Home security and automation software provider Alarm.com (NASDAQ: ALRM) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 8.8% year on year to $254.3 million. The company’s full-year revenue guidance of $993.2 million at the midpoint came in 0.8% above analysts’ estimates. Its non-GAAP profit of $0.60 per share was 18.1% above analysts’ consensus estimates.
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Alarm.com (ALRM) Q2 CY2025 Highlights:
- Revenue: $254.3 million vs analyst estimates of $243.8 million (8.8% year-on-year growth, 4.3% beat)
- Adjusted EPS: $0.60 vs analyst estimates of $0.51 (18.1% beat)
- Adjusted EBITDA: $48.41 million vs analyst estimates of $43.34 million (19% margin, 11.7% beat)
- The company slightly lifted its revenue guidance for the full year to $993.2 million at the midpoint from $983.5 million
- Adjusted EPS guidance for the full year is $2.40 at the midpoint, beating analyst estimates by 4.5%
- EBITDA guidance for the full year is $195.8 million at the midpoint, above analyst estimates of $192.1 million
- Operating Margin: 12.6%, up from 11% in the same quarter last year
- Free Cash Flow Margin: 7.1%, similar to the previous quarter
- Market Capitalization: $2.77 billion
Company Overview
Founded in 2000 as a business unit within MicroStrategy, Alarm.com (NASDAQ: ALRM) is a software-as-a-service platform that enables users to control their security systems and smart home appliances from a single app.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Alarm.com’s sales grew at a weak 6.6% compounded annual growth rate over the last three years. This was below our standard for the software sector and is a rough starting point for our analysis.
This quarter, Alarm.com reported year-on-year revenue growth of 8.8%, and its $254.3 million of revenue exceeded Wall Street’s estimates by 4.3%.
Looking ahead, sell-side analysts expect revenue to grow 3.2% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and implies its products and services will face some demand challenges.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Alarm.com is extremely efficient at acquiring new customers, and its CAC payback period checked in at 14.6 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.
Key Takeaways from Alarm.com’s Q2 Results
We were impressed by how significantly Alarm.com blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EBITDA guidance exceeded Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 3.2% to $56.10 immediately after reporting.
Alarm.com had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
