Alarm.com Holdings, Inc.ALRM
Alarm.com Holdings, Inc. Stock Compensation Disclosure
Stock-Based Compensation
Stock-based compensation expense is included in the following line items in the consolidated statements of operations (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Cost of hardware and other revenue | $ | — | $ | 2 | $ | 5 | |||||||||||
| Sales and marketing | 2,441 | 2,833 | 3,522 | ||||||||||||||
| General and administrative | 10,474 | 13,080 | 13,028 | ||||||||||||||
| Research and development | 20,275 | 25,327 | 30,728 | ||||||||||||||
| Total stock-based compensation expense | $ | 33,190 | $ | 41,242 | $ | 47,283 | |||||||||||
The following table summarizes the components of non-cash stock-based compensation expense (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Stock options | $ | 3,902 | $ | 4,237 | $ | 4,166 | |||||||||||
| Restricted stock units | 29,082 | 36,792 | 42,924 | ||||||||||||||
| Employee stock purchase plan | 206 | 213 | 193 | ||||||||||||||
| Total stock-based compensation expense | $ | 33,190 | $ | 41,242 | $ | 47,283 | |||||||||||
Tax (shortfall) / windfall benefit from stock-based awards | $ | (1,025) | $ | 1,829 | $ | (508) | |||||||||||
2025 Equity Incentive Plan
We issue stock options pursuant to our 2025 Plan. The 2025 Plan allows for the grant of stock options to employees and for the grant of nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, or RSUs, performance-based stock awards, and other forms of equity compensation to our employees, directors and non-employee directors.
On April 17, 2025, our board of directors adopted, and on June 4, 2025, our stockholders approved, our 2025 Plan. The 2025 Plan provides that (i) no new awards may be granted under the 2015 Equity Incentive Plan, or 2015 Plan, as of June 4, 2025, although awards granted under the 2015 Plan prior to June 4, 2025, will remain outstanding in accordance with their terms and those of the 2015 Plan, and (ii) the shares of common stock that were available for grant under the 2015 Plan but were unissued as of June 4, 2025, became available for issuance pursuant to awards granted under the 2025 Plan. Additionally, no
further grants may be made under the Amended and Restated 2009 Stock Incentive Plan, or the 2009 Plan. As of December 31, 2025, 10,774,498 shares remained available for future grant under the 2025 Plan.
Stock Options
Stock options under the 2025 Plan and the 2015 Plan have been granted at exercise prices based on the closing price of our common stock on the date of grant. Stock options under the 2009 Plan were granted at exercise prices as determined by the board of directors to be the fair market value of our common stock. Our stock options generally vest over a five-year period and each option, if not exercised or forfeited, expires on the th anniversary of the grant date.
Certain stock options granted under the 2025 Plan and previously granted under the 2015 Plan and 2009 Plan may be exercised before the options have vested. Unvested shares issued as a result of early exercise are subject to repurchase by us upon termination of employment or services at the original exercise price. The proceeds from the early exercise of stock options are initially recorded as a current liability and are reclassified to common stock and additional paid-in capital as the awards vest and our repurchase right lapses. There were no unvested shares of common stock outstanding subject to our right of repurchase as of December 31, 2025 and 2024. We did not repurchase any unvested shares of common stock related to early exercised stock options in connection with employee terminations during the years ended December 31, 2025, 2024 and 2023. There were no proceeds from the early exercise of the unvested stock options reflected in accounts payable, accrued expenses and other current liabilities on our consolidated balance sheets as of December 31, 2025 and 2024.
We account for stock-based compensation options based on the fair value of the award as of the grant date. We recognize stock-based compensation expense using the accelerated attribution method, net of actual forfeitures, in which compensation cost for each vesting tranche in an award is recognized ratably from the service inception date to the vesting date for that tranche.
We value our stock options using the Black-Scholes option pricing model, which requires the input of subjective assumptions, including the risk-free interest rate, expected term, expected stock price volatility and dividend yield. The risk-free interest rate assumption is based upon observed interest rates for constant maturity U.S. Treasury securities consistent with the expected term of our stock options. Beginning upon the first grant of options in 2022, the expected term for options granted is estimated using our historical experience, including information related to options we have granted. The expected volatility for options granted is based on historical volatilities of our stock over the estimated expected term of the stock options.
There were 145,500, 138,750 and 237,400 stock options granted during the years ended December 31, 2025, 2024 and 2023, respectively. We declared and paid dividends in June 2015 in anticipation of our IPO, which we closed on July 1, 2015. Subsequent to the IPO, we do not expect to declare or pay dividends on a recurring basis. As such, we assume that the dividend rate is 0%.
The following table summarizes the assumptions used for estimating the fair value of stock options granted:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Volatility | 39.0 - 39.3% | 39.7 - 41.1% | 40.9 - 41.9% | ||||||||||||||
| Expected term | 5.6 - 5.7 years | 5.5 - 5.6 years | 5.4 - 5.6 years | ||||||||||||||
| Risk-free interest rate | 3.7 - 4.2% | 3.7 - 4.4% | 3.3 - 4.4% | ||||||||||||||
| Dividend rate | — | % | — | % | — | % | |||||||||||
The following table summarizes stock option activity:
| Number of Options | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||
| Outstanding as of December 31, 2024 | 1,123,860 | $ | 50.74 | 5.8 | $ | 14,974 | |||||||||||||||||
| Granted | 145,500 | 57.29 | |||||||||||||||||||||
| Exercised | (120,525) | 22.21 | 3,936 | ||||||||||||||||||||
| Forfeited | (51,552) | 66.07 | |||||||||||||||||||||
| Expired | (171) | 11.55 | |||||||||||||||||||||
| Outstanding as of December 31, 2025 | 1,097,112 | $ | 54.02 | 5.8 | $ | 5,187 | |||||||||||||||||
| Vested and expected to vest as of December 31, 2025 | 1,097,112 | $ | 54.02 | 5.8 | $ | 5,187 | |||||||||||||||||
| Exercisable as of December 31, 2025 | 649,482 | $ | 50.06 | 4.2 | $ | 5,182 | |||||||||||||||||
The weighted average grant date fair value for our stock options granted during the years ended December 31, 2025, 2024 and 2023 was $24.94, $29.16 and $23.01, respectively. The total fair value of stock options vested during the years ended December 31, 2025, 2024 and 2023 was $3.8 million, $4.2 million and $3.3 million, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2025, 2024 and 2023 was $3.9 million, $9.3 million and $5.6 million, respectively. As of December 31, 2025, the total compensation cost related to nonvested awards not yet recognized was $5.1 million, which will be recognized over a weighted average period of 2.2 years. Cash received from exercises of stock options was $2.7 million, $8.3 million and $2.0 million during the years ended December 31, 2025, 2024 and 2023, respectively.
Restricted Stock Units
There was an aggregate of 709,762, 628,394 and 558,747 RSUs without performance conditions granted to certain of our employees and directors during the years ended December 31, 2025, 2024 and 2023, respectively. There were 25,205 RSUs with performance conditions granted during the year ended December 31, 2025. There were no RSUs with performance conditions granted during the years ended December 31, 2024 and 2023. The time-based RSUs vest over a five-year period from the vesting commencement date, which is generally the grant date. The performance-based RSUs vest when the related performance conditions are met. Vested RSUs include the amount of shares withheld to satisfy tax withholding requirements to be paid by us on behalf of our employees, when applicable. We account for RSUs based on the fair value of the award as of the grant date. We recognize stock-based compensation expense for time-based RSUs using the accelerated attribution method, net of actual forfeitures, in which compensation cost for each vesting tranche in an award is recognized ratably from the grant date to the vesting date for that tranche. The condition for vesting of the RSUs is based on continued employment. We recognize stock-based compensation expense for performance-based RSUs based on management’s determination of the probable outcome of the performance conditions and we record a cumulative adjustment in periods in which there is a change in the estimated number of shares expected to vest. As of December 31, 2025, the total unrecognized compensation expense related to RSUs without performance conditions was $53.2 million, which is expected to be recognized over a weighted average period of 2.5 years. As of December 31, 2025, the total unrecognized compensation expense related to RSUs with performance conditions was $1.3 million, which is expected to be recognized over a weighted average period of 2.2 years.
The following table summarizes RSU activity:
| RSUs without Performance Conditions | RSUs with Performance Conditions | ||||||||||||||||||||||||||||||||||
| Number of RSUs | Weighted Average Grant Date Fair Value | Aggregate Intrinsic Value (in thousands) | Number of RSUs | Weighted Average Grant Date Fair Value | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||||||||||||
| Outstanding as of December 31, 2024 | 1,819,320 | $ | 64.97 | $ | 110,615 | 154,361 | $ | 80.83 | $ | 9,385 | |||||||||||||||||||||||||
| Granted | 709,762 | 53.15 | 25,205 | 49.97 | |||||||||||||||||||||||||||||||
| Vested | (565,058) | 65.83 | 31,561 | (61,895) | 74.15 | 3,329 | |||||||||||||||||||||||||||||
| Forfeited | (184,340) | 62.31 | (9,799) | 85.35 | |||||||||||||||||||||||||||||||
| Outstanding as of December 31, 2025 | 1,779,684 | $ | 60.25 | $ | 90,799 | 107,872 | $ | 77.05 | $ | 5,504 | |||||||||||||||||||||||||
| Vested and expected to vest as of December 31, 2025 | 1,779,684 | $ | 60.25 | $ | 90,799 | 55,872 | $ | 69.82 | $ | 2,851 | |||||||||||||||||||||||||
The weighted average grant date fair value for our RSUs without performance conditions granted during the years ended December 31, 2025, 2024 and 2023 was $53.15, $65.29 and $55.40, respectively. The weighted average grant date fair value for our RSUs with performance conditions granted during the year ended December 31, 2025 was $49.97. The total fair value of RSUs without performance conditions vested during the years ended December 31, 2025, 2024 and 2023 was $37.2 million, $37.0 million and $45.3 million, respectively. The total fair value of RSUs with performance conditions vested during the years ended December 31, 2025, 2024 and 2023 was $4.6 million, $2.0 million and $3.2 million, respectively.
Employee Stock Purchase Plan
Our board of directors adopted our 2015 ESPP in June 2015. As of December 31, 2025, 1,831,595 shares have been reserved for future grant under the 2015 ESPP. The 2015 ESPP allows eligible employees to purchase shares of our common stock at 90% of the fair market value, rounded up to the nearest cent, based on the closing price of our common stock on the purchase date. The maximum number of shares of our common stock that a participant may purchase during any calendar year shall not exceed such number of shares having a fair market value equal to the lesser of $15,000 or 10% of the participant's base compensation for that year.
The 2015 ESPP is considered compensatory for purposes of share-based compensation expense due to the 10% discount on the fair market value of the common stock. An aggregate of 34,449, 29,946 and 33,639 shares were purchased by employees for the years ended December 31, 2025, 2024 and 2023, respectively, for which we recognized $0.2 million of compensation expense during each of those years. Compensation expense is recognized for the amount of the discount, net of actual forfeitures and voluntary withdrawals, over the six-month purchase period.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.