Expects Growth to Slow Down This Year

Connected-home software provider (NASDAQ: ALRM) reported its fourth-quarter results after the market closed on Feb. 27. Revenue and adjusted earnings grew at a brisk pace, but the company's guidance for 2018 called for a fairly dramatic growth slowdown. Here's what investors need to know. results: The raw numbers

What happened with this quarter?

  • Software-as-a-service (SaaS) and license revenue jumped 39% year over year to $65.2 million.
  • Adjusted EBITDA was $22.2 million, up from $14.3 million in the prior-year period.
  • An $8.8 million charge related to the U.S. tax bill for the revaluation of deferred tax assets knocked down GAAP earnings. This was partially offset by a $1.1 million windfall benefit related to a newly adopted accounting standard. Both items are excluded from the non-GAAP numbers.
  • Cash flow from operations totaled $57.2 million for the full year, up from $22.6 million in 2016.
  • Cash and cash equivalents were $96.3 million at the end of the quarter, down from $140.6 million one year ago.
  • The company announced a new smart thermostat, introduced a machine-learning feature that monitors HVAC systems, and expanded the number of smart energy devices integrated with its EnergyHub Mercury 3.0 platform. provided the following guidance:

  • For the first quarter, SaaS revenue is expected to be between $66.9 million and $67.1 million.
  • Full-year SaaS and license revenue is expected to be between $282.5 million and $283 million.
  • Full-year total revenue is expected between $380 million and $382 million, with hardware and other revenue contributing between $97.5 million and $99 million.
  • Full-year non-GAAP net income is expected to be between $56 million and $57 million, or between $1.12 and $1.14 per share.

What management had to say CEO Steve Trundle summed up the company's performance:

Looking forward

While tax-related charges knocked down's bottom line, both revenue and adjusted earnings continued to grow at a double-digit pace during the fourth quarter. The company does see a slowdown coming this year, though. At the midpoint of its 2018 guidance, revenue will grow by just 12.4% compared to 2017. SaaS and license revenue is expected to grow at a faster 19.8% rate.

This expected slowdown may just be a consequence of's growth. The bigger the revenue base, the harder it is to put up giant percentage growth numbers. Given that the market for smart-home devices is still in its infancy, still has a long growth runway, even if that growth isn't quite as impressive as it has been in the past.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends Holdings. The Motley Fool has a disclosure policy.