Software and Hardware Drive Growth for

By Timothy

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Cloud-based connected-home platform provider (NASDAQ: ALRM) reported its third-quarter results after the market closed on Nov. 14. Revenue grew by more than 25% compared with the third quarter of 2015, driven by both software and hardware sales. Higher operating costs hurt GAAP profitability, but adjusted earnings grew faster than revenue. Here's what investors need to know about's third-quarter results. results: The raw numbers

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YOY = year over year. Data source: Q3 earnings report.

What happened with this quarter? reported strong revenue growth, while higher costs knocked down GAAP profits.

  • Software-as-a-service and license revenue was $44.6 million, up 23.4% year over year.
  • Hardware and other revenue was $23.2 million, up 30.1% year over year.
  • Adjusted EBITDA increased by 20.6% year over year to $11.7 million.
  • GAAP operating expenses rose 28.1% year over year, a bit faster than revenue, which contributed to a 26.6% decline in operating profit.
  • named Steve Valenzuela as its chief financial officer, effective Nov. 15.
  • Total cash and cash equivalents grew to $135.1 million, up from $128.4 million at the end of 2015.
  • Cash flow from operations through the first nine months of 2016 was $8.8 million, down from $21.2 million during the prior-year period. provided a limited amount of guidance for the fourth quarter, and it raised its outlook for the full year.

  • Fourth-quarter SaaS and license revenue is expected to be in the range of $45.8 million to $46.1 million.
  • Full-year SaaS and license revenue is expected to be in the range of $172.5 million to $172.8 million, with total revenue between $254.0 million and $256.3 million.
  • Full-year adjusted EBITDA is expected to be between $45.3 million and $45.8 million.
  • Full-year non-GAAP net income is expected to be in the range of $28.0 million to $28.5 million, or $0.58 to $0.59 per share.

What management had to say President and CEO Steve Trundle summed up the quarter:

The company's earnings press release also highlighted the success of its platform during Hurricane Matthew:

Looking forward's strategy of partnering with over 6,000 service providers has caused its software to be widely used, with 2.6 million subscribers. The market for monitored home security systems in the U.S. is nearly 10 times as big as the company's current subscriber base, according to the company, leaving plenty of room for growth going forward.

With SaaS and license revenue renewal rates consistently topping 90%, is building a business defined by predictable revenue. The third quarter featured strong revenue growth and growing profits, adjusted for costs related to acquisitions and litigation. The company is expecting more of the same in the fourth quarter.

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Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.