My thoughts on

Stenlis brought to the board a little over a week ago:

This is a company I have been watching since early Spring. I rec’d them in CAPS on 3/21, and finally bought shares after they reported June quarter. Let’s take a look.


The company was founded in 2000, and IPO’d in 2015.

They currently have 788 employees. Their go to market strategy is to partner with security service providers (currently over 6,000 of them), and contributes the software interface for these providers’ customers (currently over 5M of them). Demand seems to be growing especially for Smart Home solutions they offer including video. They have residential and commercial customers.

Speaking of those 5M customers, that’s up from 2M at the end of 2014, 1M in 2012.

They acquired Connect and Piper from Icontrol Networks, which was extraordinarily well received when it was announced in June 2016. William Blair said that this cemented as the market leader, and noted:

not only because it gives the company a key customer in ADT, but also eliminates a potential competitor: “We believe Icontrol had plans to compete more directly with”

My only negative regarding the merger is that I haven’t seen any organic growth numbers since. I’d love to know if that was the large contributor to why SaaS revenue growth jumped to 40% (was averaging mid-20’s) this quarter, but I simply haven’t seen a definitive answer.

I did see a article (…) that said “The acquisition of those business units closed on March 8.” So perhaps that answers my question – ie, yes, they contributed less than a month in Q1, and a full quarter in Q2, so that’s why the SaaS revenue growth jumped from 26% to 40%. I’d still like to see confirmation of this, as well as organic growth numbers.


       Mar   Jun   Sep   Dec
2015:        52    54    57
2016:  59    64    68    70
2017:  74    86

       Mar   Jun   Sep   Dec
2015:              0.14  0.14
2016:  0.13  0.15  0.19  0.19
2017:  0.23  0.33

Market Cap: ~2.1B
PS ~7
PE ~45
Customer Count: 5M+
SaaS and license revenue renewal rate: 93%

Numbers I would like to have but don’t:
Organic growth rate
Net expansion rate

June 2017 quarter
SaaS revenue up 40% YoY
Total Revenue up 33%
GAAP net income was $9.9 million, or $0.20 per diluted share for the second quarter of 2017 compared to $1.9 million or $0.04 per diluted share for the second quarter of 2016. Net income was helped out because of a lower tax rate in 2017, and they also benefited from a $4.5 million tax benefit due to additional research and development (R&D) tax credits. I noticed their R&D spend was also up 5.5M from Q1 to Q2, though…it will be interesting to see how all this shakes out in September. My guess is they’ve been developing some cool stuff, but will try to stem the R&D increases soon. We’ll see.
Even though there are those caveats to Net Income, Operating Income also soared 110% just because revenue increased more than costs…even with R&D increasing YoY from 10.8M to 20M! I think they can continue this trend.
Total cash and cash equivalents was $68.9 million.

Guidance (specifically EPS guidance)

In December, they projected $0.73 - $0.75 EPS in 2017.

After March, they raised that (sheepishly) to $0.74 - $0.76. (Not much of a raise after beating by 8 cents in Q1 alone)

After June, they couldn’t hide anymore and raised expectations to $0.96 - $0.98! (Had to after beating by 18 cents in Q2!)

I expect that will get another big increase when the September quarter is reported.


I like their predictable revenue stream. I think they have a lot of room to balance spending and growing revenue with increasing profitability. They are relatively unfollowed and fairly boring – I think this is one reason valuation looks really good. I think by simply containing spending and dropping more and more revenue to the bottom line they can keep growing EPS rapidly, making the company a lot more valuable in the near future.

I also have to admit that I don’t know the company that well yet, and I haven’t been able to find out everything I’d like to. So I’m keeping my position small. 3.2% right now.


24 Likes is a buy in Hidden Gems.


I do not own and have no plans to do so.


I do not own and have no plans to do so.

You sound pretty definitive about that. Could you say a word about your reasons for that decision.

PE ~45

PE (Google Finance): 111
PE (TTM - Y! Finance): 192

What am I missing?

PE (Google Finance): 111
PE (TTM - Y! Finance): 192

What am I missing?

GAAP vs adjusted earnings


“I do not own and have no plans to do so.”


Sorry for the confusion. I been reading your Knowledge base at the right and I have learned a lot. Thanks for doing that. I have 25 positions and am slowly trimming back to half that. So I’m trying to stay away from new positions. But I do sometimes buy. :slight_smile:

If you buy, I may buy too. I have nothing negative on Alarm.

Thanks again for all you do.


1 Like

Thanks Wayne, I was just wondering if you know something that we didn’t. Welcome to the board!

1 Like

PE based on current price/expected full year earnings.

I think it is helpful if ‘PE’ is always prefixed by the adjective, eg TTM, rolling, forward, to avoid confusion.