Alarm.com Holdings, Inc.ALRM
Alarm.com Holdings, Inc. Fair Value Disclosure
Fair Value Measurements
The following tables present our assets and liabilities measured at fair value on a recurring basis (in thousands):
| Fair Value Measurements on a Recurring Basis | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
Money market accounts as of December 31, 2025 | $ | 941,134 | $ | — | $ | — | $ | 941,134 | |||||||||||||||
Money market accounts as of December 31, 2024 | 1,209,474 | — | — | 1,209,474 | |||||||||||||||||||
Equity securities with readily determinable fair value as of December 31, 2025 | 14,858 | — | — | 14,858 | |||||||||||||||||||
Equity securities with readily determinable fair value as of December 31, 2024 | 7,425 | — | — | 7,425 | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
Contingent consideration liability from acquisition as of December 31, 2025 | $ | — | $ | — | $ | 1,223 | $ | 1,223 | |||||||||||||||
Contingent consideration liability from acquisition as of December 31, 2024 | — | — | 2,169 | 2,169 | |||||||||||||||||||
The following table summarizes the change in fair value of the Level 3 contingent consideration liability with significant unobservable inputs (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning of period balance | $ | 2,169 | $ | 2,061 | $ | — | |||||||||||
Acquired liabilities | — | — | 1,993 | ||||||||||||||
| Performance target achievement payment | (1,266) | — | — | ||||||||||||||
| Changes in fair value included in earnings | 320 | 108 | 68 | ||||||||||||||
| End of period balance | $ | 1,223 | $ | 2,169 | $ | 2,061 | |||||||||||
As of December 31, 2025, $933.0 million of our money market accounts was included in cash and cash equivalents, $6.1 million was included in other assets and $2.0 million was included in other current assets in our consolidated balance sheets. As of December 31, 2024, $1.2014 billion of our money market accounts was included in cash and cash equivalents, $6.2 million was included in other assets and $1.9 million was included in other current assets in our consolidated balance sheets. Our assets from money market accounts are valued using quoted prices in active markets. Our equity securities with readily determinable fair value represent our investments in publicly traded companies, which are valued using quoted prices in active markets. During the year ended December 31, 2025, we recorded a gain on publicly traded equity securities within our treasury portfolio of $4.7 million. During the year ended December 31, 2024, we recorded a loss on publicly traded equity securities within our treasury portfolio of less than $0.1 million. Our investments in public entities are recorded at fair value within other current assets in our consolidated balance sheets and changes in fair value of the investments are recorded within other income / (expense), net within our consolidated statements of operations. See Note 14 for the carrying amount and estimated fair value of our convertible senior notes as of December 31, 2025 and 2024.
The contingent consideration liability consists of the potential earn-out payment related to our acquisition of 100% of the issued and outstanding capital stock of EBS on January 18, 2023. The earn-out payment is contingent on the satisfaction of two performance targets related to the integration of EBS's hardware into the Alarm.com platform by December 31, 2026, and has a
maximum potential payment of up to $2.5 million. We account for the contingent consideration using fair value and established a liability for the future earn-out payment based on an estimation of the probability of the future achievement of the performance targets. The contingent consideration liability was valued with Level 3 unobservable inputs, including the probability of expected achievement of the performance targets. At January 18, 2023, the fair value of the liability was $2.0 million. At each reporting date until December 31, 2026, or the achievement of the performance targets, we will remeasure the liability, using the same valuation approach. The fair value of the contingent consideration liability is included within accounts payable, accrued expenses and other current liabilities within our consolidated balance sheets. Changes in fair value resulting from information that existed subsequent to the acquisition date are recorded in general and administrative expense in the consolidated statements of operations. One of the performance targets was achieved during the year ended December 31, 2025, and the related payment of $1.3 million was made during the second quarter of 2025. The unobservable inputs used in the valuation for the remaining performance target as of December 31, 2025 included an expected achievement percentage of 100%. The valuation also included a weighted average discount rate of 4.9%, weighted by the probability of achievement of the performance targets at various dates, including a range of 4.9% to 5.0%. Selecting another probability of expected achievement or discount rate within an acceptable range would not result in a significant change to the fair value of the contingent consideration liability.
We monitor the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. There were no transfers into or out of Level 3 during the years ended December 31, 2025, 2024 and 2023. There were no reclassifications between levels of the fair value hierarchy during the years ended December 31, 2025, 2024 and 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.