Alarm.com sees considerable revenue impact following Vivint arbitration filing

TYSONS, Va. - Nov. 8 saw both Alarm.com and Vivint hold their Q3 earnings calls, but it’s Alarm.com that is left holding the short end of the stick as it has filed for arbitration against the latter.

The aftermath of the Q3 report saw Vivint’s stock surge 20% to close at $8.44 by days end. Alarm.com comparatively slipped in late October after an update provided on a licensing dispute with Vivint that will have a major impact for the company beginning in Q4 and continuing into the next year. Vivint notified Alarm.com in September that under the terms of their cross-license agreement that they were no longer obligated to make certain license fee payments and as a result have halted them.

“Shifting gears, I want to address the Vivint matter and how it relates to our initial look for 2023,” President & Chief Executive Officer of Alarm.com, Steve Trundle, said. “As you know Vivint recently notified us that it will stop paying Alarm.com the royalty fees associated with the patent license agreement that we reached with Vivint in 2013. We have filed for arbitration under our agreement. We expect the arbitration process, which is confidential and not open to the public like traditional litigation to take about 12 to 16 months.”

He continued, “We intend to continue aggressively defending the investments we have made in our technology over the course of 20 years, including our global patent portfolio of over 600 issued patents and additional patents pending. As we previously disclosed regarding the Vivint matter, Alarm.com believes that quarterly SaaS and license revenue and total revenue will be impacted by approximately $6 million per quarter beginning with the fourth quarter of 2022 and through 2023.”

During Q&A one caller questioned whether ADT, another large license revenue partner of Alarm.com might follow suit in failing to pay fees. Trundle dismissed concerns and described the two company’s relationships as being inherently different, calling it a “very positive relationship”.

In Vivint’s call, the dispute with Alarm.com was barely mentioned. “So, in late September we notified Alarm.com that under the terms of the cross-license agreement that we are no longer obligated to make certain license fee payments,” David Bywater, CEO of Vivint stated. “We feel very confident in our position. Beyond that, it’s our policy not to comment on any litigation, but we feel very good about that decision given the cross-license agreement and that’s our position there.”

In total Alarm.com estimated a loss of $6 million dollars per quarter from lost revenue from the unpaid licensing fees. The company stated that it did not want to be constrained in its legal options in 2023 and budgeted between $16 million and $20 million

“We want to be positioned to deploy a full legal budget without surprising our investors next year,” Trundle said.