SmartRent, Inc. — Q1 2024 Form 10-Q
Period: Three months ended March 31, 2024; filed May 8, 2024. Unaudited figures below are in U.S. dollars; financial statement amounts are converted from thousands to millions unless stated otherwise.
Business context
SmartRent provides property owners and managers with smart-building hardware, installation services and cloud-based software subscriptions. At quarter-end, it reported 749,401 deployed units and 639 customers. The company has one reportable operating segment.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $50.5 million | $65.1 million | Down 22% |
| Gross profit / margin | $19.4 million / 38.5% | $9.1 million / 14.0% | Margin improved |
| Operating loss | $(10.2) million | $(15.3) million | Loss narrowed |
| Net loss | $(7.7) million | $(13.2) million | Loss narrowed |
| Basic and diluted loss per share | $(0.04) | $(0.07) | |
| Operating cash flow | $(3.3) million | $(10.3) million | Lower cash use |
Revenue mix: hardware $29.1 million (down 22%), professional services $3.5 million (down 73%) and hosted services $18.0 million (up 20%). Hosted services included $11.9 million of SaaS revenue and $6.1 million of hub amortization. Gross margin gains reflected favorable hardware product mix and improved hosted-services scale; professional services remained loss-making at the gross-profit level.
Operating expenses rose 21% to $29.6 million. General and administrative expense increased 39% to $16.7 million, mainly reflecting a $5.3 million supplier-litigation accrual. Adjusted EBITDA, a non-GAAP measure, was $0.4 million versus a loss of $8.5 million; the calculation adds back the legal accrual, stock compensation and other specified items.
Cash and cash equivalents were $204.7 million at March 31, down from $215.2 million at year-end; cash, cash equivalents and restricted cash totaled $204.9 million. Current assets were $319.5 million and current liabilities $107.0 million. The company had no borrowings under its $75 million secured revolving facility, which matures in December 2026. Management said available resources should fund operations for at least 12 months beyond issuance of the financial statements, while noting additional capital could be needed if operations do not generate positive cash flow.
Investing cash outflow was $1.0 million, primarily for capitalized software; financing cash outflow was $6.5 million, including $4.4 million of share repurchases and $1.5 million of acquisition earnout payments. No outstanding debt principal was reported.
Changes versus the prior comparable period
- Total revenue fell $14.6 million, primarily as Smart Apartments revenue declined; management cited 46% fewer new units deployed, 12% lower units shipped and lower hardware and installation ARPU.
- Hosted-services growth partially offset declines in hardware and installations: deployed units rose 24% year over year, SaaS ARPU increased 4%, and ARR reached approximately $47.6 million versus $36.0 million.
- Bookings increased 4% to $38.8 million, although units booked declined 29% to 46,290. Units shipped fell 12% to 51,744.
- Net loss narrowed despite lower revenue, supported by lower cost of revenue and improved gross margin. General and administrative costs included the supplier-related accrual.
- The company restated Q1 2023 cash-flow classification, moving $1.1 million of capitalized software costs from operating to investing activities; management deemed the error immaterial.
Outlook, risks and unusual items
- No specific full-year revenue, profit or cash-flow guidance is provided. Management expects R&D spending to rise, expects hosted-services costs to grow more slowly than hosted-services revenue, and expects supply-chain improvements to continue.
- In March, the board authorized up to $50 million of share repurchases. The company bought back 1.595 million shares for $4.4 million during Q1, leaving approximately $45.6 million available at quarter-end. It repurchased another 765,000 shares for $2.0 million in April.
- A supplier dispute is a material contingency. The company recorded a $5.3 million accrual after making a substantive offer to return inventory valued at approximately $5.0 million and pay part of the supplier’s costs and fees. The outcome and any further adjustment remain uncertain.
- Other stated exposures include hardware tariffs, customer collections and credit losses, inventory obsolescence, foreign-exchange movements, cybersecurity and service availability, competition, and the need to fund operations before achieving positive operating cash flow. The filing reports no material changes to previously disclosed risk factors.
- Customer concentration is notable: one customer represented 25% of Q1 2024 revenue; two customers represented 20% and 13% of accounts receivable at quarter-end.
- Management reported effective disclosure controls and no material changes to internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether bookings, deployments and hosted-services growth can offset continuing weakness in hardware shipments and installation revenue.
- The supplier-litigation accrual’s timing, adequacy and eventual settlement terms, including the difference between the recorded $5.3 million accrual and approximately $5.0 million of inventory referenced in the offer.
- Cash burn, the path to positive operating cash flow, and whether management’s stated liquidity runway remains adequate.
- The effect of ongoing repurchases on cash available for operations and investment, particularly alongside share-based compensation and potential dilution.
- Customer concentration, receivable collectability and the increase in the doubtful-accounts allowance to $2.5 million from $1.4 million at year-end.
- How much hosted-services revenue growth is recurring SaaS versus amortization of previously shipped hub devices; management expects hub-amortization revenue to decline over time.