Alarm.com’s bottom line is impacted in Q1 due to supply chain issues

Although Alarm.com’s first-quarter revenue rose 19% to $205 million, hardware and shipping costs rose dramatically, leading to a price increase for the second quarter.

TYSONS, Va. – Sharp increases in component costs and higher logistics costs, including air freight and fuel prices, hurt Alarm.com’s (Nasdaq: ALRM) bottom line in its most recent quarterly report.

The company reported higher revenue of $205.4 million for the first quarter of 2022, an increase of 19.1%. However, the company’s bottom line EBITDA fell 16% to $29.9 million, albeit still higher than executives expected. The hardware margins alone have been halved from the previous 22% to just 11%. Therefore, Alarm.com announced a price increase for the second quarter.

“We are pleased with the demand for our products and services in the first quarter,” said Steve Trundle, President and CEO of Alarm.com. “We overcame the many supply chain challenges during the quarter. We provided our service providers with a high level of products to support their subscriber additions and incurred significantly higher shipping and inventory component costs while delivering higher than expected Adjusted EBITDA. Our R&D teams also delivered innovative, award-winning technology, including expanding our video analytics platform to address additional market segments.”

Trundle says the company absorbed rising component and freight costs in the first quarter that squeezed its hardware gross margins, and as a result Alarm.com faces a second price hike of the year on select products.

CFO Steve Valenzuela adds more details: “Hardware gross margin was 11% for the first quarter, flat from the previous quarter and down from 22.3% in the year-ago quarter. Hardware gross margins were lower than expected due to additional component cost increases and higher shipping costs.

“We continue to ship more products by air to meet demand and shipping costs have increased in part due to rising fuel prices. Because of these additional costs, we’ve announced our second price increase of the year for some hardware products. Most of the pricing changes will take effect later in the second quarter. Barring any additional economic impact or supply chain disruptions, we expect hardware gross margins to improve each quarter this year from Q1 levels.”

Trundle notes, “All things considered, I felt that our partners [integrators] expecting a positive year, most of their concerns centered on supply-related issues, inflationary pressures and labor restrictions rather than market challenges, competitors or product gaps.”

According to Trundle, one of the hottest segments for the company is attaching videos to their intrusion systems.

“Consumers are increasingly looking at security systems as a platform for an intelligent, multi-device smart home. Alarm.com and our service providers are driving this trend and leading the industry, especially in deploying video solutions. In 2021, our service provider partners will have videos attached to almost half of all new security and smart home accounts.”

That figure of almost 50%, according to Parks Associates, is much higher than the industry norm, which shows that about 30% of traditional home alarm systems have video surveillance.

In the first quarter, $123.2 million of Alarm.com’s revenue came from SaaS and license monitoring fees, compared to $107.4 million in the same quarter last year. The Company has $671.8 million in cash on hand.

The company expects to meet its full-year 2022 SaaS and license revenue targets in the range of $512.7 million to $513.3 million. Total sales are expected to be between $822.7 million and $853.3 million.


This article first appeared on SSI’s sister site, CEPro.com.

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