SmartRent Reports Second Quarter 2023 Results
Fifth Consecutive Quarter of Improved Adjusted EBITDA - Clear Path to Profitability
SCOTTSDALE, Ariz., August 08, 2023--(BUSINESS WIRE)--SmartRent, Inc. (NYSE: SMRT) ("SmartRent" or the "Company"), a leading provider of smart home and property operations solutions for the rental housing industry, today reported financial results for the three months ended June 30, 2023. Management is hosting an investor call to discuss results today, August 8, 2023, at 12:30 p.m. Eastern Time.
Second Quarter 2023 Financial and Business Highlights
Revenue of $53.4 million, up 26% year-over-year.
Gross profit of $9.9 million, up 900% year-over-year.
Net loss of $(10.3) million, a 60% improvement year-over-year.
Adjusted EBITDA of $(6.4) million, a 24% improvement from Q1 2023 and 68% improvement year-over-year.
$197.0 million in cash and cash equivalents as of June 30, 2023.
Management Commentary
"We had a strong close to the first half of the year, marked by significant improvement in sequential and year-over-year profitability, and remain on track to achieve Adjusted EBITDA breakeven by year end and cash flow breakeven within six months following. This was our fifth consecutive quarter of improvement in Adjusted EBITDA, in-line with our guidance. We experienced notable improvement in gross margin, growing to 18.5% from 2.3% last year, with both hardware and hosted services hitting record highs for the period," said Lucas Haldeman, CEO of SmartRent.
"We are also pleased to announce we have entered into an agreement with ADI Global Distribution to serve as our preferred distribution partner. This agreement improves our cash position by lowering our inventory levels. ADI will strengthen our competitive position by enhancing our ability to scale while optimizing our cash flow and use of working capital. Our customers will continue to receive products in a timely manner while we remain focused on the innovation and product enhancements that keep us at the forefront of our industry."
Second Quarter 2023 Results
Total revenue for the quarter was $53.4 million, up 26% from last year. Hardware revenue increased $6.9 million, professional services revenue increased by $0.9 million and hosted services revenue increased by $3.2 million, combining for a $11.0 million increase from Q2 2022. On a sequential basis, hardware revenue was down $9.5 million, along with a decrease in professional services revenue by $2.7 million as the Company deployed a lower number of new units. The Company saw a continued increase in hosted services revenue as our software-as-a-service ("SaaS") revenue grew 8% sequentially, pushing SaaS ARR to $38.8 million, up from $36.0 million last quarter. SaaS ARPU for the quarter was flat at $5.16 from $5.21 in Q1 2023. SaaS ARPU for Units Booked increased to $8.74 from $4.79 last year.
Total Units Deployed at the end of the quarter was 650,324, a 44% increase in Total Units Deployed compared to Q2 of 2022, as the Company had 47,768 New Units Deployed during the quarter. Units Booked for the quarter was 19,967, and total Bookings were $31.5 million.
Gross profit totaled $9.9 million, up from $1.0 million in Q2 2022. Total gross margin increased to 18.5%, from 2.3% in Q2 2022 as efficiencies and economies of scale drove improved margin.
Both hardware and hosted services gross margins hit record highs in the period. Hardware gross margins were 20.9% versus 12.7% in Q1 2023 and a loss last year. Hosted services, which includes both hub amortization and SaaS gross margin, showed steady growth, improving sequentially to 63.2% from 61.6%. Hub revenue amortization decreased while SaaS revenue continued to rise. SaaS gross margins were 75.1% vs. 73.4% last quarter and 50.9% last year. As expected, professional services gross margin decreased to (57.3)% from (38.1)% last quarter and (54.7)% last year, primarily due to a decrease in the number of New Deployed Units. The Company anticipates seeing less volatility in professional services gross margin in future periods as the result of ongoing initiatives. While each quarter is impacted by the mix and timing of deployments, the Company anticipates improvement in both professional services gross margin and total gross margin in the second half of 2023.
Operating expenses decreased to $22.0 million from $24.4 million last quarter, a decrease of $2.4 million sequentially and $6.0 million decrease from Q2 2022. The Company achieved efficiencies through improved processes and technology initiatives, resulting in a year-over-year headcount reductions.
By simultaneously growing revenue, improving gross margins and reducing operating expenses, Adjusted EBITDA improved significantly to ($6.4) million this quarter versus $(8.5) million in Q1 2023 and $(19.8) million in Q2 2022. The Company continues to execute on its strategy and anticipates achieving Adjusted EBITDA breakeven by year end.
The Company ended the quarter with a cash balance of $197.0 million, which is ample liquidity to fund the Company’s anticipated working capital requirements. The cash burn from operating activities in the first six months of 2023, including acquisition-related payments of $7 million, was less than half the cash burn of $34.9 million in the comparable 2022 period. The addition of the ADI distribution agreement should dramatically enhance SmartRent’s cash position as inventory levels decrease in future periods.
Key Operating Metrics Table | ||||||
Quarter ended | ||||||
June 30, 2023 | June 30, 2022 | % Change | ||||
Total Units Deployed(1) | 650,324 | 451,010 | 44 | % | ||
New Units Deployed | 47,768 | 60,329 | (21 | )% | ||
Units Booked | 19,967 | 59,306 | (66 | )% | ||
Bookings (in '000s) | $31,539 | $56,887 | (45 | )% | ||
SaaS ARPU for Units Booked | $8.74 | $4.79 | 82 | % | ||
(1) As of the last date of the quarter. | ||||||
Financial Outlook
Hiroshi Okamoto, CFO of SmartRent, stated, "We had another solid quarter of revenue growth, expanding margins and narrowing Adjusted EBITDA loss. We believe we can sustain our strong revenue growth and achieve Adjusted EBITDA breakeven by year end."
The Company believes it can sustain meaningful top-line growth while narrowing the Adjusted EBITDA loss, although timing differences may lead to some quarter-to-quarter variability. The Company has tightened its full year 2023 guidance to $233 to $250 million from $225 to $250 million in revenue and $(22) to $(18) million from $(25) to $(15) million in Adjusted EBITDA. SmartRent’s guidance for the third quarter, fourth quarter and full-year 2023 is as follows:
Third Quarter 2023 Guidance
Total Revenue of $57 to $62 million
Adjusted EBITDA of $(6.5) to $(4.5) million
Fourth Quarter 2023 Guidance
Total Revenue of $58 to $70 million
Adjusted EBITDA of $0 to $2 million
Full-Year 2023 Guidance
Total Revenue of $233 to $250 million
Adjusted EBITDA of $(22) to $(18) million
The estimates presented above represent a range of possible outcomes and may differ materially from actual results. These estimates exclude the impact of potential acquisitions, capital markets activities, and unforeseen continued challenges with supply chain and logistics. The estimates are forward-looking based on the Company’s current assessment of demand for its product, execution capabilities and market conditions, as well as other risks outlined below under the caption "Forward-Looking Statements."
Conference Call Information
SmartRent is hosting a conference call today, August 8, 2023 at 12:30p.m. ET to discuss its financial results. To join the call, please register on the Company’s investor relations website here.
A second quarter earnings deck is available on the Investor Relations section of our website.
About SmartRent
Founded in 2017, SmartRent, Inc. (NYSE: SMRT) is a leading provider of smart home and smart property solutions for the multifamily industry. The company’s unmatched platform, comprised of smart hardware and cloud-based SaaS solutions, gives operators seamless visibility and control over real estate assets, empowering them to simplify operations, automate workflows, benefit from additional revenue opportunities and deliver exceptional site team and resident experiences. SmartRent serves 15 of the top 20 multifamily owners and operators, and its solutions enable millions of users to live smarter every day. For more information, please visit www.smartrent.com.
Forward-Looking Statements
This press release contains forward-looking statements which address the Company's expected future business and financial performance, and may contain words such as "goal," "target," "future," "estimate," "expect," "anticipate," "intend," "plan," "believe," "seek," "project," "may," "should," "will" or similar expressions. Examples of forward-looking statements include, among others, statements regarding the expected financial results, product portfolio enhancements, expansion plans and opportunities and earnings guidance related to financial and operational metrics. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those currently anticipated. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, among other things, our ability to: (1) execute our business strategy within the smart home technology industry; (2) expand our products and solutions to meet the demands of the market; (3) meet legal obligations, including laws and regulations related to security and privacy; (4) prevent unauthorized or inadvertent access to our information technology systems and customer or resident data; (5) successfully manage the competitiveness of our market and pricing levels of our competitors; (6) hire, retain, manage and motivate employees, including key personnel; (7) successfully manage and ensure that our suppliers produce or obtain quality products and services on a timely basis or in sufficient quantity; (8) successfully manage interruptions to, or other problems with, our website and interactive user interface, information technology systems, manufacturing processes or other operations; (9) successfully identify, acquire, and integrate quality acquisition targets; (10) successfully resolve legal proceedings, recall claims, and governmental inquiries; and (11) acquire and protect our intellectual property and acquire or make investments in other businesses, patents, technologies, products or services to grow the business. The forward-looking statements herein represent the judgment of the Company, as of the date of this release, and SmartRent disclaims any intent or obligation to update forward-looking statements. This press release should be read in conjunction with the information included in the Company's other press releases, reports and other filings with the SEC. Understanding the information contained in these filings is important in order to fully understand the Company's reported financial results and our business outlook for future periods.
Use of Non-GAAP Financial Measures
In addition to disclosing financial results that are determined in accordance with GAAP, SmartRent also discloses certain non-GAAP financial measures in this press release. These financial measures are not recognized measures under GAAP and should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. EBITDA and Adjusted EBITDA are non-GAAP financial measures as defined by SEC rules. These non-GAAP financial measures, as defined below by SmartRent, may be determined or calculated differently by other companies. Reconciliations of these non-GAAP measurements to the most directly comparable GAAP financial measurements have been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliations.
SmartRent is not providing a quantitative reconciliation of Adjusted EBITDA included in its 2023 financial outlook above, in reliance on the "unreasonable efforts" exception for forward-looking non-GAAP measures set forth in SEC rules because certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated without unreasonable effort and expense. In this regard, SmartRent is unable to provide a reconciliation of forward-looking Adjusted EBITDA to GAAP net income, due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Due to the uncertainty of estimates and assumptions used in preparing forward-looking non-GAAP measures, SmartRent cautions investors that actual results could differ materially from these non-GAAP financial projections.
As detailed in the reconciliations, the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA is net income or loss. EBITDA and Adjusted EBITDA are not used as measures of SmartRent’s liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP.
SmartRent’s management uses EBITDA and Adjusted EBITDA in a number of ways to assess the Company’s financial and operating performance and believes that these measures provide useful information to investors regarding financial and business trends related to SmartRent’s results of operations. EBITDA and Adjusted EBITDA are also used to identify certain expenses and make decisions designed to help SmartRent meet its current financial goals and optimize its financial performance, while neutralizing the impact of expenses included in its operating results which could otherwise mask underlying trends in its business. SmartRent’s management believes that investors are provided with a more meaningful understanding of SmartRent’s ongoing operating performance when non-GAAP financial information is viewed with GAAP financial information.
Operating Metrics Defined
SmartRent regularly monitors several operating and financial metrics including the following non-GAAP financial measures which the Company believes are key measures of its growth, to evaluate its operating performance, identify trends affecting its business, formulate business plans, measure its progress, and make strategic decisions. The Company’s Key Operating Metrics may not provide accurate predictions of future GAAP financial results.
Units Deployed is defined as the aggregate number of SmartHubs that have been installed (also including customer self-installations) as of a stated measurement date. The Company uses this operating metric to assess the general health and trajectory of its business growth.
New Units Deployed is defined as the aggregate number of SmartHubs that have been installed (also including customer self-installations) during a stated measurement period. The Company uses this operating metric to assess the general health and trajectory of its business growth.
Units Booked is defined as the aggregate number of SmartHubs associated with binding orders executed during a stated measurement period. The Company utilizes the concept of Units Booked to measure estimated near-term resource demand and the resulting approximate range of post-delivery revenue that it will earn and record. Units Booked represent binding orders only and accordingly are a subset of Committed Units.
Bookings represent the dollar value of Units Booked from hubs and other hardware, professional services, as well as one year of SaaS.
Annual Recurring Revenue ("ARR") is defined as the annualized value of our recurring SaaS revenue earned in the current quarter.
EBITDA and Adjusted EBITDA: We define EBITDA as net income or loss computed in accordance with GAAP before the following items: interest income/expense, income tax expense and depreciation and amortization. We define Adjusted EBITDA as EBITDA reduced by stock-based compensation expense, non-employee warrant expense, warranty provisions for battery deficiencies, asset impairment, loss on extinguishment of debt, change in fair value of derivatives, unrealized gains and losses in currency exchange rates, non-recurring expenses in connection with acquisitions and other expenses caused by non-recurring, or unusual, events that are not indicative of our ongoing business. Management uses EBITDA and Adjusted EBITDA to identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance, while neutralizing the impact of expenses included in our operating results which could otherwise mask underlying trends in our business.
SMARTRENT, INC. | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenue | ||||||||||||||||
Hardware | $ | 27,788 | $ | 20,895 | $ | 65,113 | $ | 43,009 | ||||||||
Professional services | 10,050 | 9,123 | 22,819 | 16,032 | ||||||||||||
Hosted services | 15,564 | 12,391 | 30,549 | 20,727 | ||||||||||||
Total revenue | 53,402 | 42,409 | 118,481 | 79,768 | ||||||||||||
Cost of revenue | ||||||||||||||||
Hardware | 21,990 | 20,951 | 54,562 | 42,809 | ||||||||||||
Professional services | 15,809 | 14,115 | 33,443 | 29,282 | ||||||||||||
Hosted services | 5,720 | 6,355 | 11,478 | 11,433 | ||||||||||||
Total cost of revenue | 43,519 | 41,421 | 99,483 | 83,524 | ||||||||||||
Operating expense | ||||||||||||||||
Research and development | 6,536 | 8,030 | 13,767 | 14,476 | ||||||||||||
Sales and marketing | 4,829 | 6,139 | 9,990 | 11,301 | ||||||||||||
General and administrative | 10,605 | 13,832 | 22,622 | 25,783 | ||||||||||||
Total operating expense | 21,970 | 28,001 | 46,379 | 51,560 | ||||||||||||
Loss from operations | (12,087 | ) | (27,013 | ) | (27,381 | ) | (55,316 | ) | ||||||||
Interest income, net | 1,815 | 253 | 3,831 | 241 | ||||||||||||
Other (expense) income | (59 | ) | 162 | (3 | ) | 276 | ||||||||||
Loss before income taxes | (10,331 | ) | (26,598 | ) | (23,553 | ) | (54,799 | ) | ||||||||
Income tax (expense) benefit | (18 | ) | 1,009 | (11 | ) | 5,816 | ||||||||||
Net loss | $ | (10,349 | ) | $ | (25,589 | ) | $ | (23,564 | ) | $ | (48,983 | ) | ||||
Other comprehensive loss | ||||||||||||||||
Foreign currency translation adjustment | (9 | ) | (407 | ) | 95 | (590 | ) | |||||||||
Comprehensive loss | $ | (10,358 | ) | $ | (25,996 | ) | $ | (23,469 | ) | $ | (49,573 | ) | ||||
Net loss per common share | ||||||||||||||||
Basic and diluted | $ | (0.05 | ) | $ | (0.13 | ) | $ | (0.12 | ) | $ | (0.25 | ) | ||||
Weighted-average number of shares used in computing net loss per share | ||||||||||||||||
Basic and diluted | 199,619 | 195,693 | 198,980 | 194,381 | ||||||||||||
SMARTRENT, INC. | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
(in thousands, except per share amounts) | ||||||||
June 30, 2023 | December 31, 2022 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 196,970 | $ | 210,409 | ||||
Restricted cash, current portion | 247 | 7,057 | ||||||
Accounts receivable, net | 60,032 | 62,442 | ||||||
Inventory | 60,506 | 75,725 | ||||||
Deferred cost of revenue, current portion | 12,012 | 13,541 | ||||||
Prepaid expenses and other current assets | 16,438 | 9,182 | ||||||
Total current assets | 346,205 | 378,356 | ||||||
Property and equipment, net | 1,725 | 2,069 | ||||||
Deferred cost of revenue | 16,751 | 22,508 | ||||||
Goodwill | 117,268 | 117,268 | ||||||
Intangible assets, net | 29,185 | 31,123 | ||||||
Other long-term assets | 10,347 | 9,521 | ||||||
Total assets | $ | 521,481 | $ | 560,845 | ||||
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 6,304 | $ | 18,360 | ||||
Accrued expenses and other current liabilities | 21,403 | 34,396 | ||||||
Deferred revenue, current portion | 92,866 | 80,020 | ||||||
Total current liabilities | 120,573 | 132,776 | ||||||
Deferred revenue | 49,970 | 59,928 | ||||||
Other long-term liabilities | 3,733 | 3,941 | ||||||
Total liabilities | 174,276 | 196,645 | ||||||
Commitments and contingencies (Note 12) | ||||||||
Convertible preferred stock, $0.0001 par value; 50,000 shares authorized as of June 30, 2023 and December 31, 2022; no shares of preferred stock issued and outstanding as of June 30, 2023 and December 31, 2022 | - | - | ||||||
Stockholders' equity | ||||||||
Common stock, $0.0001 par value; 500,000 shares authorized as of June 30, 2023 and December 31, 2022, respectively; 200,069 and 198,525 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively | 20 | 20 | ||||||
Additional paid-in capital | 621,755 | 615,281 | ||||||
Accumulated deficit | (274,489 | ) | (250,925 | ) | ||||
Accumulated other comprehensive loss | (81 | ) | (176 | ) | ||||
Total stockholders' equity | 347,205 | 364,200 | ||||||
Total liabilities, convertible preferred stock and stockholders' equity | $ | 521,481 | $ | 560,845 | ||||
SMARTRENT, INC. | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
(in thousands) | ||||||||
For the six months ended June 30, | ||||||||
2023 | 2022 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (23,564 | ) | $ | (48,983 | ) | ||
Adjustments to reconcile net loss to net cash used by operating activities | ||||||||
Depreciation and amortization | 2,596 | 1,636 | ||||||
Non-employee warrant expense | - | 238 | ||||||
Non-cash lease expense | 412 | 648 | ||||||
Stock-based compensation related to acquisition | 109 | 401 | ||||||
Stock-based compensation | 6,847 | 6,945 | ||||||
Compensation expense related to acquisition | 1,769 | 2,109 | ||||||
Change in fair value of earnout related to acquisition | 306 | - | ||||||
Deferred tax benefit | - | (5,889 | ) | |||||
Non-cash interest expense | 65 | 41 | ||||||
Provision for excess and obsolete inventory | 47 | 16 | ||||||
Provision for doubtful accounts | (1 | ) | - | |||||
Change in operating assets and liabilities | ||||||||
Accounts receivable | 2,416 | 1,493 | ||||||
Inventory | 15,188 | (26,197 | ) | |||||
Deferred cost of revenue | 7,285 | (6,884 | ) | |||||
Prepaid expenses and other assets | (6,311 | ) | 5,856 | |||||
Accounts payable | (12,059 | ) | 8,800 | |||||
Accrued expenses and other liabilities | (13,201 | ) | (3,676 | ) | ||||
Deferred revenue | 2,878 | 29,091 | ||||||
Lease liabilities | (466 | ) | (496 | ) | ||||
Net cash used in operating activities | (15,684 | ) | (34,851 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Payments for SightPlan acquisition, net of cash acquired | - | (128,953 | ) | |||||
Purchase of property and equipment | (49 | ) | (470 | ) | ||||
Capitalized software costs | (2,279 | ) | (1,829 | ) | ||||
Net cash used in investing activities | (2,328 | ) | (131,252 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from warrant exercise | - | 3 | ||||||
Proceeds from options exercise | 71 | 62 | ||||||
Proceeds from ESPP purchases | 438 | 488 | ||||||
Taxes paid related to net share settlements of stock-based compensation awards | (1,085 | ) | (3,389 | ) | ||||
Payments for business combination and private offering transaction costs | - | (70 | ) | |||||
Payment of earnout related to acquisition | (1,702 | ) | - | |||||
Net cash used in financing activities | (2,278 | ) | (2,906 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 41 | (432 | ) | |||||
Net decrease in cash, cash equivalents, and restricted cash | (20,249 | ) | (169,441 | ) | ||||
Cash, cash equivalents, and restricted cash - beginning of period | 217,713 | 432,604 | ||||||
Cash, cash equivalents, and restricted cash - end of period | $ | 197,464 | $ | 263,163 | ||||
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets | ||||||||
Cash and cash equivalents | $ | 196,970 | $ | 255,008 | ||||
Restricted cash, current portion | 247 | 7,660 | ||||||
Restricted cash, included in other long-term assets | 247 | 495 | ||||||
Total cash, cash equivalents, and restricted cash | $ | 197,464 | $ | 263,163 | ||||
SMARTRENT, INC. | |||||||||||||||
RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
(dollars in thousands) | (dollars in thousands) | ||||||||||||||
Net loss | $ | (10,349 | ) | $ | (25,589 | ) | $ | (23,564 | ) | $ | (48,983 | ) | |||
Interest income, net | (1,815 | ) | (253 | ) | (3,831 | ) | (241 | ) | |||||||
Provision for income taxes | 18 | (1,009 | ) | 11 | (5,816 | ) | |||||||||
Depreciation and amortization | 1,342 | 1,227 | 2,596 | 1,636 | |||||||||||
EBITDA | (10,804 | ) | (25,624 | ) | (24,788 | ) | (53,404 | ) | |||||||
Stock-based compensation | 3,276 | 3,823 | 6,956 | 7,346 | |||||||||||
Non-employee warrant expense | - | 21 | - | 238 | |||||||||||
Compensation expense in connection with acquisitions | 370 | 1,830 | 1,995 | 2,109 | |||||||||||
Severance charges | 488 | - | 488 | - | |||||||||||
Other non-recurring acquisition expenses | 226 | 119 | 431 | 739 | |||||||||||
Adjusted EBITDA | $ | (6,444 | ) | $ | (19,831 | ) | $ | (14,918 | ) | $ | (42,972 | ) | |||
View source version on businesswire.com: https://www.businesswire.com/news/home/20230808660057/en/
Contacts
Investor Contact
Brian Ruttenbur
Senior Vice President, Investor Relations
investors@smartrent.com
Media Contact
Amanda Chavez
Senior Director, Corporate Communications
media@smartrent.com
