Alarm.com Holdings, Inc. ALRM announced the pricing of $435 million worth of convertible senior notes. The private offering amount is an increase from the company’s earlier announcement to offer $350 million worth of notes.
Notably, the proposal for $350 million worth of offering was announced by Alarm.com on Jan 13.
Inside the Headlines
As noted, the notes offered are due to mature on Jan 15, 2026, and carry a 0% coupon rate. These will be considered unsecured obligations of the company. The holders of the notes can opt to convert the notes into the shares of Alarm.com or cash, or both cash and shares. Notably, $1,000 principal amount of notes can be converted into 6.7939 common shares of the company.
Also, Alaram.com can opt to redeem the notes for cash only on or after Jan 20, 2024.
Alarm.com also extended an option for the initial purchasers to buy an additional $65 million worth of notes. The additional offering is valid for 13 days.
As estimated by Alarm.com, the net proceeds (after the deduction of commissions, discounts and offering expenses) from the offering will be $421.3 million. In case the additional $65 million offering option is exercised, the net proceeds will be $484.3 million.
The proceeds from the notes offering will likely be used by the company to repay borrowings under credit agreement, acquisitions, invest in technologies or businesses, and satisfy general corporate and working capital needs.
Upon the fulfillment of customary closing conditions, the notes offering is predicted to close on Jan 20, 2021.
Alarm.com’s Debt Profile
The company’s long-term debts were $111 million at the end of the third quarter of 2020 compared with $63 million reported at the end of 2019. Interest expenses totaled $2.1 million in the first three quarters of 2020.
Notably, the company’s total debt to total capital was 20.2% and times interest earned was 30.9X at the end of the third quarter. This compares with the industry’s total debt to total capital of 49% and times interest earned of 2.2X.
Zacks Rank, Price Performance and Earnings Estimate Trend
With a market capitalization of $4.8 billion, Alarm.com presently carries a Zacks Rank #3 (Hold). The company benefits from buyouts, innovative offerings and a solid customer base despite the market-uncertainties caused by the pandemic.
In the past three months, Alarm.com’s shares have gained 64.4% compared with 18.1% growth recorded by the industry.
Furthermore, the Zacks Consensus Estimate for the company’s earnings is pegged at $1.57 for 2020 (results awaited) and $1.59 for 2021, reflecting year-over-year growth of 2% and 1.3%, respectively.
Stocks to Consider
Some better-ranked stocks in the industry are Lakeland Industries, Inc. LAKE, Brady Corporation BRC and Fortune Brands Home & Security, Inc. FBHS. While Lakeland currently sports a Zacks Rank #1 (Strong Buy), Brady and Fortune Brands carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for these companies improved for the current year. Further, positive earnings surprise for the last reported quarter was 100% for Lakeland, 10.34% for Brady and 12.26% for Fortune Brands.
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