ALARM.COM HOLDINGS, INC. (ALRM): what the price assumes

In the published model solve dated 2026-Q2, anchored at $57.47, ALARM.COM HOLDINGS, INC. (ALRM) is priced for +15.9% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/ALRM

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 11: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.9% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.6%); the inversion above states its own rate.

Per-Model Detail (n=12)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Recurring software is about 68% of revenue, but the hardware Alarm.com also ships pulls the blended operating margin down to roughly 12.8%, so the income statement reads like an equipment maker while the business underneath is a subscription platform.
• Customer concentration is the specific risk, and the 10-K puts a number on it: "ADT LLC, or ADT, represented greater than 15% but not more than 20% of our revenue in each of 2023, 2024 and 2025."
• Second-quarter results are due after the close on August 6, 2026, against full-year 2026 total revenue guidance of $1.0595 billion to $1.0705 billion.

Bull Case

Roughly 68% of revenue is software, and the multiple is not. That mismatch is the most interesting number in this company. SaaS and license fees are the recurring, high-margin part: a monthly charge paid by security dealers for every subscriber account running on the platform, month after month, with no reinstallation involved. The other 32% of revenue is hardware, which carries equipment economics and drags the blend. Put the two through one income statement and the reported operating margin is about 12.8%, which looks like a mid-tier manufacturer. The market has read it that way, paying about 16 times company-wide operating income and placing the shares in the lower half of the multiple range its peer group commands.

The reason the software half is durable has to do with who does the installing. Alarm.com "market[s] and sell[s] our platforms and solutions through a channel assisted sales model", meaning a professional dealer puts the panel on the wall, connects the sensors and hands the homeowner an app. Pricing then works per account: "The fee paid by our service provider partners each month for the delivery of our solutions is based on the combination of packages and add-ons enabled for each subscriber. We utilize tiered pricing plans where our service provider partners may receive prospective pricing discounts driven by volume." Once a house is wired to one platform, moving it to another means a technician revisiting every device in it. That physical friction is the moat, and it is unusually literal.

The recent numbers say the model is still working. First-quarter 2026 revenue reached $265.19 million, growth of about 11%, and the company raised its full-year SaaS and license guidance to a range of $749.5 million to $750.5 million. Growth in the recurring line at that pace, at that scale, with retention holding, is the whole thesis in one sentence: the subscriber base keeps compounding while the platform cost of serving the next account rounds toward nothing.

Capital discipline is the quiet part. The company retired $500.0 million of maturing convertible notes on January 14, 2026, funding it out of its own investment portfolio rather than by issuing stock, and the share count has risen only about 0.5% a year over the four years to March 2026. For a software business of this size that is close to no dilution at all, which means the per-share arithmetic actually captures the growth in the underlying business rather than leaking it to compensation. Add the adjacent lines the company has been building out, video surveillance software sold on a one-time licence, gunshot detection, and commercial energy, and the platform has more places to send an incremental engineer than the security panel alone.

Bear Case

Arlo (ARLO) sells the end state this business model exists to prevent. Its own filing describes "Arlo Total Security is a comprehensive subscription service that offers 24/7 professional monitoring and security hardware with affordable monthly pricing and no upfront costs." No dealer, no truck, no installer margin, no multi-year commitment: the customer buys a camera and a subscription. Arlo runs $560.6 million of revenue growing 10.8%, Samsara (IOT) grows 29.6% selling connected-device software into commercial fleets, and ADT (ADT) runs $5.14 billion of revenue at a 25.6% operating margin while working through a subscriber base it describes as still substantially legacy. Alarm.com's own 10-K names the field without flinching, warning of competition "from other established and emerging home automation, security monitoring, video monitoring and automation, and energy management companies as well as large technology" companies.

That competition lands with unusual force because Alarm.com does not hold the customer relationship. The 10-K is explicit about the concentration it creates: "ADT LLC, or ADT, represented greater than 15% but not more than 20% of our revenue in each of 2023, 2024 and 2025." And the contract terms run the wrong way round. "Contracts with our service provider partners 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" subscribers. The dealer signs the homeowner for three to five years. Alarm.com signs the dealer for one. What looks like an annuity is a stack of annual renewals negotiated with counterparties who have platform alternatives, and the largest of them is close to a fifth of the business.

The other side of the table is consolidated too. The filing notes that "the top six dealers represented approximately 37% of all industry recurring monthly revenue in 2024. The distribution of revenue among our service provider partners is reflective of the industry overall." Bargaining power concentrated among a handful of buyers, tiered pricing that already hands them discounts as volume grows, and a one-year renewal cycle is not the structure of a business that can raise price at will. It is the structure of one that has to keep earning the right to be the default.

Only now does the price matter. Today's level asks for operating profit to compound about 13.7% a year over a five-year horizon, and roughly 53% of comparable fast growers held a pace like that across a stretch that long. Revenue is guided to grow at a high single-digit to low double-digit rate this year, so profit growing meaningfully faster than that requires the mix to keep tilting toward software. A channel that can slow the attachment of new services is precisely the mechanism that would stall the tilt, and the price has no allowance in it for a flat year.

The capital structure is a smaller issue but not a nil one. The maturing notes were retired in January 2026, and the borrowing that remains was raised on convertible terms: "On May 31, 2024, we issued $500.0 million aggregate principal amount of 2.25% convertible senior notes due June 1, 2029, in a private placement to qualified institutional buyers and received proceeds of $485.2 million, net of $14.8 million of transaction fees and other debt issuance costs." Conversion is not a solvency problem. It is a claim on the upside if the equity performs, which is exactly the scenario the current level is paying for.

Valuation

Two businesses share one income statement here, and the valuation is set on the blend. Recurring software is about 68% of revenue and hardware is the other 32%, so the reported operating margin of roughly 12.8% describes neither of them accurately. Working from that blended figure, the market is paying about 16 times company-wide operating income, which asks for operating profit to compound roughly 13.7% a year over a five-year horizon. Alarm.com's own record supports that rate comfortably. The demand is the persistence, and roughly 53% of comparable fast growers kept a pace like that going for a comparable stretch.

The lenses split along a line that says something specific rather than something alarming. The peer multiple lens and the growth-based cash-flow work both land above today's level. The asset value lenses and the earnings power methods land below it, with the price sitting at about 2.15 times where the earnings power methods reach. That gap is not a verdict on quality; it is the distance between valuing this company on the five-year average operating profit it has produced, with no growth credited at all, and valuing it on what it currently earns with the recurring line still compounding. Everything in this report turns on which of those two descriptions is closer to the next five years.

The cohort supports the middling read. Napco Security (NSSC) converts 19.9% of revenue to operating profit on a $197.2 million base growing 8.8%; ADT (ADT) converts 25.6% on $5.14 billion growing 3.3%; Arlo (ARLO) converts 2.7% while growing 10.8%; Samsara (IOT) grows 29.6% and converts nothing yet. Alarm.com sits in the middle of that spread on both axes, and the multiple it commands sits in the lower half of the same group's range. Nothing about the price is being stretched to accommodate a story.

Leverage is not the question that decides this one. The company retired $500.0 million of maturing convertible notes in January 2026 out of its own investment portfolio, the borrowing that remains is convertible and does not mature until 2029, and the share count has risen only about 0.5% a year over the four years to March 2026. A balance sheet like that removes financing risk from the analysis almost entirely. What it cannot do is answer the channel question, and the channel question is the one this price is genuinely exposed to.

Catalysts

The August print is the first real test of a raised number. Second-quarter results are due after the close on August 6, 2026, and they follow a first quarter in which revenue reached $265.19 million on growth of about 11%, ahead of what the street had modelled.

The guidance that came with it is the number to hold management to. Full-year 2026 SaaS and license revenue was raised to a range of $749.5 million to $750.5 million, with total revenue guided to $1.0595 billion to $1.0705 billion. Those two ranges are unusually tight, which tells you the recurring line is highly forecastable and the hardware line is where the variance lives. Watch the split rather than the headline: the recurring line is the one the valuation depends on, and hardware moving around inside a total that lands in range would say nothing at all.

The second thing worth watching has no scheduled date, which is why it is easy to ignore. Alarm.com's contracts with its service providers renew annually, and its largest provider accounts for between fifteen and twenty percent of revenue. Any disclosure about that relationship, in a quarterly filing or a call, carries more weight for the next five years than a revenue beat does. It is the sort of item that shows up as a sentence rather than a number, and it moves more of the thesis than the guidance range will.

Peer Cohorts (Per Segment, With Filing Citations)

Alarm.com (reported)

• NSSC (NAPCO SECURITY TECHNOLOGIES, INC)
• FY2025 10-K: …and universities have large endowments which are starting to be utilized to address this critical issue. Security equipment and services focused on education has reached over $3 billion in revenues and this segment is still in the early stages as many K-12 schools, colleges and universities have still not addressed…
• FY2025 10-K: …made up of distributors, installing dealers and wholesalers who purchase our products directly from the Company as well as many more who purchase our products from these distributors. The Company's sales representatives periodically contact existing and potential customers to introduce new products and create demand…
• ARLO (ARLO TECHNOLOGIES, INC.)
• FY2025 10-K: Arlo Total Security Arlo Total Security is a comprehensive subscription service that offers 24/7 professional monitoring and security hardware with affordable monthly pricing and no upfront costs. At the heart of this innovative subscription service is Arlo's Home Security System, which uses a first-of-its-kind,…
• FY2025 10-K: …advanced AI-based detection, DIY home security as well as professional monitoring, and an enhanced Emergency Response capability. These premium services boast support for unlimited household security devices, along with advanced AI object detection, and smarter, more interactive notifications. Additionally, the 24/7,…
• ADT (ADT Inc.)
• FY2025 10-K: …which could require us to further upgrade certain of our customer equipment. Furthermore, a majority of our existing subscriber base uses legacy systems, such as ADT Pulse or non-interactive legacy burglar alarm systems, and associated hardware that are nearing or have reached the end of their supported lifecycles.…
• FY2025 10-K: …due under an alarm monitoring or other service contract and are generally contractually obligated to pay cancellation fees if they prematurely cancel the contract during its initial term (typically between two and five years), customers' payment 38 Table of Contents obligations are unsecured, which could impair our…
• IOT (SAMSARA INC.)
• FY2025 10-K: …Cold Chain Monitoring. For customers with refrigerated trailers, our solution allows for real-time temperature monitoring and remote refrigeration control, reducing the risk of load loss and simplifying compliance reporting. • Track Time on Site. Customers can automate time-on-site reports using geofences and GPS…
• FY2025 10-K: …0001642896 false 2025 FY P3Y P3Y http://fasb.org/us-gaap/2024#PrepaidExpenseAndOtherAssetsCurrent http://fasb.org/us-gaap/2024#PrepaidExpenseAndOtherAssetsCurrent http://fasb.org/us-gaap/2024#OtherAssetsNoncurrent http://fasb.org/us-gaap/2024#OtherAssetsNoncurrent…

Other (reported)

• ADT (ADT Inc.)
• FY2025 10-K: L.C., Energypro LLC and Wells Fargo Bank, National Association 10-Q 4.7 5/6/2022 4. 2 4 Fifth Supplemental Indenture, dated as of April 28, 2022, by and among Prime Security Services Borrower, LLC, Prime Finance, Inc., ADT Innovation LLC and Wells Fargo Bank, National Association 10-Q 4.8 5/6/2022 4. 2 5 First…
• FY2025 10-K: Form Exhibit Filing Date 4.3 0 Second Supplemental Indenture, dated as of April 28, 2022, by and among The ADT Security Corporation, ADT Innovation LLC and Wells Fargo Bank, National Association 10-Q 4.14 5/6/2022 4.3 1 First-Priority Senior Secured Notes Indenture, dated as of October 15, 2025, by and among The ADT…
• ARLO (ARLO TECHNOLOGIES, INC.)
• FY2025 10-K: …not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely…
• FY2025 10-K: …in Part I, Item 1A below, and elsewhere in this Annual Report on Form 10-K, including, among other things: future demand for our products may be lower than anticipated; consumers may choose not to adopt our new product offerings or adopt competing products; the actual price, performance and ease of use of our…
• NSSC (NAPCO SECURITY TECHNOLOGIES, INC)
• FY2025 10-K: …statements by the words "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "objective," "ongoing," "plan," "predict," "project," "potential," "should," "will," "would," or the negative or plural of these words or other comparable terminology intended to identify statements…
• FY2025 10-K: …as amended Exhibit-3.(ii) to Report on Form 10-K (Commission file No. 0-10004) for the fiscal year ended June, 30 2011 ​ Table of Contents Ex-3.(iii) Second Amended and Restated By-Laws Exhibit 10.3 to Report on Form 8-K (Commission file No. 0-10004) filed on September 8, 2020 Ex-3.(iv) Amendment to the Amended and…
• EVCM (EverCommerce Inc.)
• FY2025 10-K: …restructuring of operations, exclusion from participation in governmental healthcare programs and imprisonment. I-10 Intellectual property Protecting our intellectual property and proprietary technology is an important aspect of our business and continued growth. We rely on a combination of trademark, copyright,…
• FY2025 10-K: …the end-customers they serve and use this Personal Information for various purposes, including to provide services to such customers and end-customers, as well as to support, expand and improve our business. U.S. (including U.S. state) and foreign governments have adopted laws and regulations on the collection,…
• BLKB (Blackbaud, Inc.)
• FY2025 10-K: …results and financial condition. A large percentage of our customers are nonprofits, foundations, education institutions, healthcare organizations and other members of the social impact community that fully or partially rely on charitable donations. If charitable giving, including online giving, does not continue to…
• FY2025 10-K: …General and the District of Columbia that fully resolved a multi-state Civil Investigative Demand and the separate Civil Investigative Demand from the Office of the Indiana Attorney General relating to the Security Incident; reached a settlement with the U.S. Federal Trade Commission (the "FTC") in connection with…
• VERX (Vertex, Inc.)
• FY2025 10-K: …tornados, hurricanes, floods and earthquakes may damage the facilities of our customers or those of their suppliers or retailers or their other operations, which could lead to reduced revenue for our customers and thus could result in declines in our revenue that is aligned with customer transaction volume. In…
• FY2025 10-K: …is identified, obtained through purchase or license, and integrated into our solutions, any of which may reduce demand for our solutions and increase our expenses. In addition, third-party licenses may expose us to increased risks, including risks associated with the integration of new technology, the diversion of…
• SSNC (SS&C TECHNOLOGIES HOLDINGS, INC.)
• FY2025 10-K: …regarding intellectual property rights, delays in product development, investment decisions concerning cash balances, tax risks, risks associated with our joint ventures, changes in accounting standards, our exposure to litigation and other claims, risks related to our substantial indebtedness, and the potential…
• FY2025 10-K: …information. We have registered trademarks, service marks, domain names, and logos for some of our products and will continue to evaluate the registration of additional trademarks, service marks, domain names, and logos as appropriate. We generally enter into confidentiality agreements or intellectual property…
• MANH (MANHATTAN ASSOCIATES, INC.)
• FY2025 10-K: …ability to meet our customer obligations; • customer demand for our products could decline or they may request extended payment terms for products purchased due to their need to reduce their information technology expense or preserve cash, or as a result of reductions in their sales and profits; • customers could…
• FY2025 10-K: …platforms, and Material Handling Equipment systems. At times, third-party consultants, such as those from major systems integrators, assist our customers with certain implementations. Training and Change Management Services We offer training and change management services for new and existing users, enabling our…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.