SmartRent, Inc. — 2021 Form 10-K
Reporting period: Year ended December 31, 2021. This is an annual filing; standalone fourth-quarter results are not clearly provided in the filing text. SmartRent provides an integrated smart-home operating system, hardware, installation and hosted services for residential property owners and operators. The August 24, 2021 business combination with Fifth Wall Acquisition Corp. I was accounted for as a reverse recapitalization, affecting comparability with prior periods.
Key financial metrics
Amounts below are in U.S. dollars; financial statement amounts are rounded to millions unless stated otherwise.
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $110.6 million | $52.5 million |
| Gross profit (loss) | $(10.1) million | $(4.3) million |
| Gross margin | (9.1)% | (8.2)% |
| Operating loss | $(71.7) million | $(35.7) million |
| Net loss | $(72.0) million | $(37.1) million |
| Adjusted EBITDA, non-GAAP | $(55.6) million | $(26.7) million |
| Cash used in operating activities | $(70.4) million | $(28.5) million |
- Revenue grew 111%. Hardware revenue was $69.6 million (+118%), professional services $22.7 million (+85%), and hosted services $18.3 million (+121%). Hosted services included $7.9 million of recurring SaaS revenue and $10.4 million of hub amortization. ARR was approximately $7.9 million, compared with $3.4 million in 2020.
- Cost of revenue increased 112% to $120.7 million, exceeding revenue. Hardware and professional services were each loss-making on the reported category figures; hosted services generated $6.2 million of gross profit. Operating expenses rose 96% to $61.6 million, led by research and development and sales and marketing investment.
- Cash and cash equivalents were $430.8 million at year-end; total cash, cash equivalents and restricted cash were $432.6 million. Current assets were $536.0 million versus current liabilities of $70.6 million. Management said available resources, including undrawn borrowing capacity, were expected to fund operations for at least 12 months after the report date.
- No debt was outstanding at year-end. The company had a $75 million secured revolving credit facility maturing in December 2026; it was undrawn as of December 31, 2021. The facility includes covenants, including a minimum cash balance or, if that is not met, a minimum liquidity ratio.
- Units deployed reached 339,485, versus 155,105 a year earlier; 2021 new deployments were 167,743 versus 83,293. Units booked were 219,901 versus 112,555. Committed units were 742,429; the company began tracking that metric in 2021, so no comparable 2020 figure was provided.
Material changes versus 2020
- Revenue more than doubled, but net loss increased 94% and operating cash use rose substantially as the company expanded deployments, staffing and product development.
- Gross margin weakened by approximately 0.9 percentage points, while operating margin improved from approximately (68.0)% to (64.8)% as revenue grew faster than operating expenses.
- Financing activities provided $473.9 million, principally from the business combination and PIPE financing. The transaction generated approximately $444.6 million in net cash proceeds after transaction costs; transaction costs were approximately $56.0 million.
- The company acquired iQuue on December 31, 2021. Consideration included $5.2 million of contingent earnout liability, with maximum earnouts of $6.4 million. In March 2022, it agreed to acquire SightPlan for $135 million in cash, subject to adjustments.
Outlook, commentary and risks
- Management expects continued investment and near-term operating losses and negative cash flow. It identified growth in customers, revenue per deployed unit, product offerings and international markets as important opportunities; no specific revenue or earnings guidance was provided.
- Management said COVID-19-related customer delays and supply-chain disruptions could continue through 2022. Semiconductor and Z-Wave chip shortages had delayed SmartHub production and, at times, installations and upgrades.
- A notable unusual item was a $6.4 million warranty provision in 2021 to replace batteries from one supplier in previously deployed devices. The company reported the deficient batteries represented less than 1% of deployed batteries.
- Risks include supplier concentration (including single-source components), competition and pricing pressure, customer adoption and renewal uncertainty, privacy and cybersecurity exposure, product liability, and execution of acquisitions and international expansion.
- Management concluded disclosure controls and procedures were not effective at year-end and reported material weaknesses in journal-entry review and formal IT controls. One weakness related to non-routine transactions was reported remediated; the others remained in remediation, with completion targeted during 2022. The auditor opined that the financial statements were fairly presented but was not engaged to audit internal controls.
- The company reported no off-balance-sheet arrangements and said ordinary-course legal matters were not expected to have a material adverse effect. It filed a complaint against a supplier on March 22, 2022 over defective products and disputed refunds; the filing states no loss contingency was accrued at year-end.
Important facts for investors to verify
- Whether deployment growth and the committed-unit pipeline convert into recurring SaaS revenue and improved gross margins.
- Cash burn, working-capital requirements and the duration of the company’s stated liquidity runway, particularly after the SightPlan acquisition and any earnout payments.
- Progress resolving SmartHub supply constraints and replacing the affected supplier’s batteries, including final warranty costs and customer impact.
- Remediation and testing of the remaining material weaknesses in financial reporting controls.
- Acquisition performance and integration, including SightPlan’s final purchase terms and contribution to revenue, cash flow and operating costs.