Sixth Consecutive Quarter of Improved Adjusted
EBITDA, Record High Hardware and Hosted Services Margins –
Increased Cash by $14 million
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 September 30, 2023. Management is
hosting an investor call to discuss results today, November 7,
2023, at 10:30 a.m. Eastern Time.
Third Quarter 2023 Financial and Business Highlights
- Revenue of $58.1 million, up 22% year-over-year.
- Gross profit of $13.5 million, up over 1,000%
year-over-year.
- Net loss of $(7.7) million, a 70% improvement
year-over-year.
- Adjusted EBITDA of $(5.0) million, a 22% improvement from Q2
2023 and 72% improvement year-over-year.
- $211.0 million in cash and cash equivalents as of September 30,
2023 – an increase of $14 million from Q2 2023.
Management Commentary
“With more than 680,000 rental units deployed, SmartRent
continues to lead in innovation, creating new products that pave
the way for the next generation of smarter living and working in
rental housing. We reported a strong first nine months of 2023,
marked by nearly 40% growth in revenue and a more than $40 million
decrease in operating losses,” said SmartRent CEO Lucas Haldeman.
“We were pleased with operating metrics in Q3 including the
increase in bookings and cash balance. This was our sixth
consecutive quarter of improvement in Adjusted EBITDA and we
reported continued improvement in gross margin, growing to 23.3%
from 2.5% last year, with both hardware and hosted services hitting
record highs for the quarter. We remain on track to achieve
Adjusted EBITDA profitability in Q4 2023 and positive cash flow
from operations within six months following.”
Third Quarter 2023 Results
Total revenue for the quarter was $58.1 million, up 22% from
last year. Hardware revenue increased $8.9 million, professional
services revenue decreased by $1.5 million and hosted services
revenue increased by $3.2 million, combining for a $10.6 million
total increase from Q3 2022. On a sequential basis, hardware
revenue was up $7.8 million, professional services revenue
decreased by $4.1 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 12%
sequentially, pushing SaaS ARR to $43.3 million, up from $38.8
million last quarter. SaaS ARPU for the quarter was up at $5.41
from $5.16 in Q2 2023. SaaS ARPU for Units Booked increased to
$9.04 from $5.22 last year.
Total Units Deployed at the end of the quarter was 682,632, a
35% increase in Total Units Deployed compared to Q3 of 2022, as the
Company had 32,308 New Units Deployed during the quarter. Units
Booked for the quarter was 46,272, and total Bookings were $49.7
million.
Gross profit totaled $13.5 million, up from $1.2 million in Q3
2022. Total gross margin increased to 23.3%, from 2.5% in Q3 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 22.7% versus 20.9% in Q2
2023 and 4.7% last year. Hosted services, which includes both hub
amortization and SaaS gross margin, showed steady growth, improving
sequentially to 64.3% from 63.2%. Hub revenue amortization
decreased while SaaS revenue continued to rise. SaaS gross margins
were 74.2% from 75.1% last quarter and 56.7% last year. As
expected, professional services gross margin decreased to (86.7)%
from (57.3)% last quarter and (92.4)% last year, primarily due to a
decrease in the number of New Deployed Units. The Company
implemented technology solutions that will transform professional
services to a more variable cost model and increase efficiencies
with installations on a go-forward basis. While each quarter is
impacted by the mix and timing of deployments, the Company believes
that both professional services gross margin and total gross margin
will improve in Q4 2023.
Operating expenses increased to $23.5 million from $22.0 million
last quarter and decreased by $4.4 million from Q3 2022. The
Company achieved efficiencies through improved processes and
technology initiatives.
By simultaneously growing revenue and improving gross margins,
Adjusted EBITDA improved significantly to $(5.0) million this
quarter versus $(6.4) million in Q2 2023 and $(17.6) million in Q3
2022. The Company continues to execute on its strategy and believes
it can achieve Adjusted EBITDA profitability in Q4 2023.
The Company ended the quarter with a cash balance of $211.0
million, an increase of $14 million, marking the first quarter of
significant cash generation since becoming a publicly traded
company. The increase in cash was due primarily to improved
inventory management and demand forecasting to reduce inventory
levels. On August 8, 2023, the Company announced the selection of
ADI Global Distribution as its preferred distribution partner. The
increase in cash is not a result of the ADI arrangement but is a
part of the Company’s plan to improve internal processes as it
gradually transitions to ADI over the next year.
Key Operating Metrics Table
Quarter
ended
September 30, 2023
September 30, 2022
% Change
Total Units Deployed(1)
682,632
504,409
35%
New Units Deployed
32,308
53,399
(39)%
Units Booked
46,272
67,285
(31)%
Bookings (in '000s)
$49,661
$62,534
(21)%
SaaS ARPU for Units Booked
$9.04
$5.22
73%
(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 achieve Adjusted EBITDA
profitability 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 $235 to $240
million from $233 to $250 million in revenue and to $(20) to $(18)
million from $(22) to $(18) million in Adjusted EBITDA. SmartRent’s
guidance for the fourth quarter and full-year 2023 is as
follows:
Fourth Quarter 2023 Guidance
- Total Revenue of $58 to $63 million
- Adjusted EBITDA of $0 to $2 million
Full-Year 2023 Guidance
- Total Revenue of $235 to $240 million
- Adjusted EBITDA of $(20) 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, November 7, 2023
at 10:30 a.m. ET to discuss its financial results. To join the
call, please register on the Company’s investor relations website
here.
A third 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) accelerate adoption of our products and services; (2)
anticipate the uncertainties inherent in the development of new
business lines and business strategies; (3) manage risks associated
with our third-party suppliers and manufacturers and partners for
our products; (4) manage risks associated with adverse
macroeconomic conditions, including inflation, slower growth or
recession, barriers to trade, changes to fiscal and monetary
policy, tighter credit, higher interest rates, high unemployment,
and currency fluctuations; (5) attract, train, and retain effective
officers, key employees and directors; (6) develop, design,
manufacture, and sell products and services that are differentiated
from those of competitors; (7) realize the benefits expected from
our acquisitions; (8) acquire or make investments in other
businesses, patents, technologies, products or services to grow the
business; (9) successfully pursue, defend, resolve or anticipate
the outcome of pending or future litigation matters; (10) comply
with laws and regulations applicable to our business, including
privacy regulations; and (11) maintain key strategic relationships
with partners and distributors. 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
September 30,
For the nine months
ended
September 30,
2023
2022
2023
2022
Revenue
Hardware
$
35,631
$
26,683
$
100,744
$
69,692
Professional services
5,962
7,478
28,781
23,510
Hosted services
16,511
13,341
47,060
34,068
Total revenue
58,104
47,502
176,585
127,270
Cost of revenue
Hardware
27,556
25,417
82,118
68,226
Professional services
11,130
14,386
44,573
43,668
Hosted services
5,887
6,516
17,365
17,949
Total cost of revenue
44,573
46,319
144,056
129,843
Operating expense
Research and development
7,573
7,610
21,340
22,086
Sales and marketing
4,636
4,901
14,626
16,202
General and administrative
11,269
15,337
33,891
41,120
Total operating expense
23,478
27,848
69,857
79,408
Loss from operations
(9,947
)
(26,665
)
(37,328
)
(81,981
)
Interest income, net
2,233
506
6,064
747
Other (expense) income, net
(42
)
290
(45
)
566
Loss before income taxes
(7,756
)
(25,869
)
(31,309
)
(80,668
)
Income tax benefit (expense)
33
(81
)
22
5,735
Net loss
$
(7,723
)
$
(25,950
)
$
(31,287
)
$
(74,933
)
Other comprehensive loss
Foreign currency translation
adjustment
(188
)
(493
)
(93
)
(1,083
)
Comprehensive loss
$
(7,911
)
$
(26,443
)
$
(31,380
)
$
(76,016
)
Net loss per common share
Basic and diluted
$
(0.04
)
$
(0.13
)
$
(0.16
)
$
(0.38
)
Weighted-average number of shares used in
computing net loss per share
Basic and diluted
201,584
196,486
199,858
195,090
SMARTRENT, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands, except per share
amounts)
September 30, 2023
December 31, 2022
ASSETS
Current assets
Cash and cash equivalents
$
211,000
$
210,409
Restricted cash, current portion
247
7,057
Accounts receivable, net
63,546
62,442
Inventory
47,521
75,725
Deferred cost of revenue, current
portion
12,229
13,541
Prepaid expenses and other current
assets
9,573
9,182
Total current assets
344,116
378,356
Property and equipment, net
1,589
2,069
Deferred cost of revenue
13,891
22,508
Goodwill
117,268
117,268
Intangible assets, net
28,217
31,123
Other long-term assets
10,516
9,521
Total assets
$
515,597
$
560,845
LIABILITIES, CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
9,022
$
18,360
Accrued expenses and other current
liabilities
21,144
34,396
Deferred revenue, current portion
93,445
80,020
Total current liabilities
123,611
132,776
Deferred revenue
44,134
59,928
Other long-term liabilities
4,600
3,941
Total liabilities
172,345
196,645
Commitments and contingencies (Note
12)
Convertible preferred stock, $0.0001 par
value; 50,000 shares authorized as of September 30, 2023 and
December 31, 2022; no shares of preferred stock issued and
outstanding as of September 30, 2023 and December 31, 2022
-
-
Stockholders' equity
Common stock, $0.0001 par value; 500,000
shares authorized as of September 30, 2023 and December 31, 2022,
respectively; 203,076 and 198,525 shares issued and outstanding as
of September 30, 2023 and December 31, 2022, respectively
20
20
Additional paid-in capital
625,713
615,281
Accumulated deficit
(282,212
)
(250,925
)
Accumulated other comprehensive loss
(269
)
(176
)
Total stockholders' equity
343,252
364,200
Total liabilities, convertible preferred
stock and stockholders' equity
$
515,597
$
560,845
SMARTRENT, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
For the nine months ended
September 30,
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss
$
(31,287
)
$
(74,933
)
Adjustments to reconcile net loss to net
cash used by operating activities
Depreciation and amortization
3,991
2,876
Asset Impairment
-
2,441
Non-employee warrant expense
-
289
Non-cash lease expense
733
1,050
Stock-based compensation related to
acquisition
109
607
Stock-based compensation
10,120
10,011
Compensation expense related to
acquisition
1,913
3,450
Change in fair value of earnout related to
acquisition
225
344
Deferred tax benefit
-
(5,889
)
Non-cash interest expense
103
72
Provision for excess and obsolete
inventory
1,780
16
Provision for doubtful accounts
39
196
Change in operating assets and
liabilities
Accounts receivable
(1,142
)
(17,582
)
Inventory
26,423
(28,379
)
Deferred cost of revenue
9,928
(10,380
)
Prepaid expenses and other assets
537
5,677
Accounts payable
(9,338
)
(331
)
Accrued expenses and other liabilities
(12,299
)
32
Deferred revenue
(2,378
)
31,955
Lease liabilities
(823
)
(902
)
Net cash used in operating activities
(1,366
)
(79,380
)
CASH FLOWS FROM INVESTING
ACTIVITIES
Payments for SightPlan acquisition, net of
cash acquired
-
(128,953
)
Purchase of property and equipment
(116
)
(802
)
Capitalized software costs
(3,197
)
(2,668
)
Net cash used in investing activities
(3,313
)
(132,423
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from warrant exercise
-
3
Proceeds from options exercise
899
186
Proceeds from ESPP purchases
809
1,125
Taxes paid related to net share
settlements of stock-based compensation awards
(1,506
)
(3,769
)
Payments for business combination and
private offering transaction costs
-
(70
)
Payment of earnout related to
acquisition
(1,702
)
-
Net cash used in financing activities
(1,500
)
(2,525
)
Effect of exchange rate changes on cash
and cash equivalents
(40
)
(859
)
Net decrease in cash, cash equivalents,
and restricted cash
(6,219
)
(215,187
)
Cash, cash equivalents, and restricted
cash - beginning of period
217,713
432,604
Cash, cash equivalents, and restricted
cash - end of period
$
211,494
$
217,417
Reconciliation of cash, cash
equivalents, and restricted cash to the consolidated balance
sheets
Cash and cash equivalents
$
211,000
$
210,112
Restricted cash, current portion
247
6,810
Restricted cash, included in other
long-term assets
247
495
Total cash, cash equivalents, and
restricted cash
$
211,494
$
217,417
SMARTRENT, INC.
RECONCILIATION OF NON-GAAP
MEASURES
Three months ended
September 30,
Nine months ended
September 30,
2023
2022
2023
2022
(dollars
in thousands)
(dollars
in thousands)
Net loss
$
(7,723
)
$
(25,950
)
$
(31,287
)
$
(74,933
)
Interest income, net
(2,233
)
(506
)
(6,064
)
(747
)
Provision for income taxes
(33
)
81
(22
)
(5,735
)
Depreciation and amortization
1,395
1,240
3,991
2,876
EBITDA
(8,594
)
(25,135
)
(33,382
)
(78,539
)
Stock-based compensation
3,273
3,272
10,229
10,618
Non-employee warrant expense
-
51
-
289
Compensation expense in connection with
acquisitions
15
1,341
2,010
3,450
Asset impairment
-
2,441
-
2,441
Severance charges
317
-
805
-
Other non-recurring acquisition
expenses
(23
)
405
408
1,144
Adjusted EBITDA
$
(5,012
)
$
(17,625
)
$
(19,930
)
$
(60,597
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231107504485/en/
Investor Contact Brian Ruttenbur Senior Vice President,
Investor Relations investors@smartrent.com
Media Contact Amanda Chavez Senior Director, Corporate
Communications media@smartrent.com
SmartRent (NYSE:SMRT)
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