Accounts Receivable, Net

6 Months Ended

Jun. 30, 2022

The components of accounts receivable, net are as follows (in thousands):


	June 30, 2022		December 31, 2021
Accounts receivable	$	111,995	$	108,897
Allowance for credit losses	(2,508)		(2,168)
Allowance for product returns	(1,231)		(1,181)
Accounts receivable, net	$	108,256	$	105,548

For the three and six months ended June 30, 2022, we recorded a provision for credit losses of $0.4 million and $0.5 million on our accounts receivable, respectively. For the three and six months ended June 30, 2021, we recorded a provision for credit losses of $0.1 million and $0.2 million on our accounts receivable, respectively.

For the three and six months ended June 30, 2022, we recorded a reserve for product returns of $0.9 million and $1.7 million, respectively, as compared to $0.5 million and $1.1 million for the same periods in the prior year. Historically, we have not experienced write-offs for uncollectible accounts or sales returns that have differed significantly from our estimates.

Allowance for Credit Losses - Accounts Receivable

The allowance for credit losses is a valuation account that is deducted from the accounts receivable and notes receivable amortized cost basis (see Note 8) to present the net amount expected to be collected. We estimate the allowance balance by applying the loss-rate method using relevant available information from internal and external sources, including historical write-off activity, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for changes in economic conditions, such as changes in unemployment rates. We use projected economic conditions over a period no more than twelve months based on data from external sources. For periods beyond the twelve-month reasonable and supportable forecast period, we revert to historical loss information immediately.

The allowance for credit losses is measured on a pooled basis when similar risk characteristics exist. When assessing whether to measure certain financial assets on a pooled basis, we considered various risk characteristics, including the financial asset type, size and the historical or expected credit loss pattern. We identified the following two portfolio segments for our accounts receivable: (i) outstanding accounts receivable balances within Alarm.com and certain subsidiaries and (ii) outstanding accounts receivable balances within all other subsidiaries. There were no changes to our portfolio segments for our accounts receivable during the three and six months ended June 30, 2022, and no changes to our policies or practices that influenced our estimate of expected credit losses for accounts receivable. Additionally, there were no significant changes in the amount of accounts receivable write-offs during the three and six months ended June 30, 2022, as compared to historical periods other than a partial write-off of $0.7 million related to one of our distribution partners' outstanding balance during the six months ended June 30, 2021, upon the distributor being acquired by a third party.

Expected credit losses are estimated over the contractual term of the financial assets and we adjust the term for expected prepayments when appropriate. For the three and six months ended June 30, 2022, we recorded credit loss expense for accounts receivable and notes receivable of $0.4 million and $0.3 million, respectively, in general and administrative expense in our condensed consolidated statements of operations. For the three and six months ended June 30, 2021, we recorded credit loss expense of $0.1 million and less than $0.1 million, respectively, in general and administrative expense in our condensed consolidated statements of operations. The contractual term excludes expected extensions, renewals and modifications because extension and renewal options are unconditionally cancelable by us. Write-offs of the amortized cost basis are recorded to the allowance for credit losses. Any subsequent recoveries of previously written off balances are recorded as a reduction to credit loss expense.

The changes in our allowance for credit losses for accounts receivable are as follows (in thousands):


	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021				Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
	Alarm.com and Certain Subsidiaries		All Other Subsidiaries		Alarm.com and Certain Subsidiaries		All Other Subsidiaries		Alarm.com and Certain Subsidiaries		All Other Subsidiaries		Alarm.com and Certain Subsidiaries		All Other Subsidiaries
Beginning of period balance	$	(2,122)	$	(31)	$	(3,670)	$	(242)	$	(2,035)	$	(133)	$	(4,442)	$	(254)
(Provision for) / recovery of expected credit losses	(464)		(29)		(111)		(7)		(619)		72		(147)		(3)
Write-offs	136		2		338		118		204		3		1,146		126
End of period balance	$	(2,450)	$	(58)	$	(3,443)	$	(131)	$	(2,450)	$	(58)	$	(3,443)	$	(131)