SmartRent, Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied text does not provide a separate fourth-quarter income statement. Financial amounts below are in U.S. dollars; figures are rounded to millions unless otherwise noted.
Business context
SmartRent provides property owners and managers with integrated smart-building hardware, SaaS software, and installation and support services. At year-end, it reported 547,196 units deployed, 851,815 committed units and 501 customers. Customers owned or operated approximately 6.7 million units, representing an estimated 15% of the U.S. institutionally owned multifamily and single-family rental market.
Financial and operating performance
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $167.8 million | $110.6 million | Up 52% |
| Gross profit (loss) | $1.3 million | $(10.1) million | Improved by $11.4 million |
| Gross margin | 0.8% | (9.1)% | Improved |
| Operating loss | $(104.3) million | $(71.7) million | Loss widened |
| Net loss | $(96.3) million | $(72.0) million | Loss widened 34% |
| Adjusted EBITDA (non-GAAP) | $(74.7) million | $(55.6) million | Loss widened |
| Cash used in operating activities | $(81.0) million | $(70.4) million | Outflow increased |
- Revenue mix: Hardware revenue was $87.4 million, up 25%; professional services were $32.3 million, up 42%; hosted services were $48.1 million, up 163%. Hosted services included $27.8 million of SaaS revenue and $20.3 million of hub amortization.
- Growth drivers: New units deployed increased 24% to 207,711. Management attributed revenue growth to deployments, more active subscriptions and the March 2022 SightPlan acquisition. SightPlan contributed approximately $9.9 million of the increase in SaaS revenue.
- Margins and costs: Total cost of revenue rose 38%, slower than revenue growth. Hardware cost was $83.3 million against $87.4 million of hardware revenue; professional services cost of $59.5 million exceeded its $32.3 million revenue. Operating expenses increased 71% to $105.6 million, including higher personnel, public-company and acquisition-related costs.
- Liquidity: Cash and cash equivalents were $210.4 million at year-end, down from $430.8 million. Current assets were $378.4 million and current liabilities $132.8 million. Total liabilities were $196.6 million; stockholders’ equity was $364.2 million.
- Debt: The company had no borrowings outstanding under its $75 million senior secured revolving facility, which matures in December 2026. The facility is secured by substantially all company assets and includes covenants, including a minimum cash balance requirement.
Material changes, outlook and risks
- Investing cash outflow rose to $130.8 million, primarily reflecting $129.7 million paid for SightPlan, net of cash acquired. The acquisition added $104.6 million of goodwill and $30.9 million of intangible assets in the preliminary purchase-price allocation.
- Inventory increased to $75.7 million from $33.2 million, while operating cash outflow was affected by working-capital needs, including inventory and receivables growth. Deferred revenue rose to $139.9 million from $95.6 million.
- Management said available cash, cash equivalents and revolver capacity were expected to fund operations for at least 12 months after the filing date. It also expected near-term operating losses and negative cash flow to continue. The filing provides no specific revenue, earnings or cash-flow guidance.
- Semiconductor and other component constraints delayed Hub Device, Alloy Access and specialty-lock deployments; management expected some backlog to deploy in 2023 and said Alloy Access and specialty-lock delays could persist through 2023. These were described as timing delays, not cancellations.
- Key risks include continued losses and cash burn; dependence on limited or single-source suppliers for critical components; competition and pricing pressure; customer adoption and renewal uncertainty; cybersecurity, privacy and product-safety exposure; and macroeconomic and real-estate-market conditions.
- Unusual items: The company recorded $4.4 million of asset impairment, including impairment of prepaid licenses and a loan receivable. A prior-year battery-deficiency warranty provision contributed to lower 2022 warranty costs; the year-end warranty reserve was $2.3 million, including $1.7 million for that deficiency.
- Contingencies: SmartRent sued a supplier over defective products; the supplier filed a counterclaim. The case was in discovery, and the company recorded no loss accrual, stating it did not believe the matter would materially affect the financial statements. It also reported $5.5 million of acquisition earnout liability related to iQuue.
- Management reported disclosure controls effective at December 31, 2022 and said previously identified material weaknesses in internal control had been remediated. The auditor did not provide an internal-control effectiveness opinion, consistent with the company’s emerging-growth-company status.
Important facts for investors to verify
- Whether unit deployments and committed orders convert to installations, recurring SaaS revenue and cash collections, particularly given deployment backlogs and committed units that may include non-binding customer intentions.
- Whether gross-margin improvement can continue, especially in professional services, and whether operating-expense growth and cash burn moderate.
- Cash runway and covenant compliance, including the revolver’s minimum-cash requirement, as the company continues to report substantial losses and negative operating cash flow.
- Acquisition integration and returns from SightPlan, including the valuation and impairment risk associated with goodwill and intangible assets.
- Resolution and potential financial exposure from the supplier litigation, remaining battery-related warranty costs, and iQuue earnout obligations.