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Other Assets | 3 Months Ended
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Mar. 31, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] |
Other Assets | Other Assets Loan to a Distribution Partner In December 2022, we amended a subordinated credit agreement with the affiliated entity of one of our distribution partners. The amended subordinated credit agreement with the affiliated entity of the distribution partner matures on June 18, 2027 and interest on the outstanding principal balance accrues at a rate of 12.0% per annum and is payable in kind. As of March 31, 2023 and December 31, 2022, $4.1 million and $4.0 million of the notes receivable balance related to the subordinated credit agreement was included in other assets in our condensed consolidated balance sheets, respectively. For the three months ended March 31, 2023, we recognized $0.8 million of revenue from the distribution partner associated with this loan, as compared to $0.6 million for the same period in the prior year. Loan to a Service Provider Partner In July 2020, we entered into a loan agreement with a service provider partner, under which we agreed to loan the service provider partner up to $2.5 million, collateralized by the assets of the service provider partner. Interest on the outstanding principal accrues at a rate per annum equal to 9.0% and monthly interest and principal payments began in April 2021. The maturity date of the loan is July 24, 2025. As of March 31, 2023 and December 31, 2022, $1.1 million of principal was outstanding from the service provider partner under the loan agreement. For three months ended March 31, 2023 and 2022, we recognized less than $0.1 million of revenue from the service provider partner associated with this loan. Loan to a Technology Partner In June 2022, we entered into a convertible promissory note with a technology partner, under which we agreed to loan the technology partner $1.5 million. Interest on the outstanding principal accrues at a rate per annum equal to 6.5%, starting one year from the effective date of the loan. Interest and principal payments are due on the maturity date of the loan, which is June 27, 2029, unless the loan is converted prior to the maturity date, which may occur upon a qualified financing event, as defined in the convertible promissory note, upon a sale of the technology partner or upon our election on the maturity date of the loan. As of March 31, 2023 and December 31, 2022, $1.5 million of principal was outstanding from the technology partner under the convertible promissory note. For the three months ended March 31, 2023 and 2022, we did not record any revenue from the technology partner associated with this convertible promissory note. Investment in a Hardware Supplier In October 2018, we entered into a subordinate convertible promissory note with one of our hardware suppliers. In July 2019, we converted the outstanding notes receivable balance of $5.6 million into 9,520,832 shares of Series B preferred stock in the hardware supplier. We concluded that the $5.6 million equity investment, which is included in the Alarm.com segment, does not meet the criteria for consolidation and will be accounted for using the measurement alternative. Under the alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments. As of March 31, 2023 and December 31, 2022, our investment in the hardware supplier was $5.6 million. Investments in Technology Partners In February 2021, we paid $5.0 million in cash to purchase 1,000,000 shares of Series B-2 Preferred Stock from a technology partner as part of a financing round that included other investors. The $5.0 million equity investment, which is included in the Alarm.com segment, does not meet the criteria for consolidation and is accounted for using the measurement alternative. Under the measurement alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted for observable price changes from orderly transactions for identical or similar investments. As of March 31, 2023 and December 31, 2022, our investment in the technology partner was $5.7 million. In December 2022, we paid $5.1 million in cash to another technology partner to purchase 4,231,717 shares of its Series A Preferred Stock. The $5.1 million equity investment, which is included in the Alarm.com segment, does not meet the criteria for consolidation and is accounted for using the measurement alternative. As of March 31, 2023 and December 31, 2022, our investment in the technology partner was $5.1 million. Allowance for Credit Losses - Notes Receivable We identified the following two portfolio segments for our notes receivable: (i) loan receivables and (ii) hardware financing receivables. There were no changes to our portfolio segments for our notes receivable during the three months ended March 31, 2023, and no changes to our policies or practices involving the issuance of notes receivable, customer acquisitions or any other factors that influenced our estimate of expected credit losses for notes receivable. There were no hardware financing receivables outstanding as of March 31, 2023 and December 31, 2022. We do not accrue interest on notes receivable that are considered impaired or are 90 days or greater past due based on their contractual payment terms. Notes receivable that are 90 days or greater past due are placed on nonaccrual status. Notes receivable may be placed on nonaccrual status earlier if, in management’s opinion, a timely collection of the full principal and interest becomes uncertain. After a note receivable has been placed on nonaccrual status, interest will be recognized when cash is received. A note receivable may be returned to accrual status after all of the customer’s delinquent balances of principal and interest have been settled, and collection of all remaining contractual amounts due is reasonably assured. We have elected not to measure an allowance for credit losses for accrued interest receivables. We write-off any accrued interest on notes receivable that are considered impaired or are 90 days or greater past due based on their contractual payment terms by reversing interest income. The accrued interest receivable as of March 31, 2023 and December 31, 2022 was less than $0.1 million, and is reflected in other current assets within our condensed consolidated balance sheets and excluded from the amortized cost basis of the notes receivable. We did not write-off any accrued interest receivable during the three months ended March 31, 2023 and 2022. There were no purchases or sales of financial assets during the three months ended March 31, 2023 and 2022. There were no significant changes in the amount of note receivable write-offs during the three months ended March 31, 2023, as compared to historical periods. The changes in our allowance for credit losses for notes receivable are as follows (in thousands):
| Three Months Ended March 31, 2023 |  | Three Months Ended March 31, 2022 |  |  |  |
| Loan Receivables |  | Hardware Financing Receivables |  | Loan Receivables |  | Hardware Financing Receivables |  |  |  |  |  |  |  |
Beginning of period balance | $ | (2) |  |  | $ | — |  |  | $ | (79) |  |  | $ | (1) |  |  |  |  |  |  |  |  |
Recovery of expected credit losses | — |  |  | — |  |  | 78 |  |  | — |  |  |  |  |  |  |  |  |
Write-offs | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |  |  |
End of period balance | $ | (2) |  |  | $ | — |  |  | $ | (1) |  |  | $ | (1) |  |  |  |  |  |  |  |  |
We manage our notes receivables using delinquency as a key credit quality indicator. The following tables reflect the current and delinquent notes receivable by class of financing receivables and by year of origination (in thousands):
| March 31, 2023
Loan Receivables: | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Total
Current | $ | 300 |  |  | $ | 1,500 |  |  | $ | — |  |  | $ | 1,079 |  |  | $ | 1 |  |  | $ | 4,134 |  |  | $ | 7,014 |
30-59 days past due | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
60-89 days past due | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
90-119 days past due | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
120+ days past due | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 300 |  |  | $ | 1,500 |  |  | $ | — |  |  | $ | 1,079 |  |  | $ | 1 |  |  | $ | 4,134 |  |  | $ | 7,014 |
| December 31, 2022
Loan Receivables: | 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  | Total
Current | $ | 1,500 |  |  | $ | — |  |  | $ | 1,093 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 4,015 |  |  | $ | 6,609 |
30-59 days past due | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
60-89 days past due | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
90-119 days past due | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
120+ days past due | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | $ | 1,500 |  |  | $ | — |  |  | $ | 1,093 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 4,015 |  |  | $ | 6,609 |
There were no notes receivable placed on nonaccrual status as of March 31, 2023 and December 31, 2022. During the three months ended March 31, 2023 and 2022, there was no interest income recognized related to notes receivable that were in nonaccrual status. As of March 31, 2023 and December 31, 2022, there were no notes receivable placed in nonaccrual status for which there was not a related allowance for credit losses. As of March 31, 2023 and December 31, 2022, there were no notes receivable that were 90 days or greater past due for which we continued to accrue interest income. Prepaid Expenses As of March 31, 2023 and December 31, 2022, $16.4 million and $14.5 million of prepaid expenses were included in other current assets, respectively, primarily related to software licenses, long lead-time parts related to our inventory and insurance.

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