Core Viewpoint - SmartRent, Inc. is under investigation following the resignation of its CEO and the suspension of its 2024 guidance due to market challenges and operational changes [2]. Group 1: Company Developments - On July 30, 2024, SmartRent announced the resignation of CEO Lucas Haldeman, effective July 29, 2024 [2]. - The company indicated a scaling back of its channel partner program and acknowledged increasing market headwinds, including delays in customer capital spending [2]. - As a result of these announcements, SmartRent suspended its previous guidance for full-year 2024 and advised investors not to rely on earlier forecasts [2]. Group 2: Market Reaction - Following the news of the CEO's resignation and the suspension of guidance, SmartRent's stock price experienced a significant decline during intraday trading on July 30, 2024 [2].

Financial Data and Key Metrics - Total revenue for Q2 2024 was $48.5 million, a 9% decrease YoY, primarily due to lower units deployed as a result of delayed capital investment spending by customers [17] - SaaS annual recurring revenue (ARR) reached a record $51.2 million, a 32% YoY increase, driven by improvements in SaaS ARPU and the number of units deployed [14][16] - SaaS ARPU increased by 9% YoY to $5.63 per unit, up from $5.16 in Q2 2023 [15] - Total units deployed reached 772,000, a 19% YoY increase, with 22,000 new units deployed in Q2 2024 compared to 48,000 in Q2 2023 [18] - Adjusted EBITDA for Q2 2024 was $900,000, a 114% improvement from a loss of $6.4 million in Q2 2023, marking the third consecutive quarter of positive adjusted EBITDA [20] Business Line Performance - Hosted services revenue increased by 16% YoY to $18 million, while hardware revenue decreased by 11% to $24.7 million, and professional services revenue decreased by 42% to $5.8 million [17] - SaaS gross margin improved to 75.5%, up 43 basis points YoY, while total gross margin improved to 35.7%, up 1,700 basis points YoY [18] - Hosted services gross profit increased to $12 million, up from $9.8 million in Q2 2023, and remains the company's most profitable revenue stream [19] Market and Strategic Direction - The company is refocusing on direct sales after the channel partner sales program did not meet expectations, with plans to hire a new sales leader and enhance sales operations [12] - The company is prioritizing organic reinvestment in high-return projects, focusing on product enhancements informed by customer feedback, which has contributed to a net revenue retention rate above 100% [13] - The company is implementing rigorous cost management while maintaining the agility to capitalize on market opportunities, with a focus on growing recurring revenue streams [14] Management Commentary on Market Conditions - The company is operating in a challenging economic landscape characterized by shifting capital expenditure patterns due to interest rate uncertainties and macroeconomic factors [11] - Customers have deferred the deployment of units originally forecast for 2024 into 2025, but the overall long-term market opportunity remains unchanged and compelling [22] - The company has suspended financial guidance due to the CEO transition, market conditions, and customer capital spending delays, but plans to reinstate guidance as visibility improves [20][21] Other Key Information - The company has a strong balance sheet with $187 million in cash and no debt, positioning it well to pursue growth initiatives and navigate economic challenges [21] - The company repurchased 765,000 shares in Q2 2024 and an additional 842,000 shares after the quarter, with $42 million remaining under the share repurchase program [22] Q&A Session Summary Question: Wi-Fi Strategy and Investment Plans - The Wi-Fi strategy remains a bullish opportunity, with continued investment in the program. A new CEO may bring changes, but the company remains confident in the Wi-Fi opportunity [25] Question: Customer Capital Project Delays - The company has a high degree of confidence that deployments delayed from 2024 will occur in 2025, with persistently high interest rates being a key factor impacting customer spending [26][27] Question: Confidence in 2025 Deployments - The company's confidence in 2025 deployments is based on discussions with customers and the expectation of interest rate reductions, which would normalize capital expenditure investment [32] Question: Hardware vs. Software Focus - The company is renewing its focus on deployed units, with both hardware and software being equally important to the platform. The focus is on improving SaaS ARPU and unit deployment [33] Question: CEO Search and Characteristics - The company is looking for a CEO with a history of successful scaling, as the company transitions from a $200 million to a potential $1 billion revenue company [35] Question: SaaS ARPU and Hosted Services Gross Margin - SaaS ARPU growth was driven by timing of deployments and higher pricing on new units. Hosted services gross margin was relatively flat, with expectations of approaching 75% over time [38][40] Question: Guidance and CEO Search Timeline - The company is not providing specific guidance for the rest of 2024 but expects to provide clarity as market conditions improve. The CEO search is ongoing, with no set timeline [41][42] Question: Channel Partner Strategy and Unit Deployment Profitability - The company is scaling back the channel partner program to focus on direct sales to existing customers. The company is positioned to expand unit deployment volumes profitably [45][46] Question: Conclusion and Long-Term Opportunity - Despite near-term challenges, the company remains confident in its long-term opportunity, with a strong foundation and strategic focus on innovation and customer satisfaction [48][49]

Revenue Performance - Total revenue for Q2 2024 was $48,518,000, a decrease of 9.4% compared to $53,402,000 in Q2 2023[16] - Hardware revenue decreased to $24,676,000 in Q2 2024 from $27,788,000 in Q2 2023, representing a decline of 11.4%[16] - Hosted services revenue increased to $18,026,000 in Q2 2024, up 15.8% from $15,564,000 in Q2 2023[16] - Total revenue for the six months ended June 30, 2024, was $118,481,000, compared to $106,474,000 for the same period in 2023, marking an increase of 11.3%[177] - Revenue related to Smart Apartments solution decreased by $6.1 million, primarily due to a 53% decrease in New Units Deployed to 22,469 units for the three months ended June 30, 2024[194] - Total revenue decreased by $19.5 million, or 16%, to $99.0 million for the six months ended June 30, 2024, from $118.5 million for the same period in 2023[195] Net Loss and Financial Improvement - Net loss for Q2 2024 was $4,605,000, compared to a net loss of $10,349,000 in Q2 2023, showing an improvement of 55.6%[16] - For the six months ended June 30, 2024, the net loss was $12,297 thousand, compared to a net loss of $23,564 thousand for the same period in 2023, indicating a 47.8% improvement in losses year-over-year[33] Assets and Liabilities - Total current assets decreased to $313,836,000 as of June 30, 2024, down from $340,340,000 as of December 31, 2023, a decline of 7.8%[13] - Total liabilities decreased to $145,964,000 as of June 30, 2024, down from $167,308,000 as of December 31, 2023, a reduction of 12.7%[14] - Cash and cash equivalents were $187,435,000 as of June 30, 2024, down from $215,214,000 as of December 31, 2023, a decrease of 12.9%[13] - Total stockholders' equity decreased to $329,383,000 as of June 30, 2024, down from $342,448,000 as of December 31, 2023, a decline of 3.8%[15] Research and Development - Research and development expenses increased to $7,484,000 in Q2 2024, up from $6,536,000 in Q2 2023, an increase of 14.5%[16] - The company is investing in research and development to enhance its product offerings and maintain competitive advantage[160] - Research and Development expenses are expected to increase as the company invests in enhancing existing products and developing new offerings, particularly in WiFi solutions[186] Stock and Equity - Weighted-average number of shares used in computing net loss per share increased to 201,986 in Q2 2024 from 199,619 in Q2 2023[16] - Stock-based compensation for the six months ended June 30, 2024, was $6,565 thousand, slightly down from $6,847 thousand in the same period of 2023, showing a decrease of 4.1%[33] - The 2021 Equity Incentive Plan was amended to increase the number of shares authorized for issuance to a total of 24,400 shares of Class A common stock[121] Customer and Market Insights - Significant customers accounted for 15% and 18% of accounts receivable as of June 30, 2024, and December 31, 2023, respectively, highlighting reliance on key clients[50] - The company reported a net cash used in operating activities of $17,214 thousand for the six months ended June 30, 2024, compared to $15,684 thousand for the same period in 2023, representing an increase of 9.8%[33] - Cumulative active subscriptions for Hosted Services increased by 19% during 2024 compared to 2023[194] Operational Metrics - The company reported 22,469 New Units Deployed, a decrease from 47,768 in the same period of 2023[166] - Units Booked SaaS ARPU decreased to $8.07 in Q2 2024 from $8.74 in Q2 2023, a decline of 7.7%[173] - Customer Churn for Smart Communities Solutions was 0.05% for Q2 2024, compared to 0% in Q2 2023, indicating a slight increase in churn[173] Future Outlook and Challenges - The company may need to raise additional capital through equity or debt financing to fund future operations until it generates positive operating cash flows[41] - The company continues to experience improvements in global supply chain challenges, reducing backlogged Units Deployed for Access Control and specialty locks[159] - The company has formed a Management Committee to guide operations during the transition period following the CEO's departure[163]

Financial Performance - Total revenue for Q2 2024 was $48.5 million, a 9% decrease year-over-year[2] - Net loss improved to $(4.6) million, a 56% improvement from $(10.3) million in Q2 2023[2] - Total revenue for Q2 2024 was $48,518,000, a decrease of 9.5% compared to $53,402,000 in Q2 2023[23] - Net loss for Q2 2024 was $4,605,000, compared to a net loss of $10,349,000 in Q2 2023, showing an improvement of 55.6%[23] - Net loss for the six months ended June 30, 2024, was $12,297 thousand, an improvement from a loss of $23,564 thousand in the same period of 2023[28] Revenue Breakdown - SaaS revenue reached $12.8 million, representing a 32% increase year-over-year[2] - Hardware revenue decreased to $24,676,000 in Q2 2024 from $27,788,000 in Q2 2023, representing a decline of 7.6%[23] - Professional services revenue dropped to $5,816,000 in Q2 2024 from $10,050,000 in Q2 2023, a decrease of 42.2%[23] - Hosted services revenue increased to $18,026,000 in Q2 2024 from $15,564,000 in Q2 2023, reflecting a growth of 9.4%[23] - SaaS Annual Recurring Revenue (ARR) increased to $51.2 million, up from $38.8 million in Q2 2023[4] Expenses and Margins - Total operating expenses for Q2 2024 were $24,223,000, an increase of 10.2% from $21,970,000 in Q2 2023[23] - Research and development expenses rose to $7,484,000 in Q2 2024 from $6,536,000 in Q2 2023, an increase of 14.5%[23] - Total gross margin improved to 35.7%, an increase of 1,716 basis points year-over-year[7] - Adjusted EBITDA was $902K, a 114% improvement from $(6.4) million in the same quarter last year[8] - Adjusted EBITDA for the six months ended June 30, 2024, was $1,299 thousand, compared to $(14,918) thousand for the same period in 2023[29] Cash and Assets - The company has a cash balance of $187.4 million and no debt as of June 30, 2024[2] - Cash and cash equivalents as of June 30, 2024, were $187,435,000, down from $215,214,000 as of December 31, 2023[26] - Total assets decreased to $475,347,000 as of June 30, 2024, from $509,756,000 as of December 31, 2023[26] - Total liabilities were $145,964,000 as of June 30, 2024, down from $167,308,000 as of December 31, 2023[24] Market Guidance - The annual guidance has been temporarily suspended due to market headwinds and CEO transition[10] Cash Flow Activities - Cash used in operating activities for the six months ended June 30, 2024, was $(17,214) thousand, compared to $(15,684) thousand in the prior year[28] - Cash used in investing activities for the six months ended June 30, 2024, was $(1,997) thousand, compared to $(2,328) thousand in the same period of 2023[28] - Net cash used in financing activities for the six months ended June 30, 2024, was $(8,839) thousand, compared to $(2,278) thousand in the prior year[28] - Payments for repurchases of Class A common stock amounted to $(6,381) thousand during the period[28] Other Financial Metrics - EBITDA for the six months ended June 30, 2024, was $(13,797) thousand, compared to $(24,788) thousand for the same period in 2023[29] - Stock-based compensation for the six months ended June 30, 2024, was $6,565 thousand, slightly down from $6,956 thousand in the same period of 2023[29] - Impairment of investment in non-affiliate was $2,250 thousand for the six months ended June 30, 2024, with no prior year comparison available[28]

Group 1 - SmartRent, Inc. is under investigation by Pomerantz LLP for potential securities fraud or unlawful business practices involving its officers and/or directors [1] - On July 30, 2024, SmartRent announced the resignation of CEO Lucas Haldeman and suspended its previous guidance for full-year 2024 due to market headwinds and customer capital spending delays [2] - Following the announcement, SmartRent's stock price dropped by $0.48, or 20.00%, closing at $1.92 per share on the same day [2] Group 2 - Pomerantz LLP is recognized as a leading firm in corporate, securities, and antitrust class litigation, with a history of recovering billions in damages for victims of securities fraud and corporate misconduct [3]

Core Insights - SmartRent, Inc. is under investigation for potential violations of federal securities laws and unlawful business practices [1] - The company announced a CEO transition plan, with Lucas Haldeman stepping down as CEO and resigning from the Board of Directors, effective July 29, 2024 [2] - Following the CEO transition announcement, SmartRent's stock price dropped by $0.47, or 19.58%, closing at $1.93 on July 30, 2024 [2] Company Developments - The CEO transition plan was announced on July 30, 2024, indicating a significant leadership change within SmartRent [2] - The company has suspended its 2024 guidance, which may indicate uncertainty in future performance [2] Legal Investigation - Bragar Eagel & Squire, P.C. is investigating potential claims on behalf of SmartRent stockholders regarding possible violations of securities laws [1] - The law firm is reaching out to stockholders who may have suffered losses or have information related to the investigation [3]

Group 1 - SmartRent's CEO Lucas Haldeman has resigned, with John Dorman stepping in as interim CEO and chairman of the board [1][2] - The board expressed gratitude for Haldeman's contributions and indicated a need for a CEO with a different skill set for the company's next growth phase [2] - SmartRent has suspended its full-year 2024 outlook due to the CEO change, increasing market headwinds, and a reduction in its channel partner program [2] Group 2 - Following the announcement of the CEO departure, SmartRent's stock (NYSE:SMRT) dropped by 20.6%, with approximately 4.3 million shares traded, significantly higher than the daily average of 1.3 million shares [4][6]

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SmartRent, Inc. (NYSE:SMRT) Q1 2024 Earnings Conference Call May 8, 2024 11:30 AM ET Company Participants Kristen Lee - General Counsel, Corporate Secretary Lucas Haldeman - Chairman, CEO & Founder Daryl Stemm - CFO Conference Call Participants Erik Woodring - Morgan Stanley Ryan Tomasello - KBW Tom White - DA Davidson & Co. Operator Ladies and gentlemen, thank you for standing by. We'd like to welcome you to today's conference. This is the SmartRent Q1 2024 Conference Call. [Operator Instructions]. I would ...