partners seeking to terminate or renegotiate their relationships with us; • failing to integrate the acquired technologies, or incurring significant expense to integrate acquired technologies into our platforms and solutions; • disrupting our ongoing business; • encountering complexities associated with managing a larger, more complex and growing business; • diverting our management’s attention and other company resources; • failing to maintain uniform standards, controls and policies; • incurring significant accounting charges; • impairing relationships with employees, service provider partners or subscribers; • finding that the acquired technology, asset or business does not further our business strategy, that we overpaid for the technology, asset or business or that we may be required to write off acquired assets or investments partially or entirely; • failing to realize the expected synergies of the transaction; • being exposed to unforeseen liabilities and contingencies that were not identified prior to acquiring the company; and • being unable to generate sufficient revenue and profits from acquisitions to offset the associated acquisition costs.
These acquisitions and any other acquisitions we may complete in the future will give rise to certain risks, including: • incurring higher than anticipated capital expenditures and operating expenses; • failing to assimilate and integrate the operations and personnel or failing to retain the key personnel of the acquired company or business; • failing to retain customers and service providers and other third-party business partners seeking to terminate or renegotiate their relationships with us; • failing to integrate the acquired technologies, or incurring significant expense to integrate acquired technologies into our platforms and solutions; • disrupting our ongoing business; • encountering complexities associated with managing a larger, more complex and growing business; • diverting our management’s attention and other company resources; • failing to maintain uniform standards, controls and policies; • incurring significant accounting charges; • impairing relationships with employees, service provider partners or subscribers; • finding that the acquired technology, asset or business does not further our business strategy, that we overpaid for the technology, asset or business or that we may be required to write off acquired assets or investments partially or entirely; • failing to realize the expected synergies of the transaction; • being exposed to unforeseen liabilities and contingencies that were not identified prior to acquiring the company; and • being unable to generate sufficient revenue and profits from acquisitions to offset the associated acquisition costs.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue preferred stock, without further stockholder action and with voting liquidation, dividend and other rights superior to our common stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent, and limit the ability of our stockholders to call special meetings; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for director nominees; and • provide that vacancies on our board of directors may be filled only by the vote of a majority of directors then in office, even though less than a quorum.
Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue preferred stock, without further stockholder action and with voting liquidation, dividend and other rights superior to our common stock; 48 • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent, and limit the ability of our stockholders to call special meetings; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for director nominees; and • provide that vacancies on our board of directors may be filled only by the vote of a majority of directors then in office, even though less than a quorum.
Our overall leverage and certain obligations contained in the related documentation could adversely affect our financial health and business and future operations by, among other things: • making it more difficult to satisfy our obligations, including under the terms of the 2026 Notes; • limiting our ability to refinance our debt on terms acceptable to us or at all; • limiting our flexibility to plan for and adjust to changing business and market conditions and increasing our vulnerability to general adverse economic and industry conditions; 38 • limiting our ability to use our available cash flow to fund future acquisitions, working capital, business activities, and other general corporate requirements; and • limiting our ability to obtain additional financing for working capital, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity.
Our overall leverage and certain obligations contained in the related documentation could adversely affect our financial health and business and future operations by, among other things: • making it more difficult to satisfy our obligations, including under the terms of the 2026 Notes; • limiting our ability to refinance our debt on terms acceptable to us or at all; • limiting our flexibility to plan for and adjust to changing business and market conditions and increasing our vulnerability to general adverse economic and industry conditions; • limiting our ability to use our available cash flow to fund future acquisitions, working capital, business activities, and other general corporate requirements; and • limiting our ability to obtain additional financing for working capital, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity.
Should EcoFactor prevail in either of its district court lawsuits we could be required to pay damages in the amount of EcoFactor’s lost profits and/or a reasonable royalty for sales of our solution, we could 44 be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us or we are unable to design around such patents, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.
Should EcoFactor prevail in either of its district court lawsuits we could be required to pay damages in the amount of EcoFactor’s lost profits and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us or we are unable to design around such patents, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.
If the market for connected home and commercial solutions grows more slowly than anticipated or if demand for connected home and commercial solutions does not grow as quickly as anticipated, whether as a result of competition, product obsolescence, technological change, unfavorable economic conditions, uncertain geopolitical environments, budgetary constraints of our consumers or other factors, we may not be able to continue to increase our revenue and earnings and our stock price would decline.
If the market for connected home and commercial solutions grows more slowly than anticipated or if demand for connected home and commercial solutions does not grow as quickly as anticipated, whether as a result of competition, product obsolescence, technological change, unfavorable economic conditions, uncertain geopolitical environments, budgetary 31 constraints of our consumers or other factors, we may not be able to continue to increase our revenue and earnings and our stock price would decline.
While the CJEU did not invalidate the use of SCCs as a valid mechanism for transferring personal data from the EEA to the United States, the CJEU required entities relying on SCCs to, among other things, verify on a case-by-case basis that the SCCs provide adequate protection of personal data under European Union, or EU, law by providing, where necessary, additional safeguards to those offered by the existing SCCs.
While the CJEU did not 36 invalidate the use of SCCs as a valid mechanism for transferring personal data from the EEA to the United States, the CJEU required entities relying on SCCs to, among other things, verify on a case-by-case basis that the SCCs provide adequate protection of personal data under European Union, or EU, law by providing, where necessary, additional safeguards to those offered by the existing SCCs.
In addition, there is a continued interest within the European Union, Canada and other jurisdictions to apply new taxes on companies participating in the digital economy. Such tax rule changes could materially and adversely affect our cash flows, deferred tax assets and financial results. 39 We may be subject to additional tax liabilities, which would harm our results of operations.
In addition, there is a continued interest within the European Union, Canada and other jurisdictions to apply new taxes on companies participating in the digital economy. Such tax rule changes could materially and adversely affect our cash flows, deferred tax assets and financial results. We may be subject to additional tax liabilities, which would harm our results of operations.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion that our internal control over financial reporting is effective, investors could lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, and we could be subject to sanctions or investigations by regulatory authorities, including the SEC and Nasdaq.
If we are unable to conclude our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion our internal control over financial reporting is effective, investors could lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, and we could be subject to sanctions or investigations by regulatory authorities, including the SEC and Nasdaq.
Fluctuations in our results of operations may be due to a number of factors, including: • the portion of our revenue attributable to SaaS and license versus hardware and other sales; • our ability to manage the businesses we have acquired, and to integrate and manage any future acquisitions of businesses; • fluctuations in demand, including due to seasonality or broader economic factors, for our platforms and solutions; • changes in pricing by us in response to competitive pricing actions; • our ability to increase, retain and incentivize the service provider partners that market, sell, install and support our platforms and solutions; • the ability of our hardware vendors to continue to manufacture high-quality products and to supply sufficient components and products to meet our demands; • the timing and success of introductions of new solutions, products or upgrades by us or our competitors and the entrance of new competitors; • changes in our business and pricing policies or those of our competitors; • the ability to accurately forecast revenue as we generally rely upon our service provider partner network to generate new revenue; • our ability to control costs, including our operating expenses and the costs of the hardware we purchase; 20 • changes in U.S. trade policies, including new or potential tariffs or penalties on imported products; • competition, including entry into the industry by new competitors and new offerings by existing competitors; • issues related to introductions of new or improved products such as supply chain disruptions or shortages of prior generation products or short-term decreased demand for next generation products; • perceived or actual problems with the security, privacy, integrity, reliability, quality or compatibility of our solutions, including those related to security breaches in our systems, our subscribers’ systems, unscheduled downtime, or outages; • the amount and timing of expenditures, including those related to expanding our operations, including through acquisitions, increasing research and development, introducing new solutions or paying litigation expenses; • the ability to effectively manage growth within existing and new markets domestically and abroad; • changes in the payment terms for our platforms and solutions; • collectibility of receivables due from service provider partners and other third parties; • the strength of regional, national and global economies; and • the impact of natural disasters such as earthquakes, hurricanes, fires, power outages, floods, epidemics, pandemics and public health crises, including COVID-19, and other catastrophic events or man-made problems such as terrorism, civil unrest and actual or threatened armed conflict, or global or regional economic, political and social conditions.
Fluctuations in our results of operations may be due to a number of factors, including: • the portion of our revenue attributable to SaaS and license versus hardware and other sales; • our ability to manage the businesses we have acquired, and to integrate and manage any future acquisitions of businesses; • fluctuations in demand, including due to seasonality or broader economic factors, for our platforms and solutions; • changes in pricing by us in response to competitive pricing actions; • our ability to increase, retain and incentivize the service provider partners that market, sell, install and support our platforms and solutions; • the ability of our hardware vendors to continue to manufacture high-quality products and to supply sufficient components and products to meet our demands; • the timing and success of introductions of new solutions, products or upgrades by us or our competitors and the entrance of new competitors; • changes in our business and pricing policies or those of our competitors; • the ability to accurately forecast revenue as we generally rely upon our service provider partner network to generate new revenue; • our ability to control costs, including our operating expenses and the costs of the hardware we purchase; 21 • changes in U.S. trade policies, including new or potential tariffs or penalties on imported products; • competition, including entry into the industry by new competitors and new offerings by existing competitors; • issues related to introductions of new or improved products such as supply chain disruptions or shortages of prior generation products or short-term decreased demand for next generation products; • perceived or actual problems with the security, privacy, integrity, reliability, quality or compatibility of our solutions, including those related to security breaches in our systems, our subscribers’ systems, unscheduled downtime, or outages; • the amount and timing of expenditures, including those related to expanding our operations, including through acquisitions, increasing research and development, introducing new solutions or paying litigation expenses; • the ability to effectively manage growth within existing and new markets domestically and abroad; • changes in the payment terms for our platforms and solutions; • collectibility of receivables due from service provider partners and other third parties; • the strength of regional, national and global economies; and • the impact of natural disasters such as earthquakes, hurricanes, fires, power outages, floods, epidemics, pandemics and public health crises, and other catastrophic events or man-made problems such as terrorism, civil unrest and actual or threatened armed conflict, or global or regional economic, political and social conditions.
Failure to remediate any material weakness in our internal control over financial reporting, or to maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. 47 If securities or industry analysts publish negative reports about our business, or cease coverage of our company, our share price and trading volume could decline.
Failure to remediate any material weakness in our internal control over financial reporting, or to maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. If securities or industry analysts publish negative reports about our business, or cease coverage of our company, our share price and trading volume could decline.
If we do not receive consumer information on a timely or accurate basis, or if we do not properly interpret this information, our ability to quickly react to market changes and effectively manage our business may be harmed. 30 Consumers may choose to adopt point products that provide control of discrete functions rather than adopting our connected property solutions.
If we do not receive consumer information on a timely or accurate basis, or if we do not properly interpret this information, our ability to quickly react to market changes and effectively manage our business may be harmed. Consumers may choose to adopt point products that provide control of discrete functions rather than adopting our connected property solutions.
While the global shortage of semiconductors used in our video, cellular communicator, and other products has eased, shortages of essential components of our products or significantly increased lead times for obtaining such components may lead to delays in our production, and we may be unable to fulfill orders for our hardware products on a timely basis or at all.
While the global shortage of semiconductors used in our video, cellular communicator, and other products has eased, shortages of 33 essential components of our products or significantly increased lead times for obtaining such components may lead to delays in our production, and we may be unable to fulfill orders for our hardware products on a timely basis or at all.
Regulatory restrictions could impair our access to technologies needed to improve our platforms and solutions and may also limit or reduce the demand for our platforms and solutions outside of the United States. 42 Enhanced United States tax, tariff, import/export restrictions, or other trade barriers may have an adverse impact on global economic conditions, financial markets and our business.
Regulatory restrictions could impair our access to technologies needed to improve our platforms and solutions and may also limit or reduce the demand for our platforms and solutions outside of the United States. Enhanced United States tax, tariff, import/export restrictions, or other trade barriers may have an adverse impact on global economic conditions, financial markets and our business.
Our SaaS and license revenue renewal rate is calculated across our entire subscriber base, including subscribers whose contract with their service provider reached the end of its contractual term during the measurement period, as well as subscribers whose contract with their service provider has not reached the end of its contractual 31 term during the measurement period, and is not intended to estimate the rate at which our subscribers renew their contracts with our service provider partners.
Our SaaS and license revenue renewal rate is calculated across our entire subscriber base, including subscribers whose contract with their service provider reached the end of its contractual term during the measurement period, as well as subscribers whose contract with their service provider has not reached the end of its contractual term during the measurement period, and is not intended to estimate the rate at which our subscribers renew their contracts with our service provider partners.
Furthermore, our 48 amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any claims arising under the Securities Act.
Furthermore, our amended and restated bylaws provide that unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any claims arising under the Securities Act.
State-level privacy and data security laws in California and various other U.S. states regulate our, and our service provider partners’, use, collection, and disclosure of subscribers’ personal information. A number of proposed privacy bills in 25 other U.S. states could place restrictions on how we and our service provider partners use personal information and market to consumers in those states.
State-level privacy and data security laws in California and various other U.S. states regulate our, and our service provider partners’, use, collection, and disclosure of subscribers’ personal information. A number of proposed privacy bills in other U.S. states could place restrictions on how we and our service provider partners use personal information and market to consumers in those states.
To the extent we do not successfully avoid or overcome the risks or problems related to any such acquisitions, or fail to manage the acquired business or execute our integration and growth strategy in an efficient and effective manner, our business, financial condition, cash flows and results of operations could be harmed.
To the extent we do not successfully avoid or overcome the risks or problems related to any such acquisitions, or fail to manage the acquired business or 35 execute our integration and growth strategy in an efficient and effective manner, our business, financial condition, cash flows and results of operations could be harmed.
In addition, we currently have a limited portfolio of issued patents compared to our larger competitors, and therefore may not be able to effectively utilize our intellectual property portfolio to assert defenses or counterclaims in response to patent infringement claims or litigation brought against us by third parties.
In addition, we currently have a 45 limited portfolio of issued patents compared to our larger competitors, and therefore may not be able to effectively utilize our intellectual property portfolio to assert defenses or counterclaims in response to patent infringement claims or litigation brought against us by third parties.
Additionally, Canary and other companies offer all in one video monitoring and awareness devices. In addition, we may compete with other large and small technology companies that offer control capabilities among their products, applications and services, and have ongoing development efforts to address the broader connected home market.
Additionally, Canary and other companies offer all in one video monitoring and awareness devices. In addition, 26 we may compete with other large and small technology companies that offer control capabilities among their products, applications and services, and have ongoing development efforts to address the broader connected home market.
We may change 32 aspects of our platforms and may utilize open source technology in the future, which may cause difficulties including compatibility, stability and time to market. The success of any enhanced or new product or solution will depend on several factors, including the timely completion and market acceptance of the enhanced or new product or solution.
We may change aspects of our platforms and may utilize open source technology in the future, which may cause difficulties including compatibility, stability and time to market. The success of any enhanced or new product or solution will depend on several factors, including the timely completion and market acceptance of the enhanced or new product or solution.
See “Evolving government and industry regulation and changes in applicable laws relating to the Internet and data privacy may increase our expenditures related to compliance efforts or otherwise limit the solutions we can offer, which may harm our business and adversely affect our financial condition” below.
See “Evolving government and industry regulation and changes in applicable laws relating to the Internet and data 25 privacy may increase our expenditures related to compliance efforts or otherwise limit the solutions we can offer, which may harm our business and adversely affect our financial condition” below.
In addition, changes in our platforms or solutions or changes in applicable export or import laws and regulations may create delays in the introduction and sale of our platforms and solutions in international markets, prevent our service provider partners with international operations from deploying our platforms and solutions or, in some cases, prevent the export or import of our platforms and solutions to certain countries, governments or persons altogether.
In addition, changes in our platforms or solutions or changes in applicable export or import laws and regulations may create delays in the introduction and sale of our platforms and solutions in international markets, prevent our service provider partners with international operations from deploying our platforms and 41 solutions or, in some cases, prevent the export or import of our platforms and solutions to certain countries, governments or persons altogether.
Significant judgments, assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, stock-based compensation, business combinations, and income taxes. Risks Related to Our Intellectual Property If we fail to protect our intellectual property and proprietary rights adequately, our business could be harmed.
Significant judgments, assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, stock-based compensation, business combinations, and income taxes. 44 Risks Related to Our Intellectual Property If we fail to protect our intellectual property and proprietary rights adequately, our business could be harmed.
Amazon.com offers Amazon Home Services security packages with bundled equipment and professional installation, and Amazon Key, a security camera and smart lock integration feature. Ring Inc., owned by Amazon.com, offers a connected video 26 doorbell, video cameras and an integrated security system, Ring Alarm. Samsung's SmartThings offers a security system and a home automation and awareness hub.
Amazon.com offers Amazon Home Services security packages with bundled equipment and professional installation, and Amazon Key, a security camera and smart lock integration feature. Ring Inc., owned by Amazon.com, offers a connected video doorbell, video cameras and an integrated security system, Ring Alarm. Samsung's SmartThings offers a security system and a home automation and awareness hub.
During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective and would be required to disclose any material weaknesses identified in Management’s Report on Internal Control over Financial Reporting.
During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert our internal controls are effective and would be required to disclose any material weaknesses identified in Management’s Report on Internal Control over Financial Reporting.
We anticipate that our efforts to operate and continue to expand our business internationally will entail additional costs and risks as we establish our international offerings and develop relationships with service provider partners to market, sell, install, and support our platforms, solutions and brand in other countries.
We anticipate our efforts to operate and continue to expand our business internationally will entail additional costs and risks as we establish our international offerings and develop relationships with service provider partners to market, sell, install, and support our platforms, solutions and brand in other countries.
Trade barriers, or the perception that any of them could be imposed, may have a negative effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between these nations and the United States.
Trade barriers, or the perception that any of them could be imposed, may 43 have a negative effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between these nations and the United States.
This could harm our intellectual property position as well as our business, financial condition, cash flows and results of operations. Risks Related to Ownership of Our Common Stock The market price of our common stock has been and will likely continue to be volatile.
This could harm our intellectual property position as well as our business, financial condition, cash flows and results of operations. 46 Risks Related to Ownership of Our Common Stock The market price of our common stock has been and will likely continue to be volatile.
These risks include: • localization of our solutions, including the addition of foreign languages and adaptation to new local practices, as well as certification, registration and other regulatory requirements; • lack of experience in other geographic markets; • strong local competitors; • the cost and burden of complying with, lack of familiarity with, and unexpected changes in, foreign legal and regulatory requirements, including the development of policies and procedures for different countries when requirements under privacy regulations in such countries may conflict or be inconsistent with one another; • difficulties in managing and staffing international operations; • increased costs due to new or potential tariffs, penalties, trade restrictions and other trade barriers, which may increase our cost of hardware revenue and reduce our hardware revenue margins in the future; • fluctuations in currency exchange rates or restrictions on foreign currency; • potentially adverse tax consequences, including the complexities of transfer pricing, value added or other tax systems, double taxation and restrictions and/or taxes on the repatriation of earnings; • dependence on third parties, including commercial partners with whom we do not have extensive experience; • increased financial accounting and reporting burdens and complexities; • political, social, and economic instability, such as the ongoing military conflict between Russia and Ukraine, terrorist attacks, and security concerns in general; and • reduced or varied protection for intellectual property rights in some countries.
These risks include: • localization of our solutions, including the addition of foreign languages and adaptation to new local practices, as well as certification, registration and other regulatory requirements; 42 • lack of experience in other geographic markets; • strong local competitors; • the cost and burden of complying with, lack of familiarity with, and unexpected changes in, foreign legal and regulatory requirements, including the development of policies and procedures for different countries when requirements under privacy regulations in such countries may conflict or be inconsistent with one another; • difficulties in managing and staffing international operations; • increased costs due to new or potential tariffs, penalties, trade restrictions and other trade barriers, which may increase our cost of hardware revenue and reduce our hardware revenue margins in the future; • fluctuations in currency exchange rates or restrictions on foreign currency; • potentially adverse tax consequences, including the complexities of transfer pricing, value added or other tax systems, double taxation and restrictions and/or taxes on the repatriation of earnings; • dependence on third parties, including commercial partners with whom we do not have extensive experience; • increased financial accounting and reporting burdens and complexities; • political, social, and economic instability, such as the ongoing military conflict between Russia and Ukraine and the war between Israel and Hamas, terrorist attacks, and security concerns in general; and • reduced or varied protection for intellectual property rights in some countries.
Subscribers may choose not to renew their contracts for many reasons, including the belief that our service is not required for their needs or is otherwise not cost-effective, a desire to reduce discretionary spending, or a belief that our competitors’ services provide better value.
Subscribers may choose not to renew their contracts for many reasons, including the belief our service is not required for their needs or is otherwise not cost-effective, a desire to reduce discretionary spending, or a belief our competitors’ services provide better value.
Treasury Department’s Office of Foreign Assets Controls. Exports of our platforms and solutions must be made in compliance with these laws and regulations. We may also be subject to import/export laws and 40 regulations in other jurisdictions in which we conduct business.
Treasury Department’s Office of Foreign Assets Controls. Exports of our platforms and solutions must be made in compliance with these laws and regulations. We may also be subject to import/export laws and regulations in other jurisdictions in which we conduct business.
In some cases, 29 these contracts provide the service provider partner with the right to terminate prior to the expiration of the term without cause upon 30 days written notice, or, in the case of certain termination events, the right to terminate the contract immediately.
In some cases, these contracts provide the service provider partner with the right to terminate prior to the expiration of the term without cause upon 30 days written notice, or, in the case of certain termination events, the right to terminate the contract immediately.
Given that our platforms and solutions integrate with many aspects of a property, the risk that our platforms and solutions may be subject to these allegations is exacerbated. As we seek to extend our platforms and solutions, we could be constrained by the intellectual property rights of others.
Given our platforms and solutions integrate with many aspects of a property, the risk our platforms and solutions may be subject to these allegations is exacerbated. As we seek to extend our platforms and solutions, we could be constrained by the intellectual property rights of others.
For example, certain cellular carriers have shut down their 3G and CDMA wireless networks in 2022 which required our subscribers to upgrade to alternative and potentially more expensive technologies. See “The technology we employ may become obsolete and we may need to incur significant capital expenditures to update our technology” below.
For example, certain cellular carriers shut down their 3G and CDMA wireless networks in 2022 which required our subscribers to upgrade to alternative and potentially 32 more expensive technologies. See “The technology we employ may become obsolete and we may need to incur significant capital expenditures to update our technology” below.
Further worsening, broadening or protracted extension of the economic downturn could have a negative impact on our business, revenue, results of operations and cash flows. 21 We sell security and life safety solutions and if our solutions fail for any reason, we could be subject to liability and our business could suffer.
Further worsening, broadening or protracted extension of the economic downturn could have a negative impact on our business, revenue, results of operations and cash flows. 22 We sell security and life safety solutions and if our solutions fail for any reason, we could be subject to liability and our business could suffer.
Negative Macroeconomic Conditions in the general economy both in the United States and abroad, including conditions resulting from the COVID-19 pandemic, inflation, changes in gross domestic product growth, financial and credit market fluctuations, energy costs, international trade relations and other geopolitical tensions, the availability and cost of credit, rising interest rates and the global housing and mortgage markets could cause a decrease in consumer discretionary spending and business investment and diminish growth expectations in the U.S. economy and abroad.
Negative Macroeconomic Conditions in the general economy both in the United States and abroad, including conditions resulting from inflation, changes in gross domestic product growth, financial and credit market fluctuations, energy costs, international trade relations and other geopolitical tensions, the availability and cost of credit, rising interest rates and the global housing and mortgage markets could cause a decrease in consumer discretionary spending and business investment and diminish growth expectations in the U.S. economy and abroad.
In addition, the existence of the 2026 Notes may encourage short selling by market participants because the conversion of the 2026 Notes could be used to satisfy short positions, or anticipated conversion of the 2026 Notes into shares of our common stock could depress the price of our common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 49
In addition, the existence of the 2026 Notes may encourage short selling by market participants because the conversion of the 2026 Notes could be used to satisfy short positions, or anticipated conversion of the 2026 Notes into shares of our common stock could depress the price of our common stock. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 50
Investors should also recognize that the reliability of any forecasted financial data will diminish the farther in the future that the data is forecasted. Actual operating results may be different from our guidance, and such differences may be adverse and material.
Actual results will vary from the guidance and the variations may be material. Investors should also recognize that the reliability of any forecasted financial data will diminish the farther in the future that the data is forecasted. Actual operating results may be different from our guidance, and such differences may be adverse and material.
A significant natural disaster, such as an earthquake, hurricane, fire, flood, pandemic, or a public health crisis, such as COVID-19, or a significant power outage could harm our business, financial condition, cash flows and results of operations.
A significant natural disaster, such as an earthquake, hurricane, fire, flood, pandemic, or a public health crisis, or a significant power outage could harm our business, financial condition, cash flows and results of operations.
The CCPA, as well as data privacy laws that have been adopted or proposed in other states such as Virginia, Colorado, Connecticut and Utah, may limit our ability to use, process and store certain data, which may decrease adoption of our platforms and solutions, affect our relationships with service provider partners and our suppliers, increase our costs for compliance, and harm our business, financial condition, cash flows and results of operations.
The CCPA, as well as data privacy laws that have been adopted or proposed in over a dozen other states such as Virginia, Colorado, Connecticut, Texas and Utah, may limit our ability to use, process and store certain data, which may decrease adoption of our platforms and solutions, affect our relationships with service provider partners and our suppliers, increase our costs for compliance, and harm our business, financial condition, cash flows and results of operations.
Under the terms of the license, beginning in 2023, ADT will pay us a monthly royalty for each subscriber to its branded residential interactive security, automation and video service offerings that is covered by any of our licensed patents and not supported on our platforms.
Under the terms of the license, ADT will pay us a monthly royalty for each subscriber to its branded residential interactive security, automation and video service offerings that is covered by any of our licensed patents and not supported on our platforms.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA from net income, the most directly comparable GAAP measurement, for the years ended December 31, 2022, 2021 and 2020.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the limitations of non-GAAP adjusted EBITDA and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measurement, for the years ended December 31, 2023, 2022 and 2021.
Risks of liability from our operations are significant. The nature of the solutions we provide, including our interactive security solutions, and new technologies and companies we may acquire, potentially exposes us to greater risks of liability for data privacy and security, employee acts or omissions, or technology or system failure than may be inherent in other businesses.
The nature of the solutions we provide, including our interactive security solutions, and new technologies and companies we may acquire, potentially exposes us to greater risks of liability for data privacy and security, employee acts or omissions, or technology or system failure than may be inherent in other businesses.
During the years ended December 31, 2022, 2021 and 2020, our 10 largest revenue service provider partners or distributors accounted for 49%, 47% and 48% of our revenue, respectively. ADT LLC, or ADT, represented greater than 15% but not more than 20% of our revenue in 2022, 2021 and 2020.
During the years ended December 31, 2023, 2022 and 2021, our 10 largest revenue service provider partners or distributors accounted for 50%, 49% and 47% of our revenue, respectively. ADT LLC, or ADT, represented greater than 15% but not more than 20% of our revenue in 2023, 2022 and 2021.
The situation remains uncertain, and while it is difficult to predict the full impact of any of the foregoing, the conflict and actions taken in response to the conflict could increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.
The situations remain uncertain, and while it is difficult to predict the full impact of any of the foregoing, the conflicts and actions taken in response to the conflicts could increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.
Impairment may result from, among other things, deterioration in performance, adverse market conditions, including adverse market conditions arising from the COVID-19 pandemic and geopolitical tensions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the solutions we offer, challenges to the validity of certain registered intellectual property, reduced sales of certain products or services incorporating registered intellectual property, increased attrition and a variety of other factors.
Impairment may result from, among other things, deterioration in performance, adverse market conditions, including adverse market conditions arising from the Macroeconomic Conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the solutions we offer, challenges to the validity of certain registered intellectual property, reduced sales of certain products or services incorporating registered intellectual property, increased attrition and a variety of other factors.
Several foreign jurisdictions in which we do business, including the European Union and the United Kingdom, have adopted legislation (including directives or regulations) that is more rigorous governing data collection and storage than in the United States.
Several foreign jurisdictions in which we do business, including the European Union, the United Kingdom, Canada and Argentina, among others, have adopted legislation (including directives or regulations) that is more rigorous governing data collection and storage than in the United States.
If our suppliers are unable to continue to provide agreed upon supply, we could experience interruptions in delivery of our platforms and solutions to our 33 service provider partners, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
If our suppliers or technology providers are unable to continue to provide agreed upon supply or services, we could experience interruptions in delivery of our platforms and solutions to our service provider partners, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We used some of the proceeds to repay the $110.0 million outstanding principal balance under our 2017 Facility and also used some of the proceeds to pay accrued interest, fees and expenses related to the 2017 Facility. We terminated the 2017 Facility effective January 20, 2021.
We used some of the proceeds to repay the $110.0 million outstanding principal balance under our credit facility and also used some of the proceeds to pay accrued interest, fees and expenses related to our credit facility, which was terminated effective January 20, 2021.
Revenue in countries outside of North America accounted for 4%, 3% and 3% of our total revenue for the years ended December 31, 2022, 2021 and 2020, respectively.
Revenue in countries outside of North America accounted for 4%, 4% and 3% of our total revenue for the years ended December 31, 2023, 2022 and 2021.
If we are unsuccessful in developing and marketing our platforms and solutions into new markets, or if consumers do not perceive or value the benefits of our platforms and solutions, the market for our platforms and solutions might not continue to develop or might develop more slowly than we expect, either of which would harm our revenue and growth prospects.
If we are unsuccessful in developing and marketing our platforms and solutions into new markets, or if consumers do not perceive or value the benefits of our platforms and solutions, the market for our platforms and solutions might not continue to develop or might develop more slowly than we expect, either of which would harm our revenue and growth prospects. 34 Risks of liability from our operations are significant.
Qualified individuals are in high demand, and we may incur significant costs to attract them. In addition, the loss of any of our senior management or key personnel, including as a result of the COVID-19 pandemic, could interrupt our ability to execute our business plan, as such individuals may be difficult to replace.
Qualified individuals are in high demand, and we may incur significant costs to attract them. In addition, the loss of any of our senior management or key personnel could interrupt our ability to execute our business plan, as such individuals may be difficult to replace.
We sell our solutions through service provider partners. These service provider partners work with consumers to design, install, update and maintain their connected home and commercial installations and manage the relationship with our subscribers.
These service provider partners work with consumers to design, install, update and maintain their connected home and commercial installations and manage the relationship with our subscribers.
Goodwill and other identifiable intangible assets represent a significant portion of our total assets, and we may never realize the full value of our intangible assets. As of December 31, 2022, we had $230.6 million of goodwill and identifiable intangible assets. Goodwill and other identifiable intangible assets are recorded at fair value on the date of acquisition.
Goodwill and other identifiable intangible assets represent a significant portion of our total assets, and we may never realize the full value of our intangible assets. As of December 31, 2023, we had $233.1 million of goodwill and identifiable intangible assets. Goodwill and other identifiable intangible assets are recorded at fair value on the date of acquisition.
Under the terms of this arrangement, Vivint has transitioned from selling our solutions directly to its customers to selling its own home automation product to its new customers.
Under the terms of this and subsequent arrangements, Vivint has transitioned from selling our solutions directly to its customers to selling its own home automation product to its new customers.
However, various factors are causing our accounting to become complex. Ongoing evolution of our business, and the COVID-19 pandemic and resulting uncertainty have, and any future acquisitions may, compound these complexities.
However, various factors are causing our accounting to become complex. Ongoing evolution of our business, and the Macroeconomic Conditions and resulting uncertainty have, and any future acquisitions may, compound these complexities.
Enforcement actions and sanctions could further harm our business, financial condition, cash flows and results of operations. 41 We face many risks associated with our international business operations and our plans to expand internationally, which could harm our business, financial condition, cash flows and results of operations.
We face many risks associated with our international business operations and our plans to expand internationally, which could harm our business, financial condition, cash flows and results of operations.
If we fail to manage the expansion of our operations and infrastructure effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately. We increased our number of full-time employees from 1,160 as of December 31, 2019 to 1,733 as of December 31, 2022.
If we fail to manage the expansion of our operations and infrastructure effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately. We increased our number of full-time employees from 1,404 as of December 31, 2020 to 1,989 as of December 31, 2023.
Current economic and political considerations make additional tax rules in the United States and other applicable jurisdictions subject to significant change, and changes in applicable tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect our income tax expense and profitability.
Both provisions became effective on January 1, 2023. Current economic and political considerations make additional tax rules in the United States and other applicable jurisdictions subject to significant change, and changes in applicable tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect our income tax expense and profitability.
We believe that our proprietary technology is essential to establishing and maintaining our leadership position. We seek to protect our intellectual property through trade secrets, copyrights, confidentiality, non-compete and nondisclosure agreements, patents, trademarks, domain names and other measures, some of which afford only limited protection.
We believe our proprietary technology is essential to establishing and maintaining our leadership position. We seek to protect our intellectual property through trade secrets, copyrights, confidentiality, non-compete and nondisclosure agreements, patents, trademarks, domain names and other measures, some of which afford only limited protection. We also rely on patent, trademark, trade secret and copyright laws to protect our intellectual property.
In the event a consumer decides to evaluate a new home automation, security monitoring, video monitoring, energy management, or wellness solution, the consumer may be more inclined to select one of our competitors whose product offerings are broader than those that we offer.
In the event a consumer decides to evaluate a new home automation, security monitoring, video monitoring, energy management, or wellness solution, the consumer may be more inclined to select one of our competitors whose product offerings are broader than those that we offer. In addition, consumers may prefer to purchase products that they can install themselves.
We have been involved with patent litigation suits in the past and we may be involved with and subject to similar litigation in the future to defend our intellectual property position. For example, on June 2, 2015, Vivint filed a lawsuit against us in U.S.
We have been involved with patent litigation suits in the past and we may be involved with and subject to similar litigation in the future to defend our intellectual property position. For example, on January 10, 2022, EcoFactor filed a lawsuit against us in U.S.
Further, as disclosed under “Item 3 – Legal Proceedings,” Vivint, Inc., or Vivint, has stopped paying license fees to Alarm.com under its Patent Cross License Agreement with us, which is having a material adverse effect upon our business, financial condition and results of operations and is causing our results of operations to fluctuate.
Further, as disclosed under “Item 3 – Legal Proceedings,” Vivint, Inc., or Vivint, had stopped paying license fees to Alarm.com under its Patent Cross License Agreement with us, which had a material adverse effect upon our business, financial condition and results of operations and caused our results of operations to fluctuate through December 31, 2023.
While we have developed a network of over 11,000 service provider partners as of December 31, 2022 to sell, install and support our platforms and solutions, we receive a substantial portion of our revenue from a limited number of channel partners and significant customers.
While we have developed a network of service provider partners to sell, install and support our platforms and solutions, we receive a substantial portion of our revenue from a limited number of channel partners and significant customers.
For example, on September 23, 2022, we acquired 85% of the issued and outstanding shares of capital stock of Noonlight, Inc., on October 21, 2019 , we acquired 85% of the issued and outstanding shares of capital stock of PC Open Incorporated, doing business as OpenEye, and on December 14, 2020 , we acquired Shooter Detection Systems, LLC.
For example, on April 21, 2023, we acquired certain assets of Vintra, on January 18, 2023, we acquired 100% of the issued and outstanding shares of capital stock of EBS, on September 23, 2022, we acquired 85% of the issued and outstanding shares of capital stock of Noonlight, Inc., on October 21, 2019 , we acquired 85% of the issued and outstanding shares of capital stock of PC Open Incorporated, doing business as OpenEye, and on December 14, 2020 , we acquired Shooter Detection Systems, LLC.
We have several large hardware suppliers from which we procure hardware on a purchase order basis, including three key suppliers that supplied products and components of our inventory which collectively represented 60% of our hardware revenue for the year ended December 31, 2022 (35%, 19% and 6% of hardware revenue, respectively).
We have several large hardware suppliers from which we procure hardware on a purchase order basis, including three key suppliers that supplied products and components of our inventory which collectively represented 45% of our hardware revenue for the year ended December 31, 2023 (21%, 13% and 11% of hardware revenue, respectively).
Privacy Shield to adopting, implementing and complying with the new SCCs may slow down our contracting process and increase our legal and compliance costs (including an increase in exposure to substantial fines under EEA data protection laws, increasing requests from our customers for compliance-related product changes, as well as injunctions against processing or transferring personal data from the EEA), which could adversely affect our cash flows and 36 financial condition.
Our work adopting, implementing and complying with the changing legal landscape governing international data transfers slows down our contracting process and increases our legal and compliance costs (including an increase in exposure to substantial fines under EEA data protection laws, increasing requests from our customers for compliance-related product changes, as well as injunctions against processing or transferring personal data from the EEA), which could adversely affect our cash flows and financial condition.
Moreover, some holders of shares of our common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders. We have also registered shares of common stock that we may issue under our employee equity incentive plans.
Moreover, some holders of shares of our common 47 stock have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders.
In the event of a breach of PHI that we hold, we may be subject to governmental fines, individual claims under state privacy laws governing personal health information, remediation expenses and/or harm to our reputation.
In the event of a breach of PHI that we hold, we may be subject to governmental fines, individual claims under state privacy laws governing personal health information, remediation expenses and/or harm to our reputation. The use of health-related data is coming under increasing regulatory scrutiny in other ways.
If our accounting is erroneous or based on assumptions that change or prove to be incorrect, our operating results could fall below the expectations of securities analysts and investors, resulting in a decline in our stock price.
Our accounting is becoming more complex, and relies upon estimates or judgments relating to our critical accounting policies. If our accounting is erroneous or based on assumptions that change or prove to be incorrect, our operating results could fall below the expectations of securities analysts and investors, resulting in a decline in our stock price.
See the section of this Annual Report titled "Legal Proceedings" for additional information regarding this matter and the other legal proceedings we are involved in. 45 The use of open source software in our platforms and solutions may expose us to additional risks and harm our intellectual property.
If we do not succeed in disputing it, we could face substantial liability. See the section of this Annual Report titled "Legal Proceedings" for additional information regarding this matter and the other legal proceedings we are involved in. The use of open source software in our platforms and solutions may expose us to additional risks and harm our intellectual property.
Our financial results may be adversely affected by changes in accounting principles applicable to us. Our accounting policies are critical to the manner in which we present our results of operations and financial condition. Many of these policies are highly complex and involve many assumptions, estimates and judgments.
Our accounting policies are critical to the manner in which we present our results of operations and financial condition. Many of these policies are highly complex and involve many assumptions, estimates and judgments.
Implementation of new accounting standards could have a significant effect on our financial results, and any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us. 43 Our accounting is becoming more complex, and relies upon estimates or judgments relating to our critical accounting policies.
Implementation of new accounting standards could have a significant effect on our financial results, and any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

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Item 2. Properties

Properties — owned and leased real estate

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We also own a commercial building located in Liberty Lake, Washington. These facilities are used for sales and training, research and development, technical support, warehousing and administrative purposes.
These facilities are used for sales and training, research and development, technical support, warehousing and administrative purposes.
ITEM 2. PROPERTIES Our Facilities Our principal office is located in Tysons, Virginia, where we currently occupy 189,881 square feet of commercial space under a lease we entered into in August 2014 which expires in 2026. We previously amended our lease to expand our square footage as we continued to grow.
As of December 31, 2023, we occupied 189,058 square feet of commercial space in our principal office under a lease we entered into in August 2014 that is scheduled to expire in 2026. This lease agreement has been periodically amended to expand our square footage as we have continued to grow.
Our Alarm.com segment uses this facility for sales and marketing, research and development, customer service and administrative purposes. Our Alarm.com segment leases offices in Bloomington, Minnesota and Redwood City, California as well as in other locations. Our Other segment leases an office in Brooklyn, New York as well as in other locations.
Our Alarm.com segment also leases offices in Bloomington, Minnesota; Boston, Massachusetts; and Redwood City, California as well as in other locations. Our Other segment leases an office in Brooklyn, New York as well as in other locations. Our Alarm.com segment owns a commercial building located in Liberty Lake, Washington as well as buildings in other locations.
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ITEM 2. PROPERTIES Our Facilities Our principal office is located in Tysons, Virginia and is used by our Alarm.com segment for sales and marketing, research and development, customer service and administrative purposes.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Should EcoFactor prevail in its lawsuit we could be required to pay damages and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such 50 elements is not made available to us, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.
Should EcoFactor prevail in its lawsuit we could be required to pay damages and/or a reasonable royalty for sales of our solution, we could be enjoined from making, using and selling our solution if a license or other right to continue selling such elements is not made available to us, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.
On August 27, 2021, the ITC instituted an investigation into Causam’s allegations naming Alarm.com Incorporated, Alarm.com Holdings, Inc., EnergyHub Inc. and others as respondents. We answered the complaint on October 4, 2021. Among other things, we asserted defenses based on non-infringement and invalidity of the patents in question.
On August 27, 2021, the ITC instituted an investigation into Causam’s allegations naming Alarm.com Incorporated, Alarm.com Holdings, Inc., EnergyHub Inc. and others as respondents. We answered the complaint on October 4, 2021. Among other things, 52 we asserted defenses based on non-infringement and invalidity of the patents in question.
For a description of our legal proceedings, see Note 13 to our consolidated financial statements for additional information. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 51 PART II.
For a description of our legal proceedings, see Note 13 to our consolidated financial statements for additional information. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 53 PART II.
In addition to the matters described above, we may be required to provide indemnification to certain of our service provider partners for certain claims regarding our solutions. For example, we are incurring costs associated with the indemnification of our service provider ADT, LLC in ongoing patent infringement suits.
In addition to the matters described above, we may be required to provide indemnification to certain of our service provider partners for certain claims regarding our solutions. For example, we incurred costs associated with the indemnification of our service provider ADT, LLC.
Further related to Vivint, on October 27, 2022, we filed a demand for arbitration of a dispute arising under the Patent Cross License Agreement between Alarm.com and Vivint executed in November 2013. Vivint has stopped paying license fees to Alarm.com under the agreement. Vivint has paid the required license fees to Alarm.com since the agreement was executed in November 2013.
On October 27, 2022, we filed a demand for arbitration of a dispute arising under the Patent Cross License Agreement between Alarm.com and Vivint executed in November 2013. Vivint had stopped paying license fees to Alarm.com under the agreement.
An evidentiary hearing in the investigation was held from June 28, 2022 through July 1, 2022. On February 16, 2023, the ITC issued a final decision in favor of Alarm.com and EnergyHub. Causam has until April 17, 2023 to file an appeal of the decision in federal court.
An evidentiary hearing in the investigation was held from June 28, 2022 through July 1, 2022. On February 16, 2023, the ITC issued a final decision in favor of Alarm.com and EnergyHub. Causam filed an appeal of the ITC decision on April 14, 2023. Causam did not appeal the ITC decision with respect to Alarm.com and EnergyHub.
ITEM 3. LEGAL PROCEEDINGS On June 2, 2015, Vivint, Inc., or Vivint, filed a lawsuit against us in U.S. District Court, District of Utah, alleging that our technology directly and indirectly infringes six patents that Vivint purchased. Vivint is seeking permanent injunctions, enhanced damages and attorneys' fees. We answered the complaint on July 23, 2015.
ITEM 3. LEGAL PROCEEDINGS On June 2, 2015, Vivint, Inc., or Vivint, filed a lawsuit against us in U.S. District Court, District of Utah, alleging that our technology directly and indirectly infringes six patents that Vivint purchased.
Should Vivint prevail on the claims that one or more elements of ADT’s products infringe, we could be required to indemnify ADT for damages in the form of a reasonable royalty or ADT could be enjoined from making, using and selling our solution if a license or other right to continue selling our technology is not made available or we are unable to design around such patents, and required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.
CSG could be enjoined from making, using, and selling our solution if a license or other right to continue selling our technology is not made available or if we are unable to design around such patents, and we could be required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.
Also on April 18, 2022, the district court stayed the case at the request of the parties pending the disposition of other proceedings involving the asserted patents, including the reexamination proceedings.
On April 18, 2022, the district court stayed the case at the request of the parties pending the disposition of PTAB and other proceedings involving the asserted patents, and the parties filed a joint status report on January 2, 2024.
As a result of Vivint’s refusal to pay license fees under the agreement, which began during the fourth quarter of 2022, SaaS and license revenue and total revenue will decrease by approximately $6.0 million on a quarterly basis. We also believe that quarterly earnings and cash flow will be impacted by the aforementioned $6.0 million estimate, plus additional legal fees.
As a result of Vivint’s refusal to pay license fees under the agreement, which began during the fourth quarter of 2022, SaaS and license revenue and total revenue through December 31, 2023 were lower by approximately $6.0 million on a quarterly basis.
On January 10, 2022, EcoFactor, Inc., or EcoFactor, filed a lawsuit against us in U.S. District Court, District of Oregon, alleging Alarm.com’s products and services directly and indirectly infringe five U.S. patents owned by EcoFactor. EcoFactor is seeking permanent injunctions, enhanced damages and attorneys' fees.
District Court, District of Oregon, alleging Alarm.com’s products and services directly and indirectly infringe five U.S. patents owned by EcoFactor. EcoFactor is seeking a permanent injunction, enhanced damages and attorneys' fees. EcoFactor had previously asserted two of the same patents against us in an October 2019 complaint with the U.S. International Trade Commission, or ITC.
We moved to dismiss the case for failure to state a claim on March 28, 2022. EcoFactor had previously asserted two of the same patents against us in an October 2019 complaint with the U.S. International Trade Commission, or ITC. In July 2021, the ITC found in favor of Alarm.com.
In July 2021, the ITC found in favor of Alarm.com. EcoFactor appealed the decision but withdrew its appeal in December 2021. We moved to dismiss the Oregon case for failure to state a claim on March 28, 2022.
The outcome of these legal claims cannot be predicted with certainty. Further, on November 4, 2022 and January 13, 2023, IOT Innovations LLC sued our service provider Monitronics International, Inc. d/b/a Brinks in U.S. District Court, Eastern District of Texas, alleging patent infringement of certain products and services sold by Monitronics.
On November 4, 2022, January 13, 2023 and April 18, 2023, IOT Innovations LLC, or IOT, sued Monitronics in U.S. District Court, Eastern District of Texas, alleging patent infringement of certain products and services sold by Monitronics. Together, IOT asserted infringement of 26 patents and sought permanent injunctions, enhanced damages and attorneys' fees.
EcoFactor appealed the decision but withdrew its appeal in December 2021. Two of the other three asserted patents are currently in ex parte reexamination proceedings at the PTO, and all claims of the third were found unpatentable by the PTAB in inter partes review on April 18, 2022.
Three of the asserted patents are in ex parte reexamination proceedings at the PTO, and ex parte reexamination of a fourth patent concluded on August 23, 2023 after the claims were amended. On April 18, 2022, all claims of a fifth patent were found unpatentable by the U.S.
Should Vivint prevail in proving Alarm.com infringes one or more of its patent claims, we could be required to pay damages of Vivint’s lost profits and/or a reasonable royalty for sales of our solution. Since all remaining patent claims in the litigation have expired, Vivint shall not be entitled to injunctive relief as a remedy in this matter.
Should Ubiquitous prevail on its infringement claims, we could be required to indemnify CSG for damages in the form of a reasonable royalty or of Ubiquitous’s lost profits.
Removed
Among other things, we asserted defenses based on non-infringement and invalidity of the patents in question. In 2017 and 2019, the U.S. Patent Trial and Appeal Board, or PTAB, issued final written decisions in inter partes reviews finding all or some of the claims in five of the asserted patents unpatentable. These decisions were affirmed on appeal.
Added
Quarterly earnings and cash flow through December 31, 2023 were also impacted by the aforementioned $6.0 million, plus additional legal fees. We also filed a lawsuit against Vivint on January 4, 2023 in U.S. District Court, Eastern District of Texas, alleging that Vivint infringed 15 of our patents.
Removed
Discovery closed on October 29, 2021. Vivint has moved for partial summary judgment and Alarm.com has moved for summary judgment; both motions are pending decision. Vivint has also moved to assert previously abandoned claims from two of the patents in a new proceeding. We have opposed the motion. No trial date has been set.
Added
On March 8, 2023, Vivint filed counterclaims in the action alleging that Alarm.com’s products and services directly and indirectly infringed 14 patents owned by Vivint. Most of Vivint’s counterclaims also named our service provider ADT LLC as a defendant.
Removed
While we believe we have valid defenses to Vivint’s claims, any of these outcomes could result in a material adverse effect on our business.
Added
On December 21, 2023, Alarm.com and Vivint agreed to settle all outstanding litigation between the parties and to enter into a long-term intellectual property license agreement under which Alarm.com will license to Vivint its intellectual property portfolio. On January 10, 2022, EcoFactor, Inc., or EcoFactor, filed a lawsuit against us in U.S.
Removed
Even if we were to prevail, this litigation could continue to be costly and time-consuming, divert the attention of our management and key personnel from our business operations and dissuade potential customers from purchasing our solution, which would also materially harm our business.
Added
Patent Trial and Appeal Board, or PTAB, in an inter partes review, and the parties expect that all claims of that patent will be canceled because EcoFactor's appeal of that PTAB decision was dismissed.
Removed
During the course of the litigation, we anticipate announcements of the results of hearings and motions, and other interim developments related to the litigation. If securities analysts or investors regard these announcements as negative, the market price of our common stock may decline.
Added
Pursuant to the December 21, 2023 settlement agreement between Alarm.com and Vivint, the allegations regarding ADT Pulse and Control will be dismissed, ending Alarm.com’s indemnification obligations in this matter. We also incurred costs associated with the indemnification of our service provider Monitronics International, Inc. d/b/a Brinks in patent infringement suits.
Removed
Alarm.com disputes Vivint's refusal of payment and is seeking continued payments of license fees in the arbitration, as well as interest and declaratory relief. There can be no assurance that Alarm.com will be successful in the arbitration proceedings.
Added
On October 3, 2023, IOT filed a stipulation of dismissal of all three cases, ending the cases and the Company's involvement therein. We also incur costs associated with the indemnification of our service provider, Central Security Group – Nationwide, Inc. (d/b/a Alert 360), or CSG, in an ongoing patent litigation.
Removed
We also filed a lawsuit against Vivint on January 4, 2023 in U.S. District Court, Eastern District of Texas, alleging that Vivint infringes 15 of our patents. The case is docketed as No. 2:23-CV-0004-JRG-RSP (E.D. Tex.). We are seeking compensatory and enhanced damages, a permanent injunction and other relief. Vivint’s response to the complaint is due February 27, 2023.
Added
In 2018, Ubiquitous Connectivity, LP, or Ubiquitous, brought suit against CSG in U.S. District Court, Northern District of Oklahoma, alleging infringement of two US patents. The case was stayed by agreement of the parties for several years while the patents in suit were challenged before the PTAB.
Removed
ADT answered the second amended complaint on March 22, 2022, asserted defenses based on non-infringement and invalidity of all five asserted patents and counterclaimed for declaratory judgement of invalidity of all five asserted patents. Two of the asserted patents are under inter partes review at the PTAB.
Added
In January 2021, the PTAB deemed 42 out of 46 claims of the two asserted patents unpatentable. Ubiquitous appealed a portion of the PTAB’s findings to the United States Court of Appeals for the Federal Circuit. The Federal Circuit affirmed the PTAB’s ruling on August 8, 2023.
Removed
On June 17, 2022, the court entered an order staying the case in view of the pending proceedings before the PTAB, with the exception of certain discovery of source code.
Added
As a result, only four patent claims remain at issue and the Northern District of Oklahoma case is no longer stayed. A claim construction hearing is scheduled for December 12, 2024. A hearing on dispositive motions, including for summary judgment, is scheduled for April 15, 2026. A trial is scheduled for June 22, 2026.
Removed
Monitronics filed a Motion to Dismiss the first-filed case on January 24, 2023.
Removed
The cases are in the preliminary stages and the extent of Alarm.com’s indemnify obligations to Monitronics has not yet been determined, however should IOT Innovations prevail on the claims that one or more elements of Monitronics’ products or services infringe, we could be required to indemnify Monitronics for damages in the form of a reasonable royalty or Monitronics could be enjoined from making, using and selling our solution if a license or other right to continue selling our technology is not made available or we are unable to design around such patents, and required to pay ongoing royalties and comply with unfavorable terms if such a license is made available to us.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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The returns in the graph are not intended to forecast or be indicative of possible future performance of our common stock. 52 Recent Sales of Unregistered Securities In January 2021, we issued $500.0 million aggregate principal amount of 0% convertible senior notes due January 15, 2026, or the 2026 Notes, in a private offering pursuant to Rule 144A under the Securities Act.
The returns in the graph are not intended to forecast or be indicative of possible future performance of our common stock. 54 Recent Sales of Unregistered Securities In January 2021, we issued $500.0 million aggregate principal amount of 0% convertible senior notes due January 15, 2026, or the 2026 Notes, in a private offering pursuant to Rule 144A under the Securities Act.
The following graph shows a comparison for the period from December 31, 2017 through December 31, 2022 of the cumulative total return for (i) our common stock, (ii) the Nasdaq Composite Index and (iii) Standard & Poor's 500 Index, or S&P 500 Index, assuming an initial investment of $100 on the last trading day for the fiscal year ended December 31, 2017 and reinvestment of all dividends.
The following graph shows a comparison for the period from December 31, 2018 through December 31, 2023 of the cumulative total return for (i) our common stock, (ii) the Nasdaq Composite Index and (iii) Standard & Poor's 500 Index, or S&P 500 Index, assuming an initial investment of $100 on the last trading day for the fiscal year ended December 31, 2018 and reinvestment of all dividends.
For more information related to the 2026 Notes, see Note 13 to our consolidated financial statements included in this Annual Report on Form 10-K.
For more information related to the 2026 Notes, see Note 13 to our consolidated financial statements included in this Annual Report on Form 10-K. Use of Proceeds None.
On February 17, 2023, the closing price of our common stock on The Nasdaq Global Select Market was $53.06 per share. Holders As of February 17, 2023, there were 21 stockholders of record of our common stock, one of which is Cede & Co., a nominee for Depository Trust Company, or DTC.
On February 15, 2024, the closing price of our common stock on The Nasdaq Global Select Market was $71.00 per share. Holders As of February 15, 2024, there were 19 stockholders of record of our common stock, one of which is Cede & Co., a nominee for Depository Trust Company, or DTC.
On February 15, 2023, our board of directors authorized, to be effective on February 23, 2023, the cancellation of the balance under the stock repurchase program ending December 3, 2023 and also authorized a stock repurchase program, under which we are authorized to purchase up to an aggregate of $100.0 million of our outstanding common stock during the two-year period ending February 23, 2025.
Issuer Purchases of Equity Securities On February 15, 2023, our board of directors authorized a stock repurchase program, effective February 23, 2023, under which we are authorized to purchase up to an aggregate of $100.0 million of our outstanding common stock during the two-year period ending February 23, 2025.
Use of Proceeds None. 53 Issuer Purchases of Equity Securities During the year ended December 31, 2022, we repurchased 1,385,592 shares of our common stock under our stock repurchase program for $78.8 million, which includes applicable commissions and fees.
The prohibition does not apply to trades made pursuant to a Rule 10b5-1 trading plan. 55 During the year ended December 31, 2023, we repurchased 487,918 shares of our common stock under our stock repurchase program for $27.3 million, which includes applicable commissions and fees.
The following table contains information relating to the repurchases of our common stock made by us in the quarter ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as a Part of a Publicly Announced Program (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program October 1 to October 31, 2022 — $ — — $ 48,134,158 November 1 to November 30, 2022 251,158 48.88 251,158 35,858,629 December 1 to December 31, 2022 294,185 49.97 294,185 21,156,853 Total 545,343 $ 49.47 545,343 _______________ (1) On December 3, 2020, our board of directors authorized a stock repurchase program, under which we are authorized to purchase up to an aggregate of $100.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions, block trades, tender offers and by any combination of the foregoing, in accordance with federal securities laws, during the three-year period ending December 3, 2023.
The following table contains information relating to the repurchases of our common stock made by us in the quarter ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as a Part of a Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program October 1 to October 31, 2023 — $ — — $ 87,145,286 November 1 to November 30, 2023 248,378 58.15 248,378 72,701,660 December 1 to December 31, 2023 — — — 72,701,660 Total 248,378 $ 58.15 248,378 We withhold shares of common stock in connection with the vesting of restricted stock unit awards issued to employees to satisfy applicable tax withholding requirements.
Added
We utilize our stock repurchase program in an effort to return surplus cash to stockholders efficiently. Our board of directors determines repurchase program amounts through an analysis of projected capital needs to sustain growth as well as to meet other investing and financing criteria.
Added
In determining whether to authorize repurchases and the size of the repurchase program, our board of directors considers whether we have funds legally available to repurchase shares of common stock and various alternative uses for our cash and cash equivalents.
Added
The stock repurchase program is designed to enable us to make both opportunistic repurchases based on market conditions at management’s discretion and consistent repurchases over time.
Added
Stock repurchases may be made through a variety of methods, including open-market transactions (including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act), privately negotiated transactions, block trades, tender offers and by any combination of the foregoing.
Added
Our Insider Trading and Trading Window Policy prohibits our directors, officers and other employees from trading in Alarm.com securities while they are aware of material nonpublic information about Alarm.com, which would include unannounced material stock repurchase plans.
Added
These withheld shares are not issued or considered common stock repurchases under our stock repurchase program and therefore, are excluded from our repurchase activity. As of January 1, 2023, we are subject to a 1.0% excise tax on the value of net corporate stock repurchases under the Inflation Reduction Act of 2022.
Added
When applicable, the excise tax will be included as part of the cost basis of shares acquired and is presented within stockholders’ equity in the consolidated balance sheets and will be excluded from amounts presented above. ITEM 6. [RESERVED]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Item 6. [Reserved] 54 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 54 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 77 Item 8.
Item 6. [Reserved] 56 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 56 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 76 Item 8.
Financial Statements and Supplementary Data 78 Report of Independent Registered Public Accounting Firm 79 Consolidated Statements of Operations 81 Consolidated Balance Sheets 82 Consolidated Statements of Cash Flows 83 Consolidated Statements of Equity 85 Notes to the Consolidated Financial Statements 86 Schedule II. Valuation and Qualifying Accounts 127
Financial Statements and Supplementary Data 77 Report of Independent Registered Public Accounting Firm 78 Consolidated Statements of Operations 80 Consolidated Statements of C omprehensive Income 81 Consolidated Balance Sheets 82 Consolidated Statements of Cash Flows 83 Consolidated Statements of Equity 85 Notes to the Consolidated Financial Statements 86 Schedule II. Valuation and Qualifying Accounts 124

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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If triggering events arise in the future that require changes in the underlying assumptions used in our assessment of our goodwill, and, should those changes be significant, they could have a material impact on our goodwill and potentially our other (expense) / income, net, if those significant changes result in an impairment.
If triggering events arise in the future that require changes in the underlying assumptions used in our assessment of our goodwill, and, should those changes be significant, they could have a material impact on our goodwill and potentially our other income / (expense), net, if those significant changes result in an impairment.
If triggering events arise in the future, depending on the significance of the underlying assumptions in the impairment analysis, they could have a material impact on our intangible assets and long-lived assets and potentially our other (expense) / income, net, if those significant changes result in an impairment.
If triggering events arise in the future, depending on the significance of the underlying assumptions in the impairment analysis, they could have a material impact on our intangible assets and long-lived assets and potentially our other income / (expense), net, if those significant changes result in an impairment.
We do not consider these items to be indicative of our core operating performance.
We do not consider these items to be indicative of our core operating performance.
We also use Adjusted EBITDA, a non-GAAP financial measure, as a performance measure under our executive bonus plan.
We also use non-GAAP adjusted EBITDA, a non-GAAP financial measure, as a performance measure under our executive bonus plan.
We record uncertain tax positions in accordance with ASC 740-10 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position, and (2) with respect to those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority.
We record uncertain tax positions in accordance with ASC 740-10 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that 69 the tax positions will be sustained based on the technical merits of the position, and (2) with respect to those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority.
The $12.4 million decrease in cash from operating assets and liabilities 74 was primarily due to a $8.9 million change in inventory resulting from an increase in purchased inventory as we seek to reduce risks and uncertainties in our supply chain as well as a $6.5 million change in accounts payable, accrued expenses and other liabilities primarily due to differences in the timing of disbursements during 2022 as compared to 2021.
The $12.4 million decrease in cash from operating assets and liabilities was primarily due to a $8.9 million change in inventory resulting from an increase in purchased inventory as we seek to reduce risks and uncertainties in our supply chain as well as a $6.5 million change in accounts payable, accrued expenses and other liabilities primarily due to differences in the timing of disbursements during 2022 as compared to 2021.
Approximately one-fifth to one-half of the hardware products that we sell to our service provider partners are imported from China and could be subject to increased tariffs. While the additional import duties have resulted in an increase to our cost of hardware revenue, these import duties had a modest impact on hardware revenue margins.
Approximately one-fifth to one-half of the hardware products that we sell to our service provider partners are imported from China and could be subject to increased tariffs. While the additional import duties resulted in an increase to our cost of hardware revenue, these import duties had a modest impact on hardware revenue margins.
We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements. Adjusted EBITDA is not a measure calculated in accordance with GAAP. See the table below for a reconciliation of Adjusted EBITDA from net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.
We do not adjust for ordinary course legal expenses resulting from maintaining and enforcing our intellectual property portfolio and license agreements. Non-GAAP adjusted EBITDA is not a measure calculated in accordance with GAAP. See the table below for a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.
Prolonged uncertainty with respect to Macroeconomic Conditions could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition. Other Business Metrics We regularly monitor a number of financial and operating metrics in order to measure our current performance and estimate our future performance.
Prolonged uncertainty with respect to the Macroeconomic Conditions could cause further economic slowdown or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition. Other Business Metrics We regularly monitor a number of financial and operating metrics in order to measure our current performance and estimate our future performance.
We believe that our network of service providers and the length of our service relationships with residential and commercial property owners, combined with our robust SaaS platforms and over 20 years of operating experience, contribute to a compelling business model. Our solutions are designed to make both residential and commercial properties safer, smarter and more efficient.
We believe our network of service providers and the length of our service relationships with residential and commercial property owners, combined with our robust SaaS platforms and over 20 years of operating experience, contribute to a compelling business model. Our solutions are designed to make both residential and commercial properties safer, smarter and more efficient.
This valuation contains uncertainties and requires management to apply significant judgment in estimating the fair value of long-lived and intangible assets acquired, which involves the use of significant estimates and assumptions. Significant estimates and assumptions in valuing certain acquired customer relationship intangible assets include estimates about future expected cash flows and discount rates.
This valuation contains uncertainties and requires management to apply significant judgment in estimating the fair value of long-lived and intangible assets acquired, which involves the use of significant estimates and assumptions. 68 Significant estimates and assumptions in valuing certain acquired customer relationship intangible assets include estimates about future expected cash flows and discount rates.
Our future working capital, capital expenditure and cash requirements will depend on many factors, including the impact of Macroeconomic Conditions and inflation, on the economy and our operations, the rate of our revenue growth, the amount and timing of our investments in human resources and capital equipment, future acquisitions and investments, and the timing and extent of our introduction of new solutions and platform and solution enhancements.
Our future working capital, capital expenditure and cash requirements will depend on many factors, including the impact of the Macroeconomic Conditions on the economy and our operations, the rate of our revenue growth, the amount and timing of our investments in human resources and capital equipment, future acquisitions and investments, and the timing and extent of our introduction of new solutions and platform and solution enhancements.
Beginning upon the first grant of 69 options in 2022, the expected term for options granted is estimated using our historical experience, including information related to options we have granted. Recent Accounting Pronouncements See Note 2 of our consolidated financial statements for information related to recently issued accounting standards.
Beginning upon the first grant of options in 2022, the expected term for options granted is estimated using our historical experience, including information related to options we have granted. Recent Accounting Pronouncements See Note 2 of our consolidated financial statements for information related to recently issued accounting standards.
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 exclude non-ordinary course litigation expense because we do not consider legal costs and settlement fees incurred and received 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.
Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP.
Our use of non-GAAP adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP.
In prior years, we used the "simplified method" to calculate the expected term, which was presumed to be the mid-point between the vesting date and the end of the contractual term.
In 2021 and years prior to 2021, we used the "simplified method" to calculate the expected term, which was presumed to be the mid-point between the vesting date and the end of the contractual term.
Adjusted EBITDA is not a measure calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
Non-GAAP adjusted EBITDA is not a measure calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
We exclude the impact related to our provision for / (benefit from) income taxes from Adjusted EBITDA because we do not consider this tax adjustment to be part of our ongoing results of operations. 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 the impact related to our provision for / (benefit from) income taxes from non-GAAP adjusted EBITDA because we do not consider this tax adjustment to be part of our ongoing results of operations. 58 GAAP requires that operating expenses include the amortization of acquired intangible assets, which principally include acquired customer relationships, developed technology and trade names.
We have included Adjusted EBITDA in this report because it is a key measure that our management uses to understand and evaluate our core operating performance and trends, to generate future operating plans, to make strategic decisions regarding the allocation of capital and to make investments in initiatives that are focused on cultivating new markets for our solutions.
We have included non-GAAP adjusted EBITDA in this report because it is a key measure our management uses to understand and evaluate our core operating performance and trends, to generate future operating plans, to make strategic decisions regarding the allocation of capital and to make investments in initiatives that are focused on cultivating new markets for our solutions.
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 expense from Adjusted EBITDA improves the comparability of our results to the results of other companies in our industry.
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 excluding stock-based compensation expense from non-GAAP adjusted EBITDA improves the comparability of our results to the results of other companies in our industry.
Our cost of hardware and other revenue primarily includes cost of raw materials, tooling, freight shipments and amounts paid to our third-party manufacturer for production and fulfillment of our cellular radio modules and image sensors, and procurement costs for our video cameras, video recorders and gunshot detection sensors, which we purchase from an original equipment manufacturer, and other devices.
Our cost of hardware and other revenue primarily includes cost of raw materials, tooling, freight shipments and amounts paid to our third-party manufacturer for production and fulfillment of our cellular radio modules and image sensors, and procurement costs for our video cameras, video recorders, smart thermostats and gunshot detection sensors, which we purchase from an original equipment manufacturer, and other devices.
Please see Non-GAAP Measures in this section for a discussion of the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA from net income, the most directly comparable GAAP measurement, for the years ended December 31, 2022, 2021 and 2020. SaaS and License Revenue Renewal Rate Our SaaS and license revenue renewal rate is an operating metric.
Please see Non-GAAP Measures in this section for a discussion of the limitations of non-GAAP adjusted EBITDA and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measurement, for the years ended December 31, 2023, 2022 and 2021. SaaS and License Revenue Renewal Rate Our SaaS and license revenue renewal rate is an operating metric.
Adjusted EBITDA is a key measure that our management uses to understand and evaluate our core operating performance and trends to generate future operating plans, to make strategic decisions regarding the allocation of capital, and to make investments in initiatives that are focused on cultivating new markets for our solutions.
Non-GAAP adjusted EBITDA is a key measure our management uses to understand and evaluate our core operating performance and trends to generate future operating plans, to make strategic decisions regarding the allocation of capital, and to make investments in initiatives that are focused on cultivating new markets for our solutions.
While variable consideration assumptions and assumptions regarding the relative stand-alone selling price are specific to each contract, we did not make any material changes to these assumptions for the year ended December 31, 2022. We do not expect any material changes in the near term to the underlying assumptions used to recognize revenue during the year ended December 31, 2022.
While variable consideration assumptions and assumptions regarding the relative stand-alone selling price are specific to each contract, we did not make any material changes to these assumptions for the year ended December 31, 2023. We do not expect any material changes in the near term to the underlying assumptions used to recognize revenue during the year ended December 31, 2023.
Although we exclude amortization of acquired intangible assets from Adjusted EBITDA, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. We record depreciation primarily for investments in property and equipment.
Although we exclude amortization of acquired intangible assets from non-GAAP adjusted EBITDA, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation. We record depreciation primarily for investments in property and equipment.
As the impact of Macroeconomic Conditions and inflation, on the economy and our operations evolves, we will continue to assess our liquidity needs.
As the impact of the Macroeconomic Conditions on the economy and our operations evolves, we will continue to assess our liquidity needs.
Further, we believe the exclusion of certain expenses in calculating Adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related expense and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance.
Further, we believe the exclusion of certain expenses in calculating non-GAAP adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related expense and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 24, 2022. Segment Information We have two reportable segments: Alarm.com and Other.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 24, 2023. Segment Information We have two reportable segments: Alarm.com and Other.
We generate hardware and other revenue primarily from the sale of video cameras, video recorders and cellular radio modules that provide access to our cloud-based platforms and, to a lesser extent, the sale of other devices, including image sensors, gunshot detection sensors and peripherals.
We generate hardware and other revenue primarily from the sale of video cameras, video recorders, smart thermostats and cellular radio modules that provide access to our cloud-based platforms and, to a lesser extent, the sale of other devices, including image sensors, gunshot detection sensors and peripherals.
Our cash and cash equivalents as of December 31, 2022 are available for working capital purposes. Our investment policy defines allowable investments and establishes guidelines relating to credit quality, diversification and maturities of our investments to preserve capital, maintain liquidity and limit the amount of credit risk exposure.
Our cash and cash equivalents as of December 31, 2023 are available for working capital purposes. Our investment policy defines allowable investments and establishes guidelines relating to credit quality, diversification and maturities of our investments to preserve capital, maintain liquidity and limit the amount of credit risk exposure.
Please see Non-GAAP Measures below in this section of this Annual Report for a discussion of the limitations of Adjusted EBITDA (a non-GAAP measure) and a reconciliation of Adjusted EBITDA from net income, the most directly comparable GAAP measure, for the years ended December 31, 2022, 2021 and 2020.
Please see Non-GAAP Measures below in this section of this Annual Report for a discussion of the limitations of non-GAAP adjusted EBITDA (a non-GAAP measure) and a reconciliation of non-GAAP adjusted EBITDA from net income, the most directly comparable GAAP measure, for the years ended December 31, 2023, 2022 and 2021.
We did not make any material changes to the underlying assumptions used to calculate deferred tax assets and liabilities as well as uncertain tax positions for the year ended December 31, 2022 and we do not expect any material changes in the near term to the underlying assumptions used to calculate deferred tax assets and liabilities as well as uncertain tax positions for the year ended December 31, 2022.
We did not make any material changes to the underlying assumptions used to calculate deferred tax assets and liabilities as well as uncertain tax positions for the year ended December 31, 2023 and we do not expect any material changes in the near term to the underlying assumptions used to calculate deferred tax assets and liabilities as well as uncertain tax positions for the year ended December 31, 2023.
Our cloud-based platform offers an expansive suite of IoT solutions that address opportunities in the residential, multi-family, small business and enterprise commercial markets. Alarm.com’s solutions include security, video and video analytics, energy management, access control, electric utility grid management, indoor gunshot detection, water management, health and wellness and data-rich emergency response.
Our cloud-based platform offers an expansive suite of IoT solutions addressing opportunities in the residential, multi-family, small business and enterprise commercial markets. Alarm.com’s solutions include security, video and video analytics, energy management, access control, electric utility grid management, indoor gunshot detection, water management, health and wellness and data-rich emergency response.
We exclude amortization of intangibles from Adjusted EBITDA 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 exclude amortization of intangibles from non-GAAP adjusted EBITDA 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 exclude acquisition-related expense from Adjusted EBITDA because we believe that the exclusion of this expense allows us to better provide meaningful information about our operating performance, facilitates comparisons to our historical operating results, improves the comparability of our results to the results of other companies in our industry, and ultimately, we believe helps investors better understand the acquisition-related expense and the effects of the transaction on our results of operations.
We exclude acquisition-related expense from non-GAAP adjusted EBITDA because we believe the exclusion of this expense allows us to better provide meaningful information about our operating performance, facilitates comparisons to our historical operating results, improves the comparability of our results to the results of other companies in our industry, and ultimately, we believe helps investors better understand the acquisition-related expense and the effects of the transaction on our results of operations.
There was no software license revenue recorded for the Other segment during the years ended December 31, 2022, 2021 and 2020. 66 Critical Accounting Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP.
There was no software license revenue recorded for the Other segment during the years ended December 31, 2023, 2022 and 2021. Critical Accounting Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP.
Comparison of Years Ended December 31, 2021 to December 31, 2020 A comparison of the years ended December 31, 2021 and 2020 has been omitted from this Form 10-K, but may be found in “Item 7.
Comparison of Years Ended December 31, 2022 to December 31, 2021 A comparison of the years ended December 31, 2022 and 2021 has been omitted from this Form 10-K, but may be found in “Item 7.
The 2026 Notes are discussed in more detail above under “Convertible Senior Notes.” 73 Dividends We did not declare or pay dividends during the years ended December 31, 2022, 2021 or 2020. We cannot provide any assurance that we will declare or pay cash dividends on our common stock in the future.
The 2026 Notes are discussed in more detail above under “Convertible Senior Notes.” Dividends We did not declare or pay dividends during the years ended December 31, 2023, 2022 or 2021. We cannot provide any assurance that we will declare or pay cash dividends on our common stock in the future.
In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related adjustments and certain historical legal expenses, excludes items that we do not 57 consider to be indicative of our core operating performance.
In particular, the exclusion of certain expenses in calculating non-GAAP adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis and, in the case of exclusion of acquisition-related adjustments and certain historical legal expenses, excludes items that we do not consider to be indicative of our core operating performance.
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.
We believe 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 we are, and therefore, amortization expense may vary significantly by company based on their acquisition history.
The Section 174 impact on 2023 cash flows from operating activities will depend on, among other factors, our 2023 operating results and the level of 2023 research and development activity.
The Section 174 impact on 2024 cash flows from operating activities will depend on, among other factors, our 2024 operating results and the level of 2024 research and development activity.
Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that contributed 94%, 95% and 94% of our revenue, net of intersegment eliminations, for the years ended December 31, 2022, 2021 and 2020, respectively.
Our Alarm.com segment represents our cloud-based and Software platforms for the intelligently connected property and related solutions that contributed 93%, 94% and 95% of our revenue, net of intersegment eliminations, for the years ended December 31, 2023, 2022 and 2021, respectively.
However, if changes in these assumptions occur, and, should those changes be significant, they could have a material impact on our purchase price allocation for the acquisition of Noonlight. Goodwill, Intangible Assets and Long-lived Assets Goodwill We perform our annual impairment review of goodwill on October 1 and when a triggering event occurs between annual impairment tests.
However, if changes in these assumptions occur, and, should those changes be significant, they could have a material impact on our purchase price allocation for the business combinations. Goodwill, Intangible Assets and Long-lived Assets Goodwill We perform our annual impairment review of goodwill on October 1 and when a triggering event occurs between annual impairment tests.
Based on information currently available to us, we estimate the increased 2023 Section 174 Federal and state cash tax payable for our 2023 taxable income to be in the range of $40.0 million to $45.0 million if the requirement to capitalize and amortize research and development expenditures is not deferred, modified or repealed.
Based on information currently available to us, we estimate the increased 2024 Section 174 federal and state cash tax payable for our 2024 taxable income to be in the range of $35.0 million to $40.0 million if the requirement to capitalize and amortize research and development expenditures is not deferred, modified or repealed.
See Note 12 to our consolidated financial statements for details on the components of other long-term liabilities. As of December 31, 2022, we recorded a liability for long-term accrued taxes and interest payable of $7.7 million.
See Note 12 to our consolidated financial statements for details on the components of other long-term liabilities. As of December 31, 2023, we recorded a liability for long-term accrued taxes and interest payable of $7.9 million.
Software license revenue represented 3%, 4% and 6% of our revenue in 2022, 2021 and 2020, respectively. We also generate revenue from the sale of many types of hardware, including video cameras, video recorders, cellular radio modules, thermostats, image sensors, gunshot detection sensors and other peripherals, that enable our solutions.
Software license revenue represented 3%, 3% and 4% of our revenue in 2023, 2022 and 2021, respectively. We also generate revenue from the sale of many types of hardware, including video cameras, video recorders, cellular radio modules, smart thermostats, image sensors, gunshot detection sensors and other peripherals, that enable our solutions.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations." 55 Geographic Areas We believe there is significant opportunity to expand our international business, as 4% of our total revenue during the year ended December 31, 2022 originated from customers located outside of North America.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations." 57 Geographic Areas We believe there is significant opportunity to expand our international business, as 4% of our total revenue during the year ended December 31, 2023 originated from customers located outside of North America.
The cost of SaaS and license revenue for the Other segment increased $3.2 million in 2022 as compared to 2021 primarily due to an increase in sales of our energy management and demand response solutions, which drove a corresponding increase in amounts paid to distributed energy resource providers.
The cost of SaaS and license revenue for the Other segment increased $3.5 million in 2023 as compared to 2022 primarily due to an increase in sales of our energy management and demand response solutions, which drove a corresponding increase in amounts paid to distributed energy resource providers.
On October 27, 2022, we filed a demand for arbitration of a dispute arising under the Patent Cross License Agreement between Alarm.com and Vivint executed in November 2013. Vivint has stopped paying license fees to Alarm.com under the agreement. Vivint has paid the required license fees to Alarm.com since the agreement was executed in November 2013.
On October 27, 2022, we filed a demand for arbitration of a dispute arising under the Patent Cross License Agreement between Alarm.com and Vivint executed in November 2013. Vivint had stopped paying license fees to Alarm.com under the agreement. Vivint had been paying the required license fees to Alarm.com since the agreement was executed in November 2013.
Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Accordingly, we believe non-GAAP adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
We exclude depreciation in calculating Adjusted EBITDA because we do not consider depreciation when we evaluate our ongoing business operations.
We exclude depreciation in calculating non-GAAP adjusted EBITDA because we do not consider depreciation when we evaluate our ongoing business operations.
Also included in general and administrative expenses are credit losses and acquisition-related expenses, which consist primarily of legal, accounting and professional service fees directly related to acquisitions and valuation gains or losses on acquisition-related contingent liabilities. The number of employees in general and administrative functions increased from 187 as of January 1, 2022 to 218 as of December 31, 2022.
Also included in general and administrative expenses are credit losses and acquisition-related expenses, which consist primarily of legal, accounting and professional service fees directly related to acquisitions and valuation gains or losses on acquisition-related contingent liabilities. 61 The number of employees in general and administrative functions increased from 218 as of January 1, 2023 to 229 as of December 31, 2023.
Over the next 12 months, we expect our capital expenditure requirements to be between $7.5 million and $9.5 million, primarily related to purchases of computer software and equipment as well as the continued build out of our leased and owned office space.
Over the next 12 months, we expect our capital expenditure requirements to be between $4.5 million and $6.5 million, primarily related to purchases of computer software and equipment as well as the continued build out of our leased and owned office space.
Additionally, our hardware and other revenue includes our revenue from the sale of licenses that provide our customers the right to use our gunshot detection solution in exchange for license fees. Hardware and other revenue represented 38%, 39% and 36% of our revenue in 2022, 2021 and 2020, respectively.
Additionally, our hardware and other revenue includes our revenue from the sale of licenses that provide our customers the right to use our gunshot detection solution in exchange for license fees. Hardware and other revenue represented 35%, 38% and 39% of our revenue in 2023, 2022 and 2021, respectively.
Our capital expenditures have primarily been for general business use, including leasehold improvements as we have expanded our office space to accommodate our growth in headcount, computer equipment used internally and expansion of our network operations centers. For 2022, our cash flows used in investing activities was $68.3 million, compared to $20.4 million in 2021.
Our capital expenditures have primarily been for general business use, including leasehold improvements as we have expanded our office space to accommodate our growth in headcount, computer equipment used internally and expansion of our network operations centers. For 2023, cash flows used in investing activities was $26.0 million, compared to $68.3 million in 2022.
We derive a portion of our revenue from licensing our intellectual property to third parties on a per customer basis. SaaS and license revenue represented 62%, 61% and 64% of our revenue in 2022, 2021 and 2020, respectively.
We derive a portion of our revenue from licensing our intellectual property to third parties on a per customer basis. SaaS and license revenue represented 65%, 62% and 61% of our revenue in 2023, 2022 and 2021, respectively.
We exclude interest income and certain activity within other (expense) / income, net including gains, losses or impairments on investments and other assets as well as losses on the early extinguishment of debt, when applicable, from Adjusted EBITDA because we do not consider it part of our ongoing results of operations.
We exclude interest income and certain activity within other income / (expense), net including gains, losses or impairments on investments and other assets, gains on settlement fees and losses on the early extinguishment of debt, when applicable, from non-GAAP adjusted EBITDA because we do not consider it part of our ongoing results of operations.
On December 3, 2020, our board of directors authorized another stock repurchase program, under which we are authorized to purchase up to an aggregate of $100.0 million of our outstanding common stock during the three-year period ending December 3, 2023.
Stock Repurchase Programs On December 3, 2020, our board of directors authorized a stock repurchase program, under which we were authorized to purchase up to an aggregate of $100.0 million of our outstanding common stock during the three-year period ending December 3, 2023.
Qualitative factors we consider include, but are not limited to, macroeconomic conditions, industry and market conditions, company specific events, changes in circumstances and market capitalization. For our 2022 annual impairment review, we performed a quantitative assessment for our Alarm.com reporting unit, our only reporting unit with a goodwill balance.
Qualitative factors we consider when we perform a qualitative analysis include, but are not limited to, macroeconomic conditions, industry and market conditions, company specific events, changes in circumstances and market capitalization. For our 2023 annual impairment review, we performed a qualitative assessment for our Alarm.com reporting unit, our only reporting unit with a goodwill balance.
Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 14% and 15% 2022 and 2021, respectively. The decrease in cost of SaaS and license revenue as a percentage of SaaS and license revenue in 2022 as compared to 2021 is a reflection of the mix of sales of services during the periods.
Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 15% and 14% in 2023 and 2022, respectively. The increase in cost of SaaS and license revenue as a percentage of SaaS and license revenue in 2023 as compared to 2022 is a reflection of the mix of sales of services during the periods.
Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.
Some of these limitations are: (a) although amortization and depreciation are non-cash charges, the assets being amortized and depreciated may have to be replaced in the future, and non-GAAP adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) non-GAAP adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) non-GAAP adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) non-GAAP adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate non-GAAP adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure. 75 Because of these and other limitations, you should consider non-GAAP adjusted EBITDA alongside our other GAAP-based financial performance measures, net income and our other GAAP financial results.
Our other business metrics may be calculated in a manner different from the way similar business metrics used by other companies are calculated and include the following (dollars in thousands): Year Ended December 31, 2022 2021 2020 SaaS and license revenue $ 520,377 $ 460,372 $ 393,257 Adjusted EBITDA 146,848 142,472 125,257 SaaS and license revenue renewal rate 94 % 94 % 94 % SaaS and License Revenue SaaS and license revenue is a GAAP measure that we use to measure our current performance and estimate our future performance.
Our other business metrics may be calculated in a manner different from the way similar business metrics used by other companies are calculated and include the following (dollars in thousands): Year Ended December 31, 2023 2022 2021 SaaS and license revenue $ 569,200 $ 520,377 $ 460,372 Non-GAAP adjusted EBITDA 153,967 146,848 142,472 SaaS and license revenue renewal rate 94 % 94 % 94 % SaaS and License Revenue SaaS and license revenue is a GAAP measure that we use to measure our current performance and estimate our future performance.
Historical Cash Flows The following table sets forth our cash flows for the periods indicated (in thousands): Year Ended December 31, 2022 2021 2020 Cash flows from operating activities $ 56,901 $ 103,157 $ 102,080 Cash flows used in investing activities (68,319) (20,365) (20,274) Cash flows (used in) / from financing activities (76,324) 374,370 52,024 Operating Activities Cash flows from operating activities have typically been generated from our net income and by changes in our operating assets and liabilities, particularly from accounts receivable and inventory, adjusted for non-cash expense items such as amortization and depreciation, deferred income taxes and stock-based compensation.
Historical Cash Flows The following table sets forth our cash flows for the periods indicated (in thousands): Year Ended December 31, 2023 2022 2021 Cash flows from operating activities $ 135,965 $ 56,901 $ 103,157 Cash flows used in investing activities (25,966) (68,319) (20,365) Cash flows (used in) / from financing activities (31,865) (76,324) 374,370 Operating Activities Cash flows from operating activities have typically been generated from our net income and by changes in our operating assets and liabilities, particularly from accounts receivable and inventory, adjusted for non-cash expense items such as amortization and depreciation, deferred income taxes and stock-based compensation.
Because of the use of estimates inherent in the financial reporting process in light of the continuing uncertainty arising from the COVID-19 pandemic, actual results could differ from those estimates and any such differences may be material.
Because of the use of estimates inherent in the financial reporting process in light of the continuing uncertainty arising from the Macroeconomic Conditions actual results could differ from those estimates and any such differences may be material.
We typically expect hardware and other revenue to fluctuate as a percentage of total revenue. Highlights of our financial performance for the periods covered in this Annual Report include: • SaaS and license revenue increased 13% to $520.4 million in 2022 from $460.4 million in 2021.
We typically expect hardware and other revenue to fluctuate as a percentage of total revenue. Highlights of our financial performance for the periods covered in this Annual Report include: • SaaS and license revenue increased 9% to $569.2 million in 2023 from $520.4 million in 2022.
Our cost of software license revenue included within cost of SaaS and license revenue decreased $0.6 million to $0.5 million during 2022 as compared to $1.1 million during 2021.
Our cost of software license revenue included within cost of SaaS and license revenue increased $0.1 million to $0.6 million during 2023 as compared to $0.5 million during 2022.
The cost of SaaS and license revenue for the Alarm.com segment increased $3.9 million in 2022 as compared to 2021 primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers.
The cost of SaaS and license revenue for the 64 Alarm.com segment increased $8.5 million in 2023 as compared to 2022 primarily due to the growth in our subscriber base, which drove a corresponding increase in amounts paid to wireless network providers.
The overall number of employees in our sales and marketing teams increased from 476 as of December 31, 2021 to 511 as of December 31, 2022.
The overall number of employees in our sales and marketing teams increased from 511 as of December 31, 2022 to 565 as of December 31, 2023.
Our software license revenue included within SaaS and license revenue decreased $5.5 million to $26.8 million in 2022 as compared to $32.3 million during 2021, primarily due to the result of the continuing transition of customers from non-hosted software to our cloud based hosted platform.
Our software license revenue included within SaaS and license revenue decreased $3.6 million to $23.2 million in 2023 as compared to $26.8 million during 2022, primarily due to the result of the continuing transition of customers from non-hosted software to our cloud based hosted platform.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 amended Internal Revenue Code Section 174, or Section 174, to eliminate the option to immediately deduct research and development expenditures in the year incurred, requiring these expenditures to be capitalized and amortized.
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 amended Internal Revenue Code Section 174, or Section 174, to eliminate the option to immediately deduct research and development expenditures in the year incurred, requiring these expenditures to be capitalized and amortized over five years for domestic expenditures and over 15 years for foreign expenditures.
The SaaS and license revenue for the Alarm.com segment increased $51.3 million in 2022 as compared to 2021 primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2021.
The SaaS and license revenue for the Alarm.com segment increased $36.5 million in 2023 as compared to 2022 primarily due to growth in our subscriber base, including the revenue impact from subscribers we added in 2022.
Our hardware and other revenue also includes our revenue from the sale of perpetual licenses that provide our customers in the commercial market the right to use our OpenEye video surveillance software for an indefinite period of time in exchange for a one-time license fee, which is generally paid at contract inception.
Our hardware and other revenue also includes our revenue from the sale of perpetual licenses that provide our customers in the commercial market the right to use our video surveillance software for an indefinite period of time in exchange for a one-time license fee.
As a result of Vivint’s refusal to pay license fees under the agreement, which began during the fourth quarter of 2022, cash flows from operating activities will decrease by approximately $6.0 million on a quarterly basis, plus additional legal fees.
As a result of Vivint’s refusal to pay license fees under the agreement, which began during the fourth quarter of 2022, cash flows from operating activities through December 31, 2023 were lowered by approximately $6.0 million on a quarterly basis, plus additional legal fees.
(2) Operating expenses include stock-based compensation expense as follows (in thousands): 62 Year Ended December 31, 2022 2021 2020 Stock-based compensation expense data: Sales and marketing $ 4,342 $ 4,432 $ 3,025 General and administrative 15,037 9,941 7,996 Research and development 33,275 24,321 18,155 Total stock-based compensation expense $ 52,654 $ 38,694 $ 29,176 The following table sets forth the components of cost of revenue as a percentage of revenue: Year Ended December 31, 2022 2021 2020 Components of cost of revenue as a percentage of revenue: Cost of SaaS and license revenue as a percentage of SaaS and license revenue 14% 15% 14% Cost of hardware and other revenue as a percentage of hardware and other revenue 83% 83% 77% Total cost of revenue as a percentage of total revenue 41% 41% 37% Comparison of Years Ended December 31, 2022 to December 31, 2021 The following tables in this section set forth our selected consolidated statements of operations (in thousands), data for the percentage change and data as a percentage of revenue for the years ended December 31, 2022 and 2021.
(2) Operating expenses include stock-based compensation expense as follows (in thousands): Year Ended December 31, 2023 2022 2021 Stock-based compensation expense data: Cost of hardware and other revenue $ 5 $ — $ — Sales and marketing 3,522 4,342 4,432 General and administrative 13,028 15,037 9,941 Research and development 30,728 33,275 24,321 Total stock-based compensation expense $ 47,283 $ 52,654 $ 38,694 63 The following table sets forth the components of cost of revenue as a percentage of revenue: Year Ended December 31, 2023 2022 2021 Components of cost of revenue as a percentage of revenue: Cost of SaaS and license revenue as a percentage of SaaS and license revenue 15 % 14 % 15 % Cost of hardware and other revenue as a percentage of hardware and other revenue 77 83 83 Total cost of revenue as a percentage of total revenue 37 % 41 % 41 % Comparison of Years Ended December 31, 2023 to December 31, 2022 The following tables in this section set forth our selected consolidated statements of operations (in thousands), data for the percentage change and data as a percentage of revenue for the years ended December 31, 2023 and 2022.
Our Alarm.com segment increased from 1,363 employees as of January 1, 2022 to 1,563 employees as of December 31, 2022. Our Other segment increased from 137 employees as of January 1, 2022 to 170 employees as of December 31, 2022. Inter-segment revenue includes sales of hardware between our segments.
Our Alarm.com segment increased from 1,563 employees as of January 1, 2023 to 1,776 employees as of December 31, 2023. Our Other segment increased from 170 employees as of January 1, 2023 to 213 employees as of December 31, 2023. Inter-segment revenue includes sales of hardware between our segments.
These withheld shares are not issued or considered common stock repurchases under our stock repurchase program. We paid $4.5 million of tax withholdings related to vesting of restricted stock units during the year ended December 31, 2021. No tax withholdings related to the vesting of restricted stock units were paid during the years ended December 31, 2022 and 2020.
These withheld shares are not issued or considered common stock repurchases under our stock repurchase program. We paid $2.6 million and $4.5 million of tax withholdings related to vesting of restricted stock units during the years ended December 31, 2023 and 2021, respectively.
For each of the years ended December 31, 2022, 2021 and 2020, our reserve against revenue for hardware returns was approximately 1% of hardware and other revenue. We evaluate our hardware reserve on a quarterly basis or if there is an indication of significant changes in return experience.
For each of the years ended December 31, 2023, 2022 and 2021, our reserve against revenue for hardware returns was 1% of hardware and other revenue. We evaluate our hardware reserve on a quarterly basis or if there is an indication of significant changes in return experience. Historically, our returns of hardware have not significantly differed from our estimated reserve.
The additional 2022 Federal cash tax liability is included in current income taxes payable as of December 31, 2022, and was paid in February 2023. The increased 2022 state tax liability will be paid in April 2023.
The additional 2022 federal cash tax liability was included in current income taxes payable as of December 31, 2022, and was paid in February 2023. The increased 2022 state tax liability was paid in April 2023 in the amount of $7.5 million.
Our service provider partners have indicated that they typically have three to five-year service contracts with residential and commercial property owners who use our solutions. We also generate hardware and other revenue, primarily from our service provider partners and distributors.
These service provider contracts typically have an initial term of one year, with subsequent renewal terms of one year. Our service provider partners have indicated that they typically have three to five-year service contracts with residential and commercial property owners who use our solutions. We also generate hardware and other revenue, primarily from our service provider partners and distributors.
Historically, our returns of hardware have not significantly differed from our estimated reserve. If we enter into contracts that contain multiple promised services, we evaluate which of the promised services represent separate performance obligations based on whether or not the promised services are distinct and whether or not the services are separable from other promises in the contract.
If we enter into contracts that contain multiple promised services, we evaluate which of the promised services represent separate performance obligations based on whether or not the promised services are distinct and whether or not the services are separable from other promises in the contract.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Our inability or failure to do so could harm our business, financial condition and results of operations. Foreign Currency Exchange Risk Because substantially all of our revenue and operating expenses are denominated in U.S. dollars, we do not believe that our exposure to foreign currency exchange risk is material to our business, financial condition or results of operations.
Our inability or failure to do so could harm our business, financial condition and results of operations. Foreign Currency Exchange Risk Because substantially all of our revenue and operating expenses are denominated in U.S. dollars, we do not believe our exposure to foreign currency exchange risk is material to our business, financial condition or results of operations.
If a significant portion of our revenue and operating expenses becomes denominated in currencies other than U.S. dollars, we may not be able to effectively manage this risk, and our business, financial condition and results of operations could be adversely affected by translation and by transactional foreign currency conversions. 77
If a significant portion of our revenue and operating expenses becomes denominated in currencies other than U.S. dollars, we may not be able to effectively manage this risk, and our business, financial condition and results of operations could be adversely affected by translation and by transactional foreign currency conversions. 76
While we have experienced inflationary pressures on our inventory component and freight costs, we have implemented price increases on some of our products in 2022 to cover some of these increases in costs. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.
While we have experienced inflationary pressures on our inventory component and freight costs, we implemented price increases on certain products in 2022 to partially offset these increases in costs. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.
The uncertainty that exists with respect to the economic impact of the Macroeconomic Conditions continues to create significant volatility in the financial markets subsequent to the year ended December 31, 2022. Market Risk On January 20, 2021, we issued the 2026 Notes.
The uncertainty that exists with respect to the economic impact of the Macroeconomic Conditions continues to create significant volatility in the financial markets subsequent to the year ended December 31, 2023. Market Risk On January 20, 2021, we issued the 2026 Notes. We carry these instruments at face value less unamortized issuance costs.
Removed
During 2021 we carried these instruments at face value less unamortized discount and unamortized issuance costs on our consolidated balance sheets. Subsequent to the adoption of ASU 2020-06 on January 1, 2022, we carry these instruments at face value less unamortized issuance costs.

Other ALRM 10-K year-over-year comparisons