NYSE:SMRT SmartRent Q2 2024 Earnings Report $0.94 +0.04 (+4.11%) Closing price 03:59 PM EasternExtended Trading$0.97 +0.04 (+3.95%) As of 08:00 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast SmartRent EPS ResultsActual EPS-$0.02Consensus EPS -$0.01Beat/MissMissed by -$0.01One Year Ago EPS-$0.05SmartRent Revenue ResultsActual Revenue$48.52 millionExpected Revenue$51.33 millionBeat/MissMissed by -$2.81 millionYoY Revenue Growth-9.10%SmartRent Announcement DetailsQuarterQ2 2024Date8/7/2024TimeBefore Market OpensConference Call DateWednesday, August 7, 2024Conference Call Time11:30AM ETUpcoming EarningsSmartRent's Q2 2025 earnings is scheduled for Wednesday, May 7, 2025Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by SmartRent Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 7, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Hello, and thank you for joining us today. My name is Kristen Lee, Chief Legal Officer for SmartRent. I'm joined today by Daryl Stem, CFO and Interim Principal Executive Officer and Frank Martell, Director and Chair of the Operating Committee. Before the market opened today, we issued an earnings release and filed our 10 Q with the SEC, both of which are available on the Investor Relations section of our website, smartrent.com. Before I turn the call over to Daryl, I'd like to remind everyone that the discussion today may contain certain forward looking statements that involve risks and uncertainties. Operator00:00:38Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including our annual report on Form 10 ks and quarterly reports on Form 10 Q. We undertake no obligation to provide updates regarding forward looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial position in SmartRent. Also, during today's call, we will refer to certain non GAAP financial measures. A discussion of these non GAAP financial measures, along with the reconciliation to the most directly comparable GAAP measure is included in today's earnings release. Operator00:01:21We would also like to highlight that a second quarter earnings presentation is available on the Investor Relations section of our website. And with that, I will turn the call over to Daryl. Speaker 100:01:34Good morning, everyone, and thank you for joining us today. Before we delve into our financial performance and strategic updates, I'm honored to introduce Frank Martell, our Director and Chair of the Operating Committee. Frank joined our Board in 2024 and has quickly become a valued member, bringing fresh perspectives and experience that will support our company through our leadership transition. His leadership and experience are extremely impactful as we focus on enhancing our operational capabilities and efficiencies and capitalize on growth opportunities in our dynamic market environment. Frank's oversight is critical as we discuss today's updates on our leadership and strategic business objectives. Speaker 100:02:26And now, I'll turn the call over to Frank. Speaker 200:02:31Thank you for the introduction, Daryl. Good morning, everyone. I appreciate all of you being on the call today. Before Daryl provides us with an operational update and discusses our Q2 results, I wanted to say a few words about last week's news and the future of SmartRent. I recently joined SmartRent as an independent Board Director because I was intrigued and excited by the innovative company that SmartRent is, which is leading in the Smart Home Technology Movement and revolutionizing the rental housing industry. Speaker 200:03:06Since joining the Board, it's become very clear to me that this company is a category creator with a unique and leading market position, compelling competitive strengths and exceptional growth opportunities. Speaking on behalf of our Board, we are as confident as ever in Smart Run's long term potential and are focused on working with the management team to enhance our operations, provide increased value to our customers and the residents and to drive significant value for shareholders. Because we are in such a strong competitive position with significant opportunities and because we have such promise on the horizon, the Board believes that now is a time for a change in leadership. As I'm sure you saw, last Tuesday we announced that Lucas Haldeman has stepped down as CEO and resigned from the Board. We commend Lucas on his achievements and thank him for everything that he's done. Speaker 200:04:06As Smart Run's founder, Lucas did an extraordinary job driving innovation and product development, building strong customer relationships and making the company the leader that it is today. We know that companies need different types of leadership at different stages of its development. As we evolve and scale SmartRent into its next phase of growth, we believe the company will benefit from a CEO with a different skill set and a fresh perspective. The Board has initiated a comprehensive search for a new CEO who will lead SmartRent to the next level as we capitalize on the many compelling opportunities ahead of us. We formed a management committee of talented Smart Rent executives to guide the company in this interim period. Speaker 200:04:56The management committee is comprised of the following individuals: Chief Financial Officer, Daryl Stem Co Founder and Chief Technology Officer, Isaiah DeRose Wilson Executive Vice President of Operations, Wyren Bavis Executive Vice President of Human Resources, Heather Ayer Chief Legal Officer, Kristen Lee and our Chief Marketing Officer, Robin Young. Daryl will act as our Principal Executive Officer in an interim period. This team is intimately familiar with our business and the industry and has decades of experience in technology services, software, product innovation, real estate and rental housing. One of the key reasons we are so confident in Smart Rent's ability to capture the opportunities ahead is that we know we have an exceptional team at the helm. The Board has also formed an operating committee of independent directors that will oversee the company's operations and work closely with the management committee during this transition period. Speaker 200:06:06While we have a lot of work in front of us, we are confident in Smart Run's future. From a strong foundation of proven product quality and customer satisfaction, we are finding our organization so that we have the tools and infrastructure necessary to enhance our winning value proposition for customers and drive long term shareholder value. Finally, I want to thank every member of our dedicated SmartRent team who continue to work tirelessly to deliver on our goals and support our customers. Your hard work and commitment are deeply appreciated. I'll now turn the call back over to Daryl. Speaker 100:06:46Thank you, Frank, and again, good morning, everyone. I'm pleased to provide an update on SmartRent's financial performance and I'm proud of the momentum our team has built to position SmartRent for sustainable growth. This momentum has resulted in 3 consecutive quarters of positive adjusted EBITDA, reflecting our continued focus on improving profitability. Additionally, we're steadily driving growth in recurring revenue and enhancing gross margins, providing for greater stability and visibility in this evolving market. We continue to operate in a challenging economic landscape characterized by shifting capital expenditure patterns influenced by interest rate uncertainties and other macroeconomic factors. Speaker 100:07:40In response to these dynamics, we continue to actively position our company for long term success. We're further enhancing our customer engagement, Better understanding and meeting the needs of our customers helps ensure that our products and services align more closely with their expectations. This includes making organizational changes and refining processes within our sales team. These adjustments are designed to improve our accuracy in predicting business trends and customer behaviors. We're refocusing back on direct sales. Speaker 100:08:24In 2023, we launched a channel partner sales program designed to leverage external partnerships to extend our reach within our market. Despite the strategic alignment and potential benefits we anticipated, the program did not meet our expectations. In response, we're currently seeking a new sales leader to guide our sales efforts. Concurrently, we're also enhancing our sales operations organization to refocus and strengthen our direct sales efforts. These strategic adjustments are designed to better align with our core objectives and drive improved sales performance. Speaker 100:09:11Our approach to organic reinvestment prioritizes enhancements to our products, significantly informed by customer and end user feedback. This deliberate focus is directly reflected in our low customer churn and our net revenue retention rate north of 100%, both of which are contributing to increasing our recurring revenue. Our organic growth approach helps mitigate some of the market uncertainty, driving certain customer orders being pushed out from 2024 into 2025. We're committed to ongoing enhancements to our operating model. This involves continuous improvement across various aspects of our business. Speaker 100:10:04Through back office enhancements, organizational realignment, supply chain optimization and other operating initiatives, we're making incremental gains that bolster both profitability and improved customer satisfaction each quarter. And we continue to implement rigorous cost management. This approach is carefully calibrated to maintain our company's financial health without stripping away the essential capabilities needed for rapid scaling. We're ensuring that while we manage costs effectively, we retain the agility to capitalize on market opportunities as conditions improve. At the same time, as we are focusing on controlling costs, we continue to prioritize growing recurring revenue streams. Speaker 100:11:02Top line recurring revenue growth will help enhance the predictability and stability of our earnings. This shift not only aligns with our long term operational goals, but also provides our investors with clear visibility. This quarter, we delivered record staff annual recurring revenue of $51,200,000 This achievement is an affirmation of the trust our customers place in our innovative solutions and the relentless dedication of our team. Our recurring revenue growth combined with our operational initiatives has resulted in enhanced per unit economics. SaaS ARPU this quarter was $5.63 per unit, which is a 9% increase from last year, which was $5.16 Our ability to drive substantial growth in our SaaS recurring revenue and improve our per unit economics through scale and pricing improvements in the face of broader market uncertainties underscores our commitment to delivering exceptional value and service to the rental housing industry. Speaker 100:12:25Given the continued focus on SaaS growth, we believe recurring revenue to be the best indicator of our company's future performance and potential. This focus area underscores our commitment to leveraging our market position and innovation capabilities to deliver long term value to our shareholders. We saw a significant 32% year over year increase in SaaS revenue, driven primarily by improvements in SaaS ARPU and the number of units deployed. I'm going to say that again, driven primarily by improvements in SaaS ARPU and the number of units deployed. These are key metrics that underpin our strategy for delivering more predictable growth. Speaker 100:13:24Over the same period, our SaaS ARR climbed to $51,200,000 up from $38,800,000 in the Q2 of last year. Units booked SaaS ARPU saw a decrease of 8% to $8.07 per unit from $8.74 in Q2 2023, primarily attributable to customer and product mix changes. Turning now to our overall revenue streams. Total revenue for the quarter was $48,500,000 a 9% decrease from the same quarter last year. Total revenues decreased primarily due to lower units deployed, which is primarily a result of the delayed capital investment spending we're seeing within our customer base. Speaker 100:14:19To be clear, we're not seeing any change in demand or the overall market opportunity, rather we see certain customers that have deferred the deployment of units originally forecast for deployment in 2024 into calendar year 2025. Hosted services revenue saw a 16% increase to $18,000,000 from $15,600,000 last year. Hardware revenue decreased by $3,000,000 or 11 percent to $24,700,000 and professional services revenue was $5,800,000 a decrease of $4,200,000 or 42% from the prior year. On the deployment front, total units deployed have reached about 772,000 units, an increase of 19% with roughly 121,000 more units compared to the same point last year. We had a little over 22,000 new units deployed during the quarter, compared with approximately 48,000 in the same period prior year. Speaker 100:15:39Total bookings for the quarter amounted to $45,500,000 a $14,000,000 or 44 percent increase from the same quarter last year. Gross margin improvements were a highlight this quarter. Total gross margin improved to 35.7% from 18.5% last year or roughly 1700 basis points, driven primarily by cost management and improvements to our operating model. SaaS gross margin improved to 75.5% from 75.1 percent, a 43 basis point improvement. Total gross profit increased significantly in the 2nd quarter to $17,300,000 from $9,900,000 last year or an increase of 75%. Speaker 100:16:41Hardware gross profit was $8,400,000 a 44% increase from $5,800,000 due to product mix. The gross loss in professional services narrowed to $3,000,000 from $5,800,000 in the same quarter of the previous year, primarily due to reduced volume in units deployed and followed by the benefits of cost management initiatives. Hosted services gross profit increased to $12,000,000 from $9,800,000 in the same quarter of last year and continues to be the company's most profitable revenue stream. Operating expenses were $24,200,000 in the quarter, including a one time $2,300,000 impairment charge related to an investment, compared to $29,900,000 in the same quarter of last year, reflecting our continuance of work on our operating model and cost management. Within the context of achieving a 32% increase in SaaS revenue, these operating expenses demonstrate our commitment to cost management and more importantly, we believe they reflect our ability to effectively leverage our existing cost structure to accelerate revenue growth. Speaker 100:18:16Lastly, adjusted EBITDA for the quarter was approximately $900,000 a 114% improvement from a loss of $6,400,000 in the same quarter from the prior year. This is our 3rd consecutive quarter of positive adjusted EBITDA. As we conclude the quarter with a cash balance of $187,000,000 we remain well positioned to pursue our growth initiatives and navigate the evolving economic landscape and invest in the business. As communicated last week, we've made the difficult decision to suspend financial guidance. This decision stems from a confluence of factors. Speaker 100:19:09Given the ongoing CEO transition, current market conditions, known and anticipated customer capital spending delays and the scaling back of SmartRent's channel partner sales program, we determined it was appropriate to suspend guidance at this time. In addition, recent internal reviews have highlighted the need to build greater discipline within our sales organization. In response, the management committee and I are committed to implementing more rigorous methods to enhance our forecasting accuracy and reliability. We intend to reinstate guidance with a clear comprehensive outlook as soon as visibility into our operations and market conditions improve. Our commitment is to transparency and precision in our forward looking statements, ensuring we meet the expectations of our shareholders and pave the way for the company's long term growth. Speaker 100:20:16Our balance sheet remains strong with substantial cash reserves and no debt, which positions us well to capitalize on opportunities and handle potential challenges. Our capital allocation strategy is focused primarily on organic reinvestment in high return projects that strengthen our market position. Let me also give you a brief update on our existing share repurchase program. In the quarter, we purchased roughly 765,000 shares and following the close of the quarter, we purchased an additional 842,000 shares. The Board has reaffirmed our existing share repurchase authorization, and we have approximately $42,000,000 available for future purchases under the program. Speaker 100:21:13Going forward, we will opportunistically make purchases in the open market given the substantial disconnect we see between the current share price and the long term value of the business. In conclusion, we recognize the uncertain environment in which we operate, especially as delayed capital expenditures among our customers impact the business in the near term. Again, the primary impact of this environment is a delay in anticipated 2024 deployments that our customers have pushed to 2025. The overall long term opportunity is unchanged and remains extremely compelling. Thank you for your time today. Speaker 100:22:05And now we can open the line and take your questions. Speaker 300:22:10Thank you. We will now begin the question and answer session. Our first question comes from the line of Ryan Tomasello with KBW. Please go ahead. Speaker 400:22:47Hi, everyone. Thanks for taking the questions. Wanted to start by asking about how the Wi Fi strategy fits into all of the recent developments and changes at the management level. Has the outlook and optimism there changed at all? Obviously, 2024 included a step up in the investment to build out that opportunity. Speaker 400:23:08So curious how the investment plans there might be changing going forward in light of these recent developments? Thanks. Speaker 100:23:16Yes. Thank you, Ryan. The WiFi component remains a very bullish opportunity in our minds and we continue to invest in the WiFi program. As you're aware, we have a limited number of WiFi projects that are currently underway and we did not expect much of an impact from Wi Fi on 2024 results. We are, as I said, continuing to invest in the Wi Fi line. Speaker 100:23:52We might expect that a new CEO who would come in with a fresh perspective might consider some changes. But I would say fundamentally, we believe very strongly in the Wi Fi opportunity and it will remain a compelling part of our offering to our customers. Speaker 400:24:14Great. And then in terms of these headwinds you're calling out from customers delaying these capital projects, is there a way to quantify the cumulative amount of unit deployments or bookings that you think are being pushed out here out of 2024? And as we think about next year, it seems like there's a high degree of confidence that those deployments and bookings will ultimately come through. I was hoping you can just put a finer point around the confidence level there and why you think ultimately needs to play out for apartment operators and your customers over the next, I don't know, call it 6 to 9 months to alleviate some of those headwinds and get these projects back on track? Speaker 100:25:02We do have a high degree of confidence that these deployments will occur in 2025. But in terms of what we are looking to see in the macroeconomic conditions, I would say that the persistently high interest rates have had an adverse impact on the acquisition disposition market in particular. And it may not be directly intuitive, but many of our customers when they're making acquisitions of new communities underwrite technology improvements amongst other improvements into the purchase price. So the high persistently high interest rates have had an impact on our forecast deployment. And that would be the first thing that I would look for, Ryan, to occur between now and the end of this year that would increase our confidence in the actual deployments that are being pushed out to 2025. Speaker 400:26:13Okay. Thanks for taking the questions. Speaker 100:26:16Thank you, Ryan. Speaker 300:26:19Our next question comes from the line of Eric Woodring with Morgan Stanley. Please go ahead. Speaker 500:26:25Hey, good morning guys. Thank you for taking my I have a few as well. Daryl, maybe if we could just double click on the comment that you just made to Ryan. Again, you say you have a high degree of confidence that what gets put from 2024 lands in 2025. Obviously, this is a very dynamic environment. Speaker 500:26:45Things obviously probably higher probability of shifting relatively rapidly. So my specific question is why do you have that confidence? Is it contractual terms? Is it spending that you see? I just love to really understand what leads you to say that you have that high degree of confidence? Speaker 500:27:05And then I have a follow-up please. Thank you so much. Speaker 100:27:08Yes. The first point that I would make is one that I made to Ryan as well, which is we believe that the likelihood of interest rate softening is more likely than it has been in the past roughly 1 year. And so I would be looking specifically for a rate reduction as early as September and perhaps multiple decreases to the interest rate between now and the end of the year. Our customers, we've had discussions with, as you might expect, and we have ongoing discussions with them on a regular basis. And they're expressing a higher degree of confidence in returning to more normalized CapEx investment in 2025. Speaker 100:28:03What's changed over the course of the last half a year to 9 months, most recently is that the statements with regards to what might have been deployed in 2024, the customers have said definitively will be pushed out to 2025. Speaker 500:28:28Okay. That's really helpful. Thank you for that. And then maybe as a follow-up, Daryl, what I hear from you is a focus on SaaS, on ARPU, on recurring revenue. I would say over the last handful of quarters, maybe that messaging was a bit lost with a bit of a focus on hardware. Speaker 500:28:46Are you suggesting, again to the degree that you can disclose now before you've gone through any changes and obviously hired a new permanent CEO, but are you suggesting that there could be maybe a change in the hardware approach and maybe get back to the roots of where SmartRed started, which was less of a focus on hardware and more of a focus on software and connecting the platform together? Speaker 100:29:12Well, our platform is comprehensive. And the hardware and the software are equally important. Where I think you'll see renewed focus and a return really to our core philosophy is how we're approaching the market. I repeated the statement about midway through my prepared remarks that the primary drivers behind increasing SaaS revenue are both improvements to the SaaS ARPU and the number of units deployed. So what I'm really saying there, Eric, point blank is we are renewing our focus on deployed units. Speaker 500:30:02Okay. That's very clear. And then maybe just the last one for me, and this could be for anyone on the call is just as you think about the next person that you want to bring in to lead this company, what are some of the characteristics or what's the type of background that you're looking for in a new CEO? Is this a real estate industry person? Is this a tech person? Speaker 500:30:25Is this an operational person? Just love general comments on what you're looking for in the next leader for smart rent? And that's it for me. Thanks. Speaker 100:30:34Yes. Well, Eric, thank you for the question. I think what you described would be our unicorn applicant to the physician. But a very important point that Frank made and we made in our prior release is that we've really reached the point where scale is very important. So one of the primary characteristics that we would be looking for in our next CEO is someone who can bring a history of successful scaling. Speaker 100:31:10Lucas did a wonderful job of building this company to a tough $200,000,000 a year company, but the skill set that's required to get a company from $200,000,000 to say $1,000,000,000 is different than the skill set required to get you from 0 to 200. Speaker 500:31:32Great. Thanks so much for the color. Good luck, guys. Speaker 100:31:35Thank you. Speaker 300:31:38Our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald. Please go ahead. Speaker 600:31:46Hi, guys. Thanks for taking my questions. If we could start on ARR, it grew nicely sequentially on lower units. I guess, was it a relatively stronger upsell period? And like what really drove that big sequential improvement in SaaS R2? Speaker 100:32:05Yes. You may recall, we had a bit of a mathematical anomaly on Q1 actually. And the primary reason for that was that the timing of the new deployments in Q1 were relatively late in the corner. And so we didn't receive we can receive anywhere from effectively 0 to 3 full months of SaaS revenue when we deployed new units in any particular quarter. So Q1, we deployed more units, but received relatively new low amount of revenue. Speaker 100:32:51On top of that, I would point to the bookings SaaS ARPU. Although the number in Q2 was down from a year ago, at $8.07 per unit, it still remains above our existing SaaS ARPU and it's a clear indicator that as we deploy new units and continue to deploy new units, they'll come on at higher prices, which will incrementally grow the SaaS ARPU from quarter to quarter. Speaker 600:33:27Got it. That's helpful. Then secondly on hosted services gross margins, it stepped back a little bit sequentially. And this is with the hub revenue within that declining by call it $800,000 and the SaaS revenue increasing by $900,000 So 75% gross margin went up, 20% gross margin went down. I guess how did posted services gross margin not go up in the quarter? Speaker 100:34:03Hosted services margin was relatively flat. During the quarter. It did come down by about 0.3 percent. And I would say that that's not necessarily a statistically significant change. It is up year over year. Speaker 100:34:23And I would expect that generally, it's going to approach 75% breadth over time because the hub amortization portion of it is going down. During Q2, roughly 2 thirds of the total hosted services revenue came from SaaS revenue, which is running at about 75%. So not overly concerned about the small drop sequentially. It is up year over year from 63% to about 66%. Speaker 600:35:07Got it. And then I know you guys are withdrawing guidance, but could you just help frame what you're expecting for the rest of the year? Like if we look at deployments in the Q2, are deployments going to be lower in the back half than what we saw in the second quarter? Any insights to how we should think about revenue and profitability over the next 6 months? Speaker 100:35:33Yes, we're not prepared to give any specific guidance at this particular point. As our visibility improves and as the market macroeconomic climate does change or as we expected to, we would anticipate providing some specific guidance later this year and also around 2025. Speaker 600:36:01Okay. And then maybe just lastly, I guess, timing from a new CEO. I know the search is underway, but is that something we should expect, call it, over the next couple of months before year end? I guess, what's your base case there? Speaker 100:36:17Yes, thank you. The board is working presently engaged with a leading executive search firm to identify candidates and also evaluate those candidates. And we're really focused on making this a smooth and orderly transition. And we're not setting any particular timeline because of those factors. We really want to focus on getting the right candidate to lead this company going forward because we believe the long term value is so very compelling. Speaker 600:36:55Got it. Thank you. Really appreciate it, guys. Speaker 100:36:58Thank you, Brett. Speaker 300:37:02Our next question comes from the line of Tom White with D. A. Davidson. Please go ahead. Speaker 700:37:10Hi, Daryl. Hi, everyone. Thanks for taking my question. 2 if I could. I hopped on a little bit late, so apologies if this was covered. Speaker 700:37:17But the press release announcing Lucas' departure made reference to sort of a move away from kind of the channel partner strategy. I was hoping you could just maybe provide a little bit more detail about what's happening there? What's prompted that change? Why is that the right move? And then secondarily, Daryl, you mentioned expecting kind of a renewed focus on deployed units. Speaker 700:37:45And I'm curious whether that means also doing that profitably or is there a potential that focus on deployed units could see you guys kind of dip back into maybe a little bit of a cash burn period as you prioritize deployed units? Thanks. Speaker 100:38:08Thank you for your questions, Tom. With regard to the channel partner program, we're scaling back the program. We're not totally eliminating the program. And one of the primary reasons for putting in place in the first place was really we feel like it could be an effective way to address the long tail of our market rather than smart rent directly engaging, fully engaging with smaller customers, we think it might be a more economical way to address the lower unit customers. So we're scaling it back. Speaker 100:38:55Last year, it did not work. Again, we've got a phenomenal, I think, organic opportunity in front of us in that our existing customers own and operate more than 7,000,000 units. So what we're really doing is we're refocusing our team to directly sale to these customers so that we can maintain those deep customer relationships and enhance our service to them. With regards to remaining or profitability on deployment of units, I think that we've actually positioned ourselves very well to be able to expand our unit deployment volumes on a profitable basis. We've done a lot of investment internally on back office as well as field services and done some realignment of our teams. Speaker 100:40:02And I think we've put ourselves in a position where we can expand deployed unit volume profitably. Speaker 700:40:12Great. Thank you, Daryl. Speaker 100:40:17Thank you again, Tom, and thank you all for joining us today. As we conclude this call, I'd like to reiterate a couple of points. Despite the broader economic uncertainty, our solid foundation and strategic foresight have accelerated our innovation path, leading to 3 consecutive quarters of positive adjusted EBITDA, while growing SaaS recurring revenue north of 30% to a record of $51,200,000 This was accomplished all while keeping operating expenses effectively flat and these results speak to the early innings of creating a platform for value creation. The current economic conditions marked by delayed customer CapEx impact the near term performance of the business. But as I stated earlier, the primary impact of this environment is a delay in anticipated 2024 deployments that our customers have pushed to 2025. Speaker 100:41:28The long term overall opportunity remains unchanged and remains extremely compelling. Our commitment to innovation remains strong, informed by customer feedback, which has been instrumental in maintaining our impressive net revenue retention rate north of 100%. As we move forward, we believe we're well prepared to capitalize on market opportunities and continue to serve our customers and drive long term value for our shareholders. Thank you all for your time today.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallSmartRent Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) SmartRent Earnings HeadlinesSmartRent Receives Continued Listing Standard Notice from NYSEMay 2, 2025 | businesswire.comSmartRent Expands AI-Powered Smart Operations Suite to Support Centralized TeamsMarch 31, 2025 | businesswire.comMarket Panic: Trump Just Dropped a Bomb on Your Stockstock Market Panic: Trump Just Dropped a Bomb on Your Stocks The market is in freefall—and Trump's new tariffs just lit the fuse. Millions of investors are blindsided as stocks plunge… but this is only Phase 1. If you're still holding the wrong assets, you could lose 30% or more in the coming weeks.May 7, 2025 | American Alternative (Ad)SmartRent Reports Inducement Grants Under New York Stock Exchange Listed Company Manual RuleMarch 18, 2025 | businesswire.comSmartRent Reports Fourth Quarter and Full-Year 2024 ResultsMarch 5, 2025 | finance.yahoo.comSmartRent, Inc. (SMRT) Q4 2024 Earnings Call TranscriptMarch 5, 2025 | seekingalpha.comSee More SmartRent Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like SmartRent? Sign up for Earnings360's daily newsletter to receive timely earnings updates on SmartRent and other key companies, straight to your email. Email Address About SmartRentSmartRent (NYSE:SMRT), an enterprise software company, provides an integrated smart home operating system to residential property owners and operators, homebuilders, institutional home buyers, developers, and residents in the United States. The company's products and solutions include smart apartments and homes, access control for buildings, common areas, and rental units, asset protection and monitoring, parking management, self-guided tours, and community and resident Wi-Fi. It also offers professional services to customers, which include training, installation, and support services. The company was founded in 2017 and is headquartered in Scottsdale, Arizona.View SmartRent ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Disney Stock Jumps on Earnings—Is the Magic Sustainable?Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release? 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There are 8 speakers on the call. Operator00:00:00Hello, and thank you for joining us today. My name is Kristen Lee, Chief Legal Officer for SmartRent. I'm joined today by Daryl Stem, CFO and Interim Principal Executive Officer and Frank Martell, Director and Chair of the Operating Committee. Before the market opened today, we issued an earnings release and filed our 10 Q with the SEC, both of which are available on the Investor Relations section of our website, smartrent.com. Before I turn the call over to Daryl, I'd like to remind everyone that the discussion today may contain certain forward looking statements that involve risks and uncertainties. Operator00:00:38Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including our annual report on Form 10 ks and quarterly reports on Form 10 Q. We undertake no obligation to provide updates regarding forward looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial position in SmartRent. Also, during today's call, we will refer to certain non GAAP financial measures. A discussion of these non GAAP financial measures, along with the reconciliation to the most directly comparable GAAP measure is included in today's earnings release. Operator00:01:21We would also like to highlight that a second quarter earnings presentation is available on the Investor Relations section of our website. And with that, I will turn the call over to Daryl. Speaker 100:01:34Good morning, everyone, and thank you for joining us today. Before we delve into our financial performance and strategic updates, I'm honored to introduce Frank Martell, our Director and Chair of the Operating Committee. Frank joined our Board in 2024 and has quickly become a valued member, bringing fresh perspectives and experience that will support our company through our leadership transition. His leadership and experience are extremely impactful as we focus on enhancing our operational capabilities and efficiencies and capitalize on growth opportunities in our dynamic market environment. Frank's oversight is critical as we discuss today's updates on our leadership and strategic business objectives. Speaker 100:02:26And now, I'll turn the call over to Frank. Speaker 200:02:31Thank you for the introduction, Daryl. Good morning, everyone. I appreciate all of you being on the call today. Before Daryl provides us with an operational update and discusses our Q2 results, I wanted to say a few words about last week's news and the future of SmartRent. I recently joined SmartRent as an independent Board Director because I was intrigued and excited by the innovative company that SmartRent is, which is leading in the Smart Home Technology Movement and revolutionizing the rental housing industry. Speaker 200:03:06Since joining the Board, it's become very clear to me that this company is a category creator with a unique and leading market position, compelling competitive strengths and exceptional growth opportunities. Speaking on behalf of our Board, we are as confident as ever in Smart Run's long term potential and are focused on working with the management team to enhance our operations, provide increased value to our customers and the residents and to drive significant value for shareholders. Because we are in such a strong competitive position with significant opportunities and because we have such promise on the horizon, the Board believes that now is a time for a change in leadership. As I'm sure you saw, last Tuesday we announced that Lucas Haldeman has stepped down as CEO and resigned from the Board. We commend Lucas on his achievements and thank him for everything that he's done. Speaker 200:04:06As Smart Run's founder, Lucas did an extraordinary job driving innovation and product development, building strong customer relationships and making the company the leader that it is today. We know that companies need different types of leadership at different stages of its development. As we evolve and scale SmartRent into its next phase of growth, we believe the company will benefit from a CEO with a different skill set and a fresh perspective. The Board has initiated a comprehensive search for a new CEO who will lead SmartRent to the next level as we capitalize on the many compelling opportunities ahead of us. We formed a management committee of talented Smart Rent executives to guide the company in this interim period. Speaker 200:04:56The management committee is comprised of the following individuals: Chief Financial Officer, Daryl Stem Co Founder and Chief Technology Officer, Isaiah DeRose Wilson Executive Vice President of Operations, Wyren Bavis Executive Vice President of Human Resources, Heather Ayer Chief Legal Officer, Kristen Lee and our Chief Marketing Officer, Robin Young. Daryl will act as our Principal Executive Officer in an interim period. This team is intimately familiar with our business and the industry and has decades of experience in technology services, software, product innovation, real estate and rental housing. One of the key reasons we are so confident in Smart Rent's ability to capture the opportunities ahead is that we know we have an exceptional team at the helm. The Board has also formed an operating committee of independent directors that will oversee the company's operations and work closely with the management committee during this transition period. Speaker 200:06:06While we have a lot of work in front of us, we are confident in Smart Run's future. From a strong foundation of proven product quality and customer satisfaction, we are finding our organization so that we have the tools and infrastructure necessary to enhance our winning value proposition for customers and drive long term shareholder value. Finally, I want to thank every member of our dedicated SmartRent team who continue to work tirelessly to deliver on our goals and support our customers. Your hard work and commitment are deeply appreciated. I'll now turn the call back over to Daryl. Speaker 100:06:46Thank you, Frank, and again, good morning, everyone. I'm pleased to provide an update on SmartRent's financial performance and I'm proud of the momentum our team has built to position SmartRent for sustainable growth. This momentum has resulted in 3 consecutive quarters of positive adjusted EBITDA, reflecting our continued focus on improving profitability. Additionally, we're steadily driving growth in recurring revenue and enhancing gross margins, providing for greater stability and visibility in this evolving market. We continue to operate in a challenging economic landscape characterized by shifting capital expenditure patterns influenced by interest rate uncertainties and other macroeconomic factors. Speaker 100:07:40In response to these dynamics, we continue to actively position our company for long term success. We're further enhancing our customer engagement, Better understanding and meeting the needs of our customers helps ensure that our products and services align more closely with their expectations. This includes making organizational changes and refining processes within our sales team. These adjustments are designed to improve our accuracy in predicting business trends and customer behaviors. We're refocusing back on direct sales. Speaker 100:08:24In 2023, we launched a channel partner sales program designed to leverage external partnerships to extend our reach within our market. Despite the strategic alignment and potential benefits we anticipated, the program did not meet our expectations. In response, we're currently seeking a new sales leader to guide our sales efforts. Concurrently, we're also enhancing our sales operations organization to refocus and strengthen our direct sales efforts. These strategic adjustments are designed to better align with our core objectives and drive improved sales performance. Speaker 100:09:11Our approach to organic reinvestment prioritizes enhancements to our products, significantly informed by customer and end user feedback. This deliberate focus is directly reflected in our low customer churn and our net revenue retention rate north of 100%, both of which are contributing to increasing our recurring revenue. Our organic growth approach helps mitigate some of the market uncertainty, driving certain customer orders being pushed out from 2024 into 2025. We're committed to ongoing enhancements to our operating model. This involves continuous improvement across various aspects of our business. Speaker 100:10:04Through back office enhancements, organizational realignment, supply chain optimization and other operating initiatives, we're making incremental gains that bolster both profitability and improved customer satisfaction each quarter. And we continue to implement rigorous cost management. This approach is carefully calibrated to maintain our company's financial health without stripping away the essential capabilities needed for rapid scaling. We're ensuring that while we manage costs effectively, we retain the agility to capitalize on market opportunities as conditions improve. At the same time, as we are focusing on controlling costs, we continue to prioritize growing recurring revenue streams. Speaker 100:11:02Top line recurring revenue growth will help enhance the predictability and stability of our earnings. This shift not only aligns with our long term operational goals, but also provides our investors with clear visibility. This quarter, we delivered record staff annual recurring revenue of $51,200,000 This achievement is an affirmation of the trust our customers place in our innovative solutions and the relentless dedication of our team. Our recurring revenue growth combined with our operational initiatives has resulted in enhanced per unit economics. SaaS ARPU this quarter was $5.63 per unit, which is a 9% increase from last year, which was $5.16 Our ability to drive substantial growth in our SaaS recurring revenue and improve our per unit economics through scale and pricing improvements in the face of broader market uncertainties underscores our commitment to delivering exceptional value and service to the rental housing industry. Speaker 100:12:25Given the continued focus on SaaS growth, we believe recurring revenue to be the best indicator of our company's future performance and potential. This focus area underscores our commitment to leveraging our market position and innovation capabilities to deliver long term value to our shareholders. We saw a significant 32% year over year increase in SaaS revenue, driven primarily by improvements in SaaS ARPU and the number of units deployed. I'm going to say that again, driven primarily by improvements in SaaS ARPU and the number of units deployed. These are key metrics that underpin our strategy for delivering more predictable growth. Speaker 100:13:24Over the same period, our SaaS ARR climbed to $51,200,000 up from $38,800,000 in the Q2 of last year. Units booked SaaS ARPU saw a decrease of 8% to $8.07 per unit from $8.74 in Q2 2023, primarily attributable to customer and product mix changes. Turning now to our overall revenue streams. Total revenue for the quarter was $48,500,000 a 9% decrease from the same quarter last year. Total revenues decreased primarily due to lower units deployed, which is primarily a result of the delayed capital investment spending we're seeing within our customer base. Speaker 100:14:19To be clear, we're not seeing any change in demand or the overall market opportunity, rather we see certain customers that have deferred the deployment of units originally forecast for deployment in 2024 into calendar year 2025. Hosted services revenue saw a 16% increase to $18,000,000 from $15,600,000 last year. Hardware revenue decreased by $3,000,000 or 11 percent to $24,700,000 and professional services revenue was $5,800,000 a decrease of $4,200,000 or 42% from the prior year. On the deployment front, total units deployed have reached about 772,000 units, an increase of 19% with roughly 121,000 more units compared to the same point last year. We had a little over 22,000 new units deployed during the quarter, compared with approximately 48,000 in the same period prior year. Speaker 100:15:39Total bookings for the quarter amounted to $45,500,000 a $14,000,000 or 44 percent increase from the same quarter last year. Gross margin improvements were a highlight this quarter. Total gross margin improved to 35.7% from 18.5% last year or roughly 1700 basis points, driven primarily by cost management and improvements to our operating model. SaaS gross margin improved to 75.5% from 75.1 percent, a 43 basis point improvement. Total gross profit increased significantly in the 2nd quarter to $17,300,000 from $9,900,000 last year or an increase of 75%. Speaker 100:16:41Hardware gross profit was $8,400,000 a 44% increase from $5,800,000 due to product mix. The gross loss in professional services narrowed to $3,000,000 from $5,800,000 in the same quarter of the previous year, primarily due to reduced volume in units deployed and followed by the benefits of cost management initiatives. Hosted services gross profit increased to $12,000,000 from $9,800,000 in the same quarter of last year and continues to be the company's most profitable revenue stream. Operating expenses were $24,200,000 in the quarter, including a one time $2,300,000 impairment charge related to an investment, compared to $29,900,000 in the same quarter of last year, reflecting our continuance of work on our operating model and cost management. Within the context of achieving a 32% increase in SaaS revenue, these operating expenses demonstrate our commitment to cost management and more importantly, we believe they reflect our ability to effectively leverage our existing cost structure to accelerate revenue growth. Speaker 100:18:16Lastly, adjusted EBITDA for the quarter was approximately $900,000 a 114% improvement from a loss of $6,400,000 in the same quarter from the prior year. This is our 3rd consecutive quarter of positive adjusted EBITDA. As we conclude the quarter with a cash balance of $187,000,000 we remain well positioned to pursue our growth initiatives and navigate the evolving economic landscape and invest in the business. As communicated last week, we've made the difficult decision to suspend financial guidance. This decision stems from a confluence of factors. Speaker 100:19:09Given the ongoing CEO transition, current market conditions, known and anticipated customer capital spending delays and the scaling back of SmartRent's channel partner sales program, we determined it was appropriate to suspend guidance at this time. In addition, recent internal reviews have highlighted the need to build greater discipline within our sales organization. In response, the management committee and I are committed to implementing more rigorous methods to enhance our forecasting accuracy and reliability. We intend to reinstate guidance with a clear comprehensive outlook as soon as visibility into our operations and market conditions improve. Our commitment is to transparency and precision in our forward looking statements, ensuring we meet the expectations of our shareholders and pave the way for the company's long term growth. Speaker 100:20:16Our balance sheet remains strong with substantial cash reserves and no debt, which positions us well to capitalize on opportunities and handle potential challenges. Our capital allocation strategy is focused primarily on organic reinvestment in high return projects that strengthen our market position. Let me also give you a brief update on our existing share repurchase program. In the quarter, we purchased roughly 765,000 shares and following the close of the quarter, we purchased an additional 842,000 shares. The Board has reaffirmed our existing share repurchase authorization, and we have approximately $42,000,000 available for future purchases under the program. Speaker 100:21:13Going forward, we will opportunistically make purchases in the open market given the substantial disconnect we see between the current share price and the long term value of the business. In conclusion, we recognize the uncertain environment in which we operate, especially as delayed capital expenditures among our customers impact the business in the near term. Again, the primary impact of this environment is a delay in anticipated 2024 deployments that our customers have pushed to 2025. The overall long term opportunity is unchanged and remains extremely compelling. Thank you for your time today. Speaker 100:22:05And now we can open the line and take your questions. Speaker 300:22:10Thank you. We will now begin the question and answer session. Our first question comes from the line of Ryan Tomasello with KBW. Please go ahead. Speaker 400:22:47Hi, everyone. Thanks for taking the questions. Wanted to start by asking about how the Wi Fi strategy fits into all of the recent developments and changes at the management level. Has the outlook and optimism there changed at all? Obviously, 2024 included a step up in the investment to build out that opportunity. Speaker 400:23:08So curious how the investment plans there might be changing going forward in light of these recent developments? Thanks. Speaker 100:23:16Yes. Thank you, Ryan. The WiFi component remains a very bullish opportunity in our minds and we continue to invest in the WiFi program. As you're aware, we have a limited number of WiFi projects that are currently underway and we did not expect much of an impact from Wi Fi on 2024 results. We are, as I said, continuing to invest in the Wi Fi line. Speaker 100:23:52We might expect that a new CEO who would come in with a fresh perspective might consider some changes. But I would say fundamentally, we believe very strongly in the Wi Fi opportunity and it will remain a compelling part of our offering to our customers. Speaker 400:24:14Great. And then in terms of these headwinds you're calling out from customers delaying these capital projects, is there a way to quantify the cumulative amount of unit deployments or bookings that you think are being pushed out here out of 2024? And as we think about next year, it seems like there's a high degree of confidence that those deployments and bookings will ultimately come through. I was hoping you can just put a finer point around the confidence level there and why you think ultimately needs to play out for apartment operators and your customers over the next, I don't know, call it 6 to 9 months to alleviate some of those headwinds and get these projects back on track? Speaker 100:25:02We do have a high degree of confidence that these deployments will occur in 2025. But in terms of what we are looking to see in the macroeconomic conditions, I would say that the persistently high interest rates have had an adverse impact on the acquisition disposition market in particular. And it may not be directly intuitive, but many of our customers when they're making acquisitions of new communities underwrite technology improvements amongst other improvements into the purchase price. So the high persistently high interest rates have had an impact on our forecast deployment. And that would be the first thing that I would look for, Ryan, to occur between now and the end of this year that would increase our confidence in the actual deployments that are being pushed out to 2025. Speaker 400:26:13Okay. Thanks for taking the questions. Speaker 100:26:16Thank you, Ryan. Speaker 300:26:19Our next question comes from the line of Eric Woodring with Morgan Stanley. Please go ahead. Speaker 500:26:25Hey, good morning guys. Thank you for taking my I have a few as well. Daryl, maybe if we could just double click on the comment that you just made to Ryan. Again, you say you have a high degree of confidence that what gets put from 2024 lands in 2025. Obviously, this is a very dynamic environment. Speaker 500:26:45Things obviously probably higher probability of shifting relatively rapidly. So my specific question is why do you have that confidence? Is it contractual terms? Is it spending that you see? I just love to really understand what leads you to say that you have that high degree of confidence? Speaker 500:27:05And then I have a follow-up please. Thank you so much. Speaker 100:27:08Yes. The first point that I would make is one that I made to Ryan as well, which is we believe that the likelihood of interest rate softening is more likely than it has been in the past roughly 1 year. And so I would be looking specifically for a rate reduction as early as September and perhaps multiple decreases to the interest rate between now and the end of the year. Our customers, we've had discussions with, as you might expect, and we have ongoing discussions with them on a regular basis. And they're expressing a higher degree of confidence in returning to more normalized CapEx investment in 2025. Speaker 100:28:03What's changed over the course of the last half a year to 9 months, most recently is that the statements with regards to what might have been deployed in 2024, the customers have said definitively will be pushed out to 2025. Speaker 500:28:28Okay. That's really helpful. Thank you for that. And then maybe as a follow-up, Daryl, what I hear from you is a focus on SaaS, on ARPU, on recurring revenue. I would say over the last handful of quarters, maybe that messaging was a bit lost with a bit of a focus on hardware. Speaker 500:28:46Are you suggesting, again to the degree that you can disclose now before you've gone through any changes and obviously hired a new permanent CEO, but are you suggesting that there could be maybe a change in the hardware approach and maybe get back to the roots of where SmartRed started, which was less of a focus on hardware and more of a focus on software and connecting the platform together? Speaker 100:29:12Well, our platform is comprehensive. And the hardware and the software are equally important. Where I think you'll see renewed focus and a return really to our core philosophy is how we're approaching the market. I repeated the statement about midway through my prepared remarks that the primary drivers behind increasing SaaS revenue are both improvements to the SaaS ARPU and the number of units deployed. So what I'm really saying there, Eric, point blank is we are renewing our focus on deployed units. Speaker 500:30:02Okay. That's very clear. And then maybe just the last one for me, and this could be for anyone on the call is just as you think about the next person that you want to bring in to lead this company, what are some of the characteristics or what's the type of background that you're looking for in a new CEO? Is this a real estate industry person? Is this a tech person? Speaker 500:30:25Is this an operational person? Just love general comments on what you're looking for in the next leader for smart rent? And that's it for me. Thanks. Speaker 100:30:34Yes. Well, Eric, thank you for the question. I think what you described would be our unicorn applicant to the physician. But a very important point that Frank made and we made in our prior release is that we've really reached the point where scale is very important. So one of the primary characteristics that we would be looking for in our next CEO is someone who can bring a history of successful scaling. Speaker 100:31:10Lucas did a wonderful job of building this company to a tough $200,000,000 a year company, but the skill set that's required to get a company from $200,000,000 to say $1,000,000,000 is different than the skill set required to get you from 0 to 200. Speaker 500:31:32Great. Thanks so much for the color. Good luck, guys. Speaker 100:31:35Thank you. Speaker 300:31:38Our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald. Please go ahead. Speaker 600:31:46Hi, guys. Thanks for taking my questions. If we could start on ARR, it grew nicely sequentially on lower units. I guess, was it a relatively stronger upsell period? And like what really drove that big sequential improvement in SaaS R2? Speaker 100:32:05Yes. You may recall, we had a bit of a mathematical anomaly on Q1 actually. And the primary reason for that was that the timing of the new deployments in Q1 were relatively late in the corner. And so we didn't receive we can receive anywhere from effectively 0 to 3 full months of SaaS revenue when we deployed new units in any particular quarter. So Q1, we deployed more units, but received relatively new low amount of revenue. Speaker 100:32:51On top of that, I would point to the bookings SaaS ARPU. Although the number in Q2 was down from a year ago, at $8.07 per unit, it still remains above our existing SaaS ARPU and it's a clear indicator that as we deploy new units and continue to deploy new units, they'll come on at higher prices, which will incrementally grow the SaaS ARPU from quarter to quarter. Speaker 600:33:27Got it. That's helpful. Then secondly on hosted services gross margins, it stepped back a little bit sequentially. And this is with the hub revenue within that declining by call it $800,000 and the SaaS revenue increasing by $900,000 So 75% gross margin went up, 20% gross margin went down. I guess how did posted services gross margin not go up in the quarter? Speaker 100:34:03Hosted services margin was relatively flat. During the quarter. It did come down by about 0.3 percent. And I would say that that's not necessarily a statistically significant change. It is up year over year. Speaker 100:34:23And I would expect that generally, it's going to approach 75% breadth over time because the hub amortization portion of it is going down. During Q2, roughly 2 thirds of the total hosted services revenue came from SaaS revenue, which is running at about 75%. So not overly concerned about the small drop sequentially. It is up year over year from 63% to about 66%. Speaker 600:35:07Got it. And then I know you guys are withdrawing guidance, but could you just help frame what you're expecting for the rest of the year? Like if we look at deployments in the Q2, are deployments going to be lower in the back half than what we saw in the second quarter? Any insights to how we should think about revenue and profitability over the next 6 months? Speaker 100:35:33Yes, we're not prepared to give any specific guidance at this particular point. As our visibility improves and as the market macroeconomic climate does change or as we expected to, we would anticipate providing some specific guidance later this year and also around 2025. Speaker 600:36:01Okay. And then maybe just lastly, I guess, timing from a new CEO. I know the search is underway, but is that something we should expect, call it, over the next couple of months before year end? I guess, what's your base case there? Speaker 100:36:17Yes, thank you. The board is working presently engaged with a leading executive search firm to identify candidates and also evaluate those candidates. And we're really focused on making this a smooth and orderly transition. And we're not setting any particular timeline because of those factors. We really want to focus on getting the right candidate to lead this company going forward because we believe the long term value is so very compelling. Speaker 600:36:55Got it. Thank you. Really appreciate it, guys. Speaker 100:36:58Thank you, Brett. Speaker 300:37:02Our next question comes from the line of Tom White with D. A. Davidson. Please go ahead. Speaker 700:37:10Hi, Daryl. Hi, everyone. Thanks for taking my question. 2 if I could. I hopped on a little bit late, so apologies if this was covered. Speaker 700:37:17But the press release announcing Lucas' departure made reference to sort of a move away from kind of the channel partner strategy. I was hoping you could just maybe provide a little bit more detail about what's happening there? What's prompted that change? Why is that the right move? And then secondarily, Daryl, you mentioned expecting kind of a renewed focus on deployed units. Speaker 700:37:45And I'm curious whether that means also doing that profitably or is there a potential that focus on deployed units could see you guys kind of dip back into maybe a little bit of a cash burn period as you prioritize deployed units? Thanks. Speaker 100:38:08Thank you for your questions, Tom. With regard to the channel partner program, we're scaling back the program. We're not totally eliminating the program. And one of the primary reasons for putting in place in the first place was really we feel like it could be an effective way to address the long tail of our market rather than smart rent directly engaging, fully engaging with smaller customers, we think it might be a more economical way to address the lower unit customers. So we're scaling it back. Speaker 100:38:55Last year, it did not work. Again, we've got a phenomenal, I think, organic opportunity in front of us in that our existing customers own and operate more than 7,000,000 units. So what we're really doing is we're refocusing our team to directly sale to these customers so that we can maintain those deep customer relationships and enhance our service to them. With regards to remaining or profitability on deployment of units, I think that we've actually positioned ourselves very well to be able to expand our unit deployment volumes on a profitable basis. We've done a lot of investment internally on back office as well as field services and done some realignment of our teams. Speaker 100:40:02And I think we've put ourselves in a position where we can expand deployed unit volume profitably. Speaker 700:40:12Great. Thank you, Daryl. Speaker 100:40:17Thank you again, Tom, and thank you all for joining us today. As we conclude this call, I'd like to reiterate a couple of points. Despite the broader economic uncertainty, our solid foundation and strategic foresight have accelerated our innovation path, leading to 3 consecutive quarters of positive adjusted EBITDA, while growing SaaS recurring revenue north of 30% to a record of $51,200,000 This was accomplished all while keeping operating expenses effectively flat and these results speak to the early innings of creating a platform for value creation. The current economic conditions marked by delayed customer CapEx impact the near term performance of the business. But as I stated earlier, the primary impact of this environment is a delay in anticipated 2024 deployments that our customers have pushed to 2025. Speaker 100:41:28The long term overall opportunity remains unchanged and remains extremely compelling. Our commitment to innovation remains strong, informed by customer feedback, which has been instrumental in maintaining our impressive net revenue retention rate north of 100%. As we move forward, we believe we're well prepared to capitalize on market opportunities and continue to serve our customers and drive long term value for our shareholders. Thank you all for your time today.Read morePowered by