NYSE:SMRT SmartRent Q1 2025 Earnings Report $0.79 -0.02 (-2.89%) Closing price 05/23/2025 03:59 PM EasternExtended Trading$0.79 0.00 (-0.46%) As of 05/23/2025 07:18 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. ProfileEarnings HistoryForecast SmartRent EPS ResultsActual EPS-$0.05Consensus EPS -$0.02Beat/MissMissed by -$0.03One Year Ago EPSN/ASmartRent Revenue ResultsActual Revenue$41.34 millionExpected Revenue$40.10 millionBeat/MissBeat by +$1.24 millionYoY Revenue GrowthN/ASmartRent Announcement DetailsQuarterQ1 2025Date5/7/2025TimeBefore Market OpensConference Call DateWednesday, May 7, 2025Conference Call Time11:30AM ETUpcoming EarningsSmartRent's Q2 2025 earnings is scheduled for Wednesday, August 6, 2025, with a conference call scheduled at 11:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by SmartRent Q1 2025 Earnings Call TranscriptProvided by QuartrMay 7, 2025 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Thank you for standing by. My name is Van, and I will be your conference operator today. At this time, I would like to welcome everyone to the SmartRent Quarter One twenty twenty five Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:29Thank you. I would now like to turn the call over to Kristen Lee, Chief Legal Officer. Please go ahead. Speaker 100:00:38Hello and thank you for joining us today. My name is Kristen Lee, Chief Legal Officer for SmartRent. I'm joined today by our Interim Chief Executive Officer, John Dorman and Daryl Stem, Chief Financial Officer. Before the market opened today, we issued an earnings release and filed our 10 Q with the SEC, both of which will be available on the Investor Relations section of our website, smartrent.com. Before I turn the call over to John, I would like to remind everyone that the discussion today may contain certain forward looking statements that involve risks and uncertainties. Speaker 100:01:13Various 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, 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 a reconciliation to the most directly comparable GAAP measure is included in today's earnings release. Speaker 100:01:56We would also like to highlight that a fourth quarter and full year earnings presentation will be available on the Investor Relations section of our website. And with that, I will turn the call over to John. Speaker 200:02:07Good morning, and thank you for joining SmartRent's first quarter twenty twenty five earnings call. We appreciate your continued engagement as we execute a focused plan designed to position SmartRent for long term sustainable growth and value creation. I've been a board member for over three years, chairman of the board for the past year and now interim CEO. Given this unique position, I thought it would be helpful to use my time this morning to give investors some perspective on the evolution of SmartRent, our plan to drive the company toward meaningful and sustainable long term value creation, and where we are in executing that plan. The SmartRent story really isn't all that complicated, and I hope to make it a little clearer this morning. Speaker 200:02:53SmartRent was founded with a unique vision to deploy IoT technology to transform property operations and resident experiences. Because SmartRent was built on the foundation of experience from the multifamily and single family rental operating businesses, the company's solutions were built with a very deep understanding of the needs and challenges of our customers. Three key and distinct elements differentiated our initial solutions, drove our early success, and still largely distinguish our platform today. Number one, integrating IoT hardware devices through an enterprise scale software platform to fully deliver and maximize the ROI potential for property owners while enhancing the resident experience. Number two, designing the software platform to fully and seamlessly integrate with existing systems in third party hardware devices rather than constraining solutions to our own branded hardware. Speaker 200:03:54And number three, delivering solutions with the unique expertise to deploy them in a retrofit environment rather than limiting them to new build or major renovations. This focus addresses the needs of the largest portion of the addressable market. The power and clear differentiation of these core products launched SmartRent on an initial phase of high growth during which we successfully deployed our platform with 15 of the top 20 multifamily owners and operators in the country as well as several of the largest single family rental operators and iBuyers. These early customers are still with us today. This early and rapid success enabled the establishment of first mover advantage in a massive TAM. Speaker 200:04:42However, the company's operational processes and infrastructure, including in its sales organization, did not adapt quickly enough to the size the business had become. They reflected a culture that was too siloed and dependent on a small number of individuals and was therefore neither scalable nor sufficient to enhance our market leading position and best serve our customers. Over the past nine months, we have made significant progress in redesigning an organization that we believe will enable sustained growth as we move to the next stage of the company's evolution. This includes the addition of seasoned leaders across sales and customer success, most notably Chief Revenue Officer, Natalie Cariola, who are leading the build out of a scalable customer centric sales organization and a high impact customer success function to support long term growth. And while CEO changes are not actions that any board takes lightly, they are often necessary. Speaker 200:05:44I'm pleased to announce we are now in the final stages of our search. We have found multiple highly qualified candidates to assume the permanent CEO role and expect to be able to make an announcement in the coming weeks. Over the past year, in addition to completing internal organizational changes, we've strengthened the board of directors by appointing three highly experienced and proven leaders. Collectively, they bring a strong track record in operating financial and technology leadership at scale, experience that is directly relevant to guiding SmartRent through our next phase of growth. Enhancing board strength and ensuring we have a fit for purpose board remains a priority as we continue to position SmartRent for long term value creation. Speaker 200:06:32Now pivoting to today and what we are executing. First, we are well into the process of addressing the company go to market strategy and capabilities with our new sales organization and approach. Second, we initiated a significant restructuring by breaking down silos and ensuring our infrastructure is scalable. We are also refocusing our operations organization around the needs of our customers. We believe our customers will begin feeling the benefits of these changes in the near term. Speaker 200:07:05Third, we have shifted our focus and technology investment away from developing and selling our own branded hardware components and are executing a strategy based on our four strategic pillars, which are first, sustainable and predictable ARR growth. Our value will be built by focusing on our hardware enabled SaaS model, not on selling our own hardware. Second, platform superiority. The ROI of our solutions for customers will be maximized by delivering a fully integrated enterprise scale software platform. Third, operational excellence. Speaker 200:07:45As a SaaS company, our success will be highly dependent upon the success of our customers in deploying and maintaining our solutions. And finally, collaborative innovation. Rapid and continuous innovation in building out our software platform will be critical to maintaining our position as market leader. We announced these strategic pillars in the third quarter of twenty twenty four along with $10,000,000 in strategic investments to accelerate our change. We believe the fruits of that focus and investment became visible to our customers in the most recent quarter with meaningful enhancements to our smart operations solutions. Speaker 200:08:26We also started to deliver more focused customer engagement as we began to build a more robust customer success organization. As we have proceeded with our operational reorganization and refocusing our technology investment, we've been successful in completing over $10,000,000 in annualized cost savings that we believe will improve cash flow and produce a more rapid return to profitability. Quite simply, we believe we can operate more efficiently and more effectively at the same time. Our conviction remains unchanged. The challenges we faced are largely execution related and solvable. Speaker 200:09:06Over the past nine months, our work has enhanced the board's belief that improving operating effectiveness and maturing our organization will unlock scalable long term growth and value creation. Our confidence is grounded in several levers. First, SmartRent's IoT platform solution has a long term moat due to our hardware enabled SaaS offering. We sustained a customer retention rate above 99.9% over the past three years. While our hardware and hardware implementation revenues have declined over the past year, our SaaS revenues grew by more than 17% and our net revenue retention exceeded 100%. Speaker 200:09:49Number two, SmartRent has unrivaled scale and product advantage. We believe that the unique product advantages that drove our initial wave of success and rapid growth remain. With over 800,000 units deployed, we remain the market leader. Number three, the TAM is large and underpenetrated with secular tailwinds driving smart home adoption in the long term. The total market opportunity is estimated to be at least 11,000,000,000 to $13,000,000,000 and even our current target of Class A and B buildings owned and operated by larger companies is a 3,000,000,000 to $4,000,000,000 opportunity. Speaker 200:10:27As first mover and market leader, we seek to continue to capture a large share of this market opportunity. Number four, our customers see real business ROI from adopting SmartRent. While our execution challenges have impacted relationships with our customers, they remain committed to SmartRent and want us to succeed. In a recent survey, 96% of property managers indicated that SmartRent has had a positive impact on their customer experience, and 90% view actual realization of NOI expansion as a key driver of continued investment in smart home adoption. And number five, SmartRent is executing a plan to accelerate the return to delivering sustainable growth combined with profitability. Speaker 200:11:11While our performance in 2025 will continue to reflect that we are building our foundation for future growth, we remain confident that we will be able to show evidence of continued progress in coming quarters. Looking forward, we remain focused on scaling the business with greater efficiency while maintaining the strategic flexibility required in a dynamic market. Our aim is to achieve non GAAP adjusted EBITDA profitability without sacrificing long term growth. The strategic foundation we've laid, anchored by a growing base of high margin SaaS revenue, a more streamlined cost structure and operational focus gives us confidence in our ability to deliver sustainable progress toward that goal. As always, execution discipline remains key. Speaker 200:11:59To close, the last nine months have resulted in significant change at SmartRent that has strengthened our conviction that we are on the right path. We appreciate investors' active engagement with us as we continue to execute this plan. Our North Star is unchanged to deliver long term shareholder value by scaling a high quality recurring revenue business that drives meaningful ROI for our customers and long term value for shareholders. The work underway is intentional. The pace of change is accelerating, and we look forward to updating you on our continued progress. Speaker 200:12:35With that, I will turn it to Daryl to take you through our financials and key results. Speaker 300:12:40Thank you, John, and good morning, everyone. We appreciate you joining our call today to discuss our first quarter twenty twenty five results. I'll now walk through the financials and provide some additional context on how we're balancing execution, margin management and strategic investment across the business. Total revenue for the first quarter was $41,300,000 down 18% when compared to the same period in the prior year. Hardware revenue was $18,800,000 down 35% year over year, which is a continued reflection of our strategic decision to reduce reliance on hardware sales as we focus on expanding our annual recurring revenue. Speaker 300:13:30SaaS revenue grew 17% year over year to $14,000,000 supported by improved ARPU, expanded platform utility and continued strength in customer retention. In terms of unit economics, SaaS ARPU increased to $5.69 up 5% from the prior year and up slightly on a sequential basis. Units booked SaaS ARPU reached $10.28 which was a 44% increase year over year. We believe these trends validate the value proposition of our platform and our strategy of placing the customer at the center of how we deploy, engage and grow revenue. Gross margin in Q1 was 32.8% compared to 38.5% in the prior year. Speaker 300:14:25This compression of roughly five seventy basis points was expected and driven primarily by lower hardware volume and a shift in customer and product mix as we move away from bulk hardware sales. SaaS gross margin remained strong at 70.7% and we continue to believe SaaS margins can expand over time with scale and further infrastructure optimization. Operating expenses were $29,900,000 including a $5,000,000 legal accrual compared to $29,600,000 in the prior year. Net losses increased to $40,200,000 compared to $7,700,000 in the same period prior year, primarily due to a non cash goodwill impairment charge of $24,900,000 During the quarter, the company experienced a sustained decline in stock price, resulting in a significant decrease in market capitalization. As a result, the company conducted an interim impairment test on its goodwill, utilizing the qualitative approach and determined that an impairment is more likely than not. Speaker 300:15:41As a result, the company then performed an interim quantitative impairment test in accordance with GAAP. The resulting impairment charge reflects a GAAP accounting adjustment based on a mix of income approach and market based approach and does not represent a change in the company's view of the intrinsic or long term value of the business. Adjusted EBITDA was negative $6,400,000 a year over year decline of $6,800,000 reflecting lower unit volumes. We have executed over $10,000,000 in cost savings as part of a broader initiative to simplify our structure, reduce cash burn and reorient the organization around customer value. These actions are enabling us to invest in critical areas, including go to market capability, implementation efficiency and post sale engagement without expanding our cost base. Speaker 300:16:43We also remain disciplined in capital allocation. During the quarter, we repurchased approximately 1,000,000 shares for $1,200,000 leaving $20,400,000 authorized under our existing buyback program. We ended the quarter with $125,600,000 in cash, no debt and $75,000,000 in undrawn credit, a strong balance sheet that gives us the flexibility to continue executing from a position of strength. Net cash used in operating activities in the first quarter was $12,200,000 which as we've noted in prior years tends to be seasonally higher in Q1. Looking ahead to Q2, we do not expect a significant improvement in cash use as the benefits of our cost reduction efforts will be offset by severance payments and other onetime item. Speaker 300:17:43That said, we do expect to see meaningful improvement in net cash use in the second half of the year, driven by the full benefit of these cost savings actions and improved operating leverage. We're not yet free cash flow positive, but we believe we're taking disciplined steps to get there, reducing expenses, improving efficiency and aligning the business to a more durable recurring revenue model. We continue to monitor our cash position closely and remain confident in our ability to execute our plan while maintaining sufficient balance sheet flexibility. We're balancing disciplined expense management with targeted reinvestment in areas aligned to long term growth and profitability. While we're not providing a sales outlook at this time due to a number of macro factors impacting customer purchasing decisions, we remain focused on building long term customer value and strengthening recurring revenue. Speaker 300:18:50Finally, I want to note that recently announced tariff developments could present cost pressure in the second half of twenty twenty five. We're actively assessing the potential impact and working through mitigation strategies to address exposure. We remain confident in our strategy, our market position and our ability to execute with discipline. Thank you for your continued support. We'll now open the line and take your questions. Operator00:19:41Your first question comes from the line of Ryan Tomasello from KBW. Please go ahead. Speaker 400:19:49Thanks for taking the questions. Starting on the restructuring actions, do the $10,000,000 of savings you called out represent the full benefit that you ultimately expect to realize there? Or are you expecting to drive more efficiencies on top of that? And then how much of that $10,000,000 is run rating through your adjusted EBITDA in 1Q results? If not the full benefit, when should we expect that to flow through? Speaker 300:20:23Brian, this is Daryl. The $10,000,000 annualized savings are actions that we've taken, but we took them in April. So you're not seeing any adjustments for severance or any of the onetime charges related to these actions in the Q1 result. From a cash flow perspective, it will be relatively neutral in Q2 as we just noted. We'll start to see a little bit of the benefit on adjusted EBITDA during Q2, but you won't see the full effect until Q3. Speaker 400:21:05Okay. And then in terms of the sales organization build out that you've been executing, do you feel like you're in a good spot to support scalability? Or do you think there's still more to go in terms of hiring needs? And on the broader operational changes you highlighted, can you just put a finer point around what those entail in areas like customer success and, I guess, technology, operations that you called out in your prepared remarks? Speaker 200:21:39Thanks, Ryan. First, on the sales build out, we we think we've completed the the initial wave of build out of the organization. But as you know, you know, new salespeople take time to ramp up, so there's there's a little bit of a lag effect there. But we've we've done the initial build out of the sales organization. We're still adding some talent in the customer success organization, but a great deal of that shift has come from the operational reorganization where we've as I mentioned in the script, we've concluded we were overly siloed, and we've we've broken down those silos, and we've collapsed a a lot of big customer facing operations into the customer success organization and giving us more scale in the customer success organization and and making a lot of our operational touch points with our customers much more customer centered. Speaker 200:22:37So we're we're quite excited about both. It is a continuing effort. You know, we're not declaring victory or anything close to that, but we've made enough changes at this point that that we're confident that we're gonna start seeing the results as we move forward. Speaker 400:22:56And then I'll squeeze in one final one. Just just considering the ongoing CEO search, how much of the broader organizational and strategy changes are you kind of hitting pause on and reserving for, you know, the time when the new c CEO onboards and can take their own kind of fresh look at how to evolve the strategy going forward. Speaker 200:23:20Thanks. Yeah. We're really not, we're not hitting pause on meeting right now. This this is a different phase than the previous search phase when, you know, we we didn't have an opportunity for somebody to step in as interim CEO largely because of me being the logical one and and constraints on my own availability at that point in time. So we we did have more things on hold during that period while the board was coming to a greater understanding of the business through the search process. Speaker 200:23:59But over that period of time, over the past nine months, I and the board have become very deeply engaged with the company on both strategy and execution. And that allowed us, even with the recent quick turnover, to really start using that as a catalyst to accelerate our change and execute some of these organizational changes and cost cuts. And the strategy is pretty well evolved. It's it's mapping out our our plan for returning to growth and profitability. And our engagement on that with our with our finalist candidates is is deep enough to the point where we're really confident that the handoff is gonna be a smooth without having to pause anything. Operator00:25:03Our next question comes from the line of Yifu Li from Cantor Fitzgerald. Speaker 300:25:08Please go ahead. Speaker 500:25:09Thank you for taking my question. I just want to follow-up on the CEO change from the last caller, the last analyst. Why, like, John and Dow, why the, you know, quick change again? And what are the qualities? You say you're on the final stages, in finalizing the CEO search. Speaker 500:25:28What are the qualities you are looking to see for? Speaker 200:25:34I I think as as to the first part of your question, I believe we answered that to the extent we could when we made the announcement. But I'll I'll repeat that, you know, that that quick change had nothing to do with misalignment of strategy, nothing to do with being bought or malfeasance, had nothing to do with current financial performance. It was initiated by the board as was evident in our disclosures about the transition arrangements with with the the the then CEO, and it was just one of those top decisions the board has to make. But as I hope we conveyed on the call this morning, it it really wasn't a significant event in terms of affecting our execution of our plan. And, also, as as I believe we implied at the time we made that announcement, we were because we were just coming off a very robust search process, we were engaged enough with multiple candidates that we've been able to move very, very quick. Speaker 200:26:48And as I said in my comments this morning, we do expect to be in making an announcement in the coming weeks, not months. And so we're moving ahead full speed with that. As to what what the qualities are we're looking for, they they remain the same. We want a CEO who has proven track record of executing operationally in a recurring revenue business at scale. A lot of the problems, you know, that we we faced when we launched this path of CEO transitions were related to not having matured the organization fast enough. Speaker 200:27:29And we're addressing all of those, but but we're, you know, looking to bring in a CEO who has very strong proven ability of of operating and executing a high recurring revenue business at scale. Speaker 500:27:43Thanks for that. And the follow-up, it could be Daryl or you, John. It's you know, you guys have a great, you know, NRR and very low churn in your business. I'll ask them both at the same time. Right? Speaker 500:27:54Daryl, you mentioned about you're trying to minimize the tariff impact. Can you explain how, SmartRent is able to do so, considering, you know you know, the situation is so fluid? And, like, with the, you know, hire of Natalie and the fill out of the go to market team, and you talked about, you know, there's still more work to be done in terms of hiring for, you know, customers and SaaS, when do you believe that, you know, the fruits of this, you know, I guess, the build out of go to market team will will inflect more positively, like, in terms of the timeline? And that's it from me. Thank you. Speaker 500:28:28Okay. Speaker 300:28:29Yeah. Thank you for the question. Why don't I start by addressing the tariffs and then hand it back over to John to address the sales worry. The tariffs tariffs are not nothing new. SmartRent has historically sourced the vast majority of its hardware devices from overseas, and there's nothing to do about that. Speaker 300:28:54So there's been, obviously, significant developments recently. We believe from a from a kind of maximum exposure standpoint that we have potentially about a $2,000,000 exposure in the back half of this year related to tariffs. That's subject to a couple of things that one would be the simple changing of the tariffs yet again, but also we began addressing the potential for tariff increases by changing where we do our own manufacturing of our own devices. Also, with regards to third party source devices that come from overseas, because of the lack of clarity, most of our suppliers have not committed to a particular path like passing along the cost to SmartRent. That may or may not happen in the future. Speaker 300:30:00And then the last point that points to potential mitigation is we are evaluating changing some of our own manufacturing locations again for lower tariff Operator00:30:18nations. Think that's Speaker 200:30:22And regarding the timing of evidence of of the the build out of the go to market function, I I wouldn't be specific on, you know, pinpointing a quarter when when that's gonna be, you know, compellingly evident for a a number of factors. First of all, as as you understand, new people in sales take time to ramp up. We also have, you know, which we have done our demand creation, lead generation organization, and and that's early days. We're also facing some macro factors still in the capital investment cycle of the multifamily market and as well as just the broader economic uncertainty right now. And then our products, as we discussed many times before, have a long sales cycle that is tied in with the capital investment cycle of our major customers. Speaker 200:31:25So given all those factors, there remains some degree of uncertainty as to the timing for this year. What I would characterize is that 2025 will be a year that that is primarily foundation building with some expectation of growth. We're gonna continue showing strong growth in our SaaS rep. And but with that foundation building, we expect to be able to show, you know, evidence of proof points along the way that will that will lead to more sustainable growth as we enter 2026. Speaker 500:32:06I guess, what are those proof points, like, John? Is it, like, you know, like, SaaS revenue as a I know it's, like, one third right now. Obviously, Daryl could chime in on this. Right? What are the proof points that would make, you know, the board and yourself and the management team be more positive throughout the year? Speaker 200:32:25The the principal one would be at the beginning of a sustainable path of acceleration in bookings. Operator00:32:46Since there are no further questions, I will now turn the call back over to Interim CEO, John Dorman, for closing remarks. Thank you, and thanks to all Speaker 200:32:56of you for joining us today. As we wrap up, I will leave you with a clear message. We both believe SmartVent is a very compelling long term opportunity for value creation. This is a company with unmatched scale, real product differentiation in a massive addressable market that's still largely untapped. We have over 800,000 units deployed, net retention rates north of 100%, and recurring SaaS revenue that grew 17% year over year while we were in the midst of fixing execution challenges. Speaker 200:33:33We faced some near term execution challenges, but the fundamentals haven't changed. In fact, they've gotten stronger. We streamlined the business, realigned leadership, and refocused the organization around a disciplined SaaS strategy that prioritizes recruitment, platform superiority, and customer success. The work we've done over the past nine months is not just about fixing what wasn't working. It's about laying the foundation for something much bigger. Speaker 200:34:03The smart grid of tomorrow is more focused, more efficient, and more ambitious. So for those watching us closely, here's what I'll say. We believe the opportunity ahead of us is significant. We're executing with urgency and clarity, and we believe the value creation potential from here is real, durable and meaningful. Thanks again for your time, your engagement and your continued support. Operator00:34:31Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.Read morePowered by Key Takeaways Leadership & Organizational Overhaul: Appointed John Dorman as interim CEO while finalizing a permanent CEO search, added a seasoned Chief Revenue Officer, revamped sales and customer success teams, and strengthened the board to support scalable growth. Strategic Pivot to Hardware-Enabled SaaS: Shifting away from selling proprietary hardware toward a SaaS-first model built on four pillars—sustainable ARR growth, platform superiority, operational excellence, and collaborative innovation. Mixed Q1 Results With SaaS Growth: Reported total revenue of $41.3 million (-18% YoY) driven by a 35% decline in hardware revenue offset by a 17% increase in SaaS revenue to $14 million and a 5% rise in SaaS ARPU. Profitability Path & Cost Savings: Achieved over $10 million in annualized cost savings, ended the quarter with $125.6 million in cash and no debt, incurred a $24.9 million goodwill impairment, and posted an adjusted EBITDA loss of $6.4 million while targeting non-GAAP profitability. Strong Market Position & Long-Term Growth: Deployed solutions across 800,000 units with net revenue retention above 100%, targeting an $11–$13 billion total addressable market and planning a bookings acceleration as execution improvements take hold into 2026. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallSmartRent Q1 202500:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) SmartRent Earnings HeadlinesColliers Securities Cuts Earnings Estimates for SmartRentMay 24 at 2:25 AM | americanbankingnews.comAnalysts Issue Forecasts for SmartRent Q2 EarningsMay 24 at 1:41 AM | americanbankingnews.comWe’ve Entered the Most Bullish Phase of the CycleIt happens like clockwork. Every four years, the crypto market enters a new phase — and for those who know how to trade it, this phase brings the most potential. We’re now in that window. A free workshop outlines how a proven system is targeting daily wins, passive income, and explosive upside through curated altcoin picks. Whether you're new to crypto or looking to catch the next move with confidence, this is your roadmap. And just for showing up, you’ll receive $10 in real Bitcoin. Don’t miss it.May 24, 2025 | Crypto Swap Profits (Ad)SmartRent Receives Continued Listing Standard Notice from NYSEMay 2, 2025 | businesswire.comSmartRent Expands AI-Powered Smart Operations Suite to Support Centralized TeamsMarch 31, 2025 | businesswire.comSmartRent Reports Inducement Grants Under New York Stock Exchange Listed Company Manual RuleMarch 18, 2025 | businesswire.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 Advance Auto Parts Jumps on Surprise Earnings BeatAlibaba's Earnings Just Changed Everything for the StockCisco Stock Eyes New Highs in 2025 on AI, Earnings, UpgradesSymbotic Gets Big Earnings Lift: Is the Stock Investable Again?D-Wave Pushes Back on Short Seller Case With Strong EarningsAppLovin Surges on Earnings: What's Next for This Tech Standout?Can Shopify Stock Make a Comeback After an Earnings Sell-Off? 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There are 6 speakers on the call. Operator00:00:00Thank you for standing by. My name is Van, and I will be your conference operator today. At this time, I would like to welcome everyone to the SmartRent Quarter One twenty twenty five Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:29Thank you. I would now like to turn the call over to Kristen Lee, Chief Legal Officer. Please go ahead. Speaker 100:00:38Hello and thank you for joining us today. My name is Kristen Lee, Chief Legal Officer for SmartRent. I'm joined today by our Interim Chief Executive Officer, John Dorman and Daryl Stem, Chief Financial Officer. Before the market opened today, we issued an earnings release and filed our 10 Q with the SEC, both of which will be available on the Investor Relations section of our website, smartrent.com. Before I turn the call over to John, I would like to remind everyone that the discussion today may contain certain forward looking statements that involve risks and uncertainties. Speaker 100:01:13Various 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, 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 a reconciliation to the most directly comparable GAAP measure is included in today's earnings release. Speaker 100:01:56We would also like to highlight that a fourth quarter and full year earnings presentation will be available on the Investor Relations section of our website. And with that, I will turn the call over to John. Speaker 200:02:07Good morning, and thank you for joining SmartRent's first quarter twenty twenty five earnings call. We appreciate your continued engagement as we execute a focused plan designed to position SmartRent for long term sustainable growth and value creation. I've been a board member for over three years, chairman of the board for the past year and now interim CEO. Given this unique position, I thought it would be helpful to use my time this morning to give investors some perspective on the evolution of SmartRent, our plan to drive the company toward meaningful and sustainable long term value creation, and where we are in executing that plan. The SmartRent story really isn't all that complicated, and I hope to make it a little clearer this morning. Speaker 200:02:53SmartRent was founded with a unique vision to deploy IoT technology to transform property operations and resident experiences. Because SmartRent was built on the foundation of experience from the multifamily and single family rental operating businesses, the company's solutions were built with a very deep understanding of the needs and challenges of our customers. Three key and distinct elements differentiated our initial solutions, drove our early success, and still largely distinguish our platform today. Number one, integrating IoT hardware devices through an enterprise scale software platform to fully deliver and maximize the ROI potential for property owners while enhancing the resident experience. Number two, designing the software platform to fully and seamlessly integrate with existing systems in third party hardware devices rather than constraining solutions to our own branded hardware. Speaker 200:03:54And number three, delivering solutions with the unique expertise to deploy them in a retrofit environment rather than limiting them to new build or major renovations. This focus addresses the needs of the largest portion of the addressable market. The power and clear differentiation of these core products launched SmartRent on an initial phase of high growth during which we successfully deployed our platform with 15 of the top 20 multifamily owners and operators in the country as well as several of the largest single family rental operators and iBuyers. These early customers are still with us today. This early and rapid success enabled the establishment of first mover advantage in a massive TAM. Speaker 200:04:42However, the company's operational processes and infrastructure, including in its sales organization, did not adapt quickly enough to the size the business had become. They reflected a culture that was too siloed and dependent on a small number of individuals and was therefore neither scalable nor sufficient to enhance our market leading position and best serve our customers. Over the past nine months, we have made significant progress in redesigning an organization that we believe will enable sustained growth as we move to the next stage of the company's evolution. This includes the addition of seasoned leaders across sales and customer success, most notably Chief Revenue Officer, Natalie Cariola, who are leading the build out of a scalable customer centric sales organization and a high impact customer success function to support long term growth. And while CEO changes are not actions that any board takes lightly, they are often necessary. Speaker 200:05:44I'm pleased to announce we are now in the final stages of our search. We have found multiple highly qualified candidates to assume the permanent CEO role and expect to be able to make an announcement in the coming weeks. Over the past year, in addition to completing internal organizational changes, we've strengthened the board of directors by appointing three highly experienced and proven leaders. Collectively, they bring a strong track record in operating financial and technology leadership at scale, experience that is directly relevant to guiding SmartRent through our next phase of growth. Enhancing board strength and ensuring we have a fit for purpose board remains a priority as we continue to position SmartRent for long term value creation. Speaker 200:06:32Now pivoting to today and what we are executing. First, we are well into the process of addressing the company go to market strategy and capabilities with our new sales organization and approach. Second, we initiated a significant restructuring by breaking down silos and ensuring our infrastructure is scalable. We are also refocusing our operations organization around the needs of our customers. We believe our customers will begin feeling the benefits of these changes in the near term. Speaker 200:07:05Third, we have shifted our focus and technology investment away from developing and selling our own branded hardware components and are executing a strategy based on our four strategic pillars, which are first, sustainable and predictable ARR growth. Our value will be built by focusing on our hardware enabled SaaS model, not on selling our own hardware. Second, platform superiority. The ROI of our solutions for customers will be maximized by delivering a fully integrated enterprise scale software platform. Third, operational excellence. Speaker 200:07:45As a SaaS company, our success will be highly dependent upon the success of our customers in deploying and maintaining our solutions. And finally, collaborative innovation. Rapid and continuous innovation in building out our software platform will be critical to maintaining our position as market leader. We announced these strategic pillars in the third quarter of twenty twenty four along with $10,000,000 in strategic investments to accelerate our change. We believe the fruits of that focus and investment became visible to our customers in the most recent quarter with meaningful enhancements to our smart operations solutions. Speaker 200:08:26We also started to deliver more focused customer engagement as we began to build a more robust customer success organization. As we have proceeded with our operational reorganization and refocusing our technology investment, we've been successful in completing over $10,000,000 in annualized cost savings that we believe will improve cash flow and produce a more rapid return to profitability. Quite simply, we believe we can operate more efficiently and more effectively at the same time. Our conviction remains unchanged. The challenges we faced are largely execution related and solvable. Speaker 200:09:06Over the past nine months, our work has enhanced the board's belief that improving operating effectiveness and maturing our organization will unlock scalable long term growth and value creation. Our confidence is grounded in several levers. First, SmartRent's IoT platform solution has a long term moat due to our hardware enabled SaaS offering. We sustained a customer retention rate above 99.9% over the past three years. While our hardware and hardware implementation revenues have declined over the past year, our SaaS revenues grew by more than 17% and our net revenue retention exceeded 100%. Speaker 200:09:49Number two, SmartRent has unrivaled scale and product advantage. We believe that the unique product advantages that drove our initial wave of success and rapid growth remain. With over 800,000 units deployed, we remain the market leader. Number three, the TAM is large and underpenetrated with secular tailwinds driving smart home adoption in the long term. The total market opportunity is estimated to be at least 11,000,000,000 to $13,000,000,000 and even our current target of Class A and B buildings owned and operated by larger companies is a 3,000,000,000 to $4,000,000,000 opportunity. Speaker 200:10:27As first mover and market leader, we seek to continue to capture a large share of this market opportunity. Number four, our customers see real business ROI from adopting SmartRent. While our execution challenges have impacted relationships with our customers, they remain committed to SmartRent and want us to succeed. In a recent survey, 96% of property managers indicated that SmartRent has had a positive impact on their customer experience, and 90% view actual realization of NOI expansion as a key driver of continued investment in smart home adoption. And number five, SmartRent is executing a plan to accelerate the return to delivering sustainable growth combined with profitability. Speaker 200:11:11While our performance in 2025 will continue to reflect that we are building our foundation for future growth, we remain confident that we will be able to show evidence of continued progress in coming quarters. Looking forward, we remain focused on scaling the business with greater efficiency while maintaining the strategic flexibility required in a dynamic market. Our aim is to achieve non GAAP adjusted EBITDA profitability without sacrificing long term growth. The strategic foundation we've laid, anchored by a growing base of high margin SaaS revenue, a more streamlined cost structure and operational focus gives us confidence in our ability to deliver sustainable progress toward that goal. As always, execution discipline remains key. Speaker 200:11:59To close, the last nine months have resulted in significant change at SmartRent that has strengthened our conviction that we are on the right path. We appreciate investors' active engagement with us as we continue to execute this plan. Our North Star is unchanged to deliver long term shareholder value by scaling a high quality recurring revenue business that drives meaningful ROI for our customers and long term value for shareholders. The work underway is intentional. The pace of change is accelerating, and we look forward to updating you on our continued progress. Speaker 200:12:35With that, I will turn it to Daryl to take you through our financials and key results. Speaker 300:12:40Thank you, John, and good morning, everyone. We appreciate you joining our call today to discuss our first quarter twenty twenty five results. I'll now walk through the financials and provide some additional context on how we're balancing execution, margin management and strategic investment across the business. Total revenue for the first quarter was $41,300,000 down 18% when compared to the same period in the prior year. Hardware revenue was $18,800,000 down 35% year over year, which is a continued reflection of our strategic decision to reduce reliance on hardware sales as we focus on expanding our annual recurring revenue. Speaker 300:13:30SaaS revenue grew 17% year over year to $14,000,000 supported by improved ARPU, expanded platform utility and continued strength in customer retention. In terms of unit economics, SaaS ARPU increased to $5.69 up 5% from the prior year and up slightly on a sequential basis. Units booked SaaS ARPU reached $10.28 which was a 44% increase year over year. We believe these trends validate the value proposition of our platform and our strategy of placing the customer at the center of how we deploy, engage and grow revenue. Gross margin in Q1 was 32.8% compared to 38.5% in the prior year. Speaker 300:14:25This compression of roughly five seventy basis points was expected and driven primarily by lower hardware volume and a shift in customer and product mix as we move away from bulk hardware sales. SaaS gross margin remained strong at 70.7% and we continue to believe SaaS margins can expand over time with scale and further infrastructure optimization. Operating expenses were $29,900,000 including a $5,000,000 legal accrual compared to $29,600,000 in the prior year. Net losses increased to $40,200,000 compared to $7,700,000 in the same period prior year, primarily due to a non cash goodwill impairment charge of $24,900,000 During the quarter, the company experienced a sustained decline in stock price, resulting in a significant decrease in market capitalization. As a result, the company conducted an interim impairment test on its goodwill, utilizing the qualitative approach and determined that an impairment is more likely than not. Speaker 300:15:41As a result, the company then performed an interim quantitative impairment test in accordance with GAAP. The resulting impairment charge reflects a GAAP accounting adjustment based on a mix of income approach and market based approach and does not represent a change in the company's view of the intrinsic or long term value of the business. Adjusted EBITDA was negative $6,400,000 a year over year decline of $6,800,000 reflecting lower unit volumes. We have executed over $10,000,000 in cost savings as part of a broader initiative to simplify our structure, reduce cash burn and reorient the organization around customer value. These actions are enabling us to invest in critical areas, including go to market capability, implementation efficiency and post sale engagement without expanding our cost base. Speaker 300:16:43We also remain disciplined in capital allocation. During the quarter, we repurchased approximately 1,000,000 shares for $1,200,000 leaving $20,400,000 authorized under our existing buyback program. We ended the quarter with $125,600,000 in cash, no debt and $75,000,000 in undrawn credit, a strong balance sheet that gives us the flexibility to continue executing from a position of strength. Net cash used in operating activities in the first quarter was $12,200,000 which as we've noted in prior years tends to be seasonally higher in Q1. Looking ahead to Q2, we do not expect a significant improvement in cash use as the benefits of our cost reduction efforts will be offset by severance payments and other onetime item. Speaker 300:17:43That said, we do expect to see meaningful improvement in net cash use in the second half of the year, driven by the full benefit of these cost savings actions and improved operating leverage. We're not yet free cash flow positive, but we believe we're taking disciplined steps to get there, reducing expenses, improving efficiency and aligning the business to a more durable recurring revenue model. We continue to monitor our cash position closely and remain confident in our ability to execute our plan while maintaining sufficient balance sheet flexibility. We're balancing disciplined expense management with targeted reinvestment in areas aligned to long term growth and profitability. While we're not providing a sales outlook at this time due to a number of macro factors impacting customer purchasing decisions, we remain focused on building long term customer value and strengthening recurring revenue. Speaker 300:18:50Finally, I want to note that recently announced tariff developments could present cost pressure in the second half of twenty twenty five. We're actively assessing the potential impact and working through mitigation strategies to address exposure. We remain confident in our strategy, our market position and our ability to execute with discipline. Thank you for your continued support. We'll now open the line and take your questions. Operator00:19:41Your first question comes from the line of Ryan Tomasello from KBW. Please go ahead. Speaker 400:19:49Thanks for taking the questions. Starting on the restructuring actions, do the $10,000,000 of savings you called out represent the full benefit that you ultimately expect to realize there? Or are you expecting to drive more efficiencies on top of that? And then how much of that $10,000,000 is run rating through your adjusted EBITDA in 1Q results? If not the full benefit, when should we expect that to flow through? Speaker 300:20:23Brian, this is Daryl. The $10,000,000 annualized savings are actions that we've taken, but we took them in April. So you're not seeing any adjustments for severance or any of the onetime charges related to these actions in the Q1 result. From a cash flow perspective, it will be relatively neutral in Q2 as we just noted. We'll start to see a little bit of the benefit on adjusted EBITDA during Q2, but you won't see the full effect until Q3. Speaker 400:21:05Okay. And then in terms of the sales organization build out that you've been executing, do you feel like you're in a good spot to support scalability? Or do you think there's still more to go in terms of hiring needs? And on the broader operational changes you highlighted, can you just put a finer point around what those entail in areas like customer success and, I guess, technology, operations that you called out in your prepared remarks? Speaker 200:21:39Thanks, Ryan. First, on the sales build out, we we think we've completed the the initial wave of build out of the organization. But as you know, you know, new salespeople take time to ramp up, so there's there's a little bit of a lag effect there. But we've we've done the initial build out of the sales organization. We're still adding some talent in the customer success organization, but a great deal of that shift has come from the operational reorganization where we've as I mentioned in the script, we've concluded we were overly siloed, and we've we've broken down those silos, and we've collapsed a a lot of big customer facing operations into the customer success organization and giving us more scale in the customer success organization and and making a lot of our operational touch points with our customers much more customer centered. Speaker 200:22:37So we're we're quite excited about both. It is a continuing effort. You know, we're not declaring victory or anything close to that, but we've made enough changes at this point that that we're confident that we're gonna start seeing the results as we move forward. Speaker 400:22:56And then I'll squeeze in one final one. Just just considering the ongoing CEO search, how much of the broader organizational and strategy changes are you kind of hitting pause on and reserving for, you know, the time when the new c CEO onboards and can take their own kind of fresh look at how to evolve the strategy going forward. Speaker 200:23:20Thanks. Yeah. We're really not, we're not hitting pause on meeting right now. This this is a different phase than the previous search phase when, you know, we we didn't have an opportunity for somebody to step in as interim CEO largely because of me being the logical one and and constraints on my own availability at that point in time. So we we did have more things on hold during that period while the board was coming to a greater understanding of the business through the search process. Speaker 200:23:59But over that period of time, over the past nine months, I and the board have become very deeply engaged with the company on both strategy and execution. And that allowed us, even with the recent quick turnover, to really start using that as a catalyst to accelerate our change and execute some of these organizational changes and cost cuts. And the strategy is pretty well evolved. It's it's mapping out our our plan for returning to growth and profitability. And our engagement on that with our with our finalist candidates is is deep enough to the point where we're really confident that the handoff is gonna be a smooth without having to pause anything. Operator00:25:03Our next question comes from the line of Yifu Li from Cantor Fitzgerald. Speaker 300:25:08Please go ahead. Speaker 500:25:09Thank you for taking my question. I just want to follow-up on the CEO change from the last caller, the last analyst. Why, like, John and Dow, why the, you know, quick change again? And what are the qualities? You say you're on the final stages, in finalizing the CEO search. Speaker 500:25:28What are the qualities you are looking to see for? Speaker 200:25:34I I think as as to the first part of your question, I believe we answered that to the extent we could when we made the announcement. But I'll I'll repeat that, you know, that that quick change had nothing to do with misalignment of strategy, nothing to do with being bought or malfeasance, had nothing to do with current financial performance. It was initiated by the board as was evident in our disclosures about the transition arrangements with with the the the then CEO, and it was just one of those top decisions the board has to make. But as I hope we conveyed on the call this morning, it it really wasn't a significant event in terms of affecting our execution of our plan. And, also, as as I believe we implied at the time we made that announcement, we were because we were just coming off a very robust search process, we were engaged enough with multiple candidates that we've been able to move very, very quick. Speaker 200:26:48And as I said in my comments this morning, we do expect to be in making an announcement in the coming weeks, not months. And so we're moving ahead full speed with that. As to what what the qualities are we're looking for, they they remain the same. We want a CEO who has proven track record of executing operationally in a recurring revenue business at scale. A lot of the problems, you know, that we we faced when we launched this path of CEO transitions were related to not having matured the organization fast enough. Speaker 200:27:29And we're addressing all of those, but but we're, you know, looking to bring in a CEO who has very strong proven ability of of operating and executing a high recurring revenue business at scale. Speaker 500:27:43Thanks for that. And the follow-up, it could be Daryl or you, John. It's you know, you guys have a great, you know, NRR and very low churn in your business. I'll ask them both at the same time. Right? Speaker 500:27:54Daryl, you mentioned about you're trying to minimize the tariff impact. Can you explain how, SmartRent is able to do so, considering, you know you know, the situation is so fluid? And, like, with the, you know, hire of Natalie and the fill out of the go to market team, and you talked about, you know, there's still more work to be done in terms of hiring for, you know, customers and SaaS, when do you believe that, you know, the fruits of this, you know, I guess, the build out of go to market team will will inflect more positively, like, in terms of the timeline? And that's it from me. Thank you. Speaker 500:28:28Okay. Speaker 300:28:29Yeah. Thank you for the question. Why don't I start by addressing the tariffs and then hand it back over to John to address the sales worry. The tariffs tariffs are not nothing new. SmartRent has historically sourced the vast majority of its hardware devices from overseas, and there's nothing to do about that. Speaker 300:28:54So there's been, obviously, significant developments recently. We believe from a from a kind of maximum exposure standpoint that we have potentially about a $2,000,000 exposure in the back half of this year related to tariffs. That's subject to a couple of things that one would be the simple changing of the tariffs yet again, but also we began addressing the potential for tariff increases by changing where we do our own manufacturing of our own devices. Also, with regards to third party source devices that come from overseas, because of the lack of clarity, most of our suppliers have not committed to a particular path like passing along the cost to SmartRent. That may or may not happen in the future. Speaker 300:30:00And then the last point that points to potential mitigation is we are evaluating changing some of our own manufacturing locations again for lower tariff Operator00:30:18nations. Think that's Speaker 200:30:22And regarding the timing of evidence of of the the build out of the go to market function, I I wouldn't be specific on, you know, pinpointing a quarter when when that's gonna be, you know, compellingly evident for a a number of factors. First of all, as as you understand, new people in sales take time to ramp up. We also have, you know, which we have done our demand creation, lead generation organization, and and that's early days. We're also facing some macro factors still in the capital investment cycle of the multifamily market and as well as just the broader economic uncertainty right now. And then our products, as we discussed many times before, have a long sales cycle that is tied in with the capital investment cycle of our major customers. Speaker 200:31:25So given all those factors, there remains some degree of uncertainty as to the timing for this year. What I would characterize is that 2025 will be a year that that is primarily foundation building with some expectation of growth. We're gonna continue showing strong growth in our SaaS rep. And but with that foundation building, we expect to be able to show, you know, evidence of proof points along the way that will that will lead to more sustainable growth as we enter 2026. Speaker 500:32:06I guess, what are those proof points, like, John? Is it, like, you know, like, SaaS revenue as a I know it's, like, one third right now. Obviously, Daryl could chime in on this. Right? What are the proof points that would make, you know, the board and yourself and the management team be more positive throughout the year? Speaker 200:32:25The the principal one would be at the beginning of a sustainable path of acceleration in bookings. Operator00:32:46Since there are no further questions, I will now turn the call back over to Interim CEO, John Dorman, for closing remarks. Thank you, and thanks to all Speaker 200:32:56of you for joining us today. As we wrap up, I will leave you with a clear message. We both believe SmartVent is a very compelling long term opportunity for value creation. This is a company with unmatched scale, real product differentiation in a massive addressable market that's still largely untapped. We have over 800,000 units deployed, net retention rates north of 100%, and recurring SaaS revenue that grew 17% year over year while we were in the midst of fixing execution challenges. Speaker 200:33:33We faced some near term execution challenges, but the fundamentals haven't changed. In fact, they've gotten stronger. We streamlined the business, realigned leadership, and refocused the organization around a disciplined SaaS strategy that prioritizes recruitment, platform superiority, and customer success. The work we've done over the past nine months is not just about fixing what wasn't working. It's about laying the foundation for something much bigger. Speaker 200:34:03The smart grid of tomorrow is more focused, more efficient, and more ambitious. So for those watching us closely, here's what I'll say. We believe the opportunity ahead of us is significant. We're executing with urgency and clarity, and we believe the value creation potential from here is real, durable and meaningful. Thanks again for your time, your engagement and your continued support. Operator00:34:31Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.Read morePowered by