LATCH(LTCH) - 2023 Q4 - Annual Report

Financial Performance - Software revenue for 2023 was $17,775,000, an increase of $4,751,000 or 36.5% compared to 2022[333] - Total revenue for 2023 reached $44,961,000, reflecting a $2,006,000 increase or 4.7% from the previous year[333] - The net loss for 2023 was $107,540,000, a reduction of $54,796,000 or 33.8% compared to a net loss of $162,336,000 in 2022[333] - Adjusted EBITDA for 2023 was $(68,459,000), improving by $50,114,000 or 42.3% from $(118,573,000) in 2022[333] - Total revenue for the year ended December 31, 2023, was $44.961 million, an increase of $2.006 million or 4.7% compared to 2022[360] - Software revenue increased by $4.751 million or 36.5%, while installation services revenue grew by $2.048 million or 37.9%, offset by a decrease of $4.793 million or 19.5% in hardware revenue[360] - Net loss for the year was $107.540 million, a reduction of $54.796 million or 33.8% compared to 2022[360] Revenue Sources - Hardware revenue is generated primarily from the sale of smart access devices, with revenue recognized upon transfer of control to customers[341] - Software revenue is derived from subscription-based arrangements, with terms ranging from one to ten years, recognized ratably over the subscription period[343] Expenses and Cost Management - Total cost of revenue decreased by $14.243 million or 30.4%, primarily due to a $15.459 million decrease in hardware sales-related costs[361] - Research and development expenses decreased by $21.146 million or 38.5%, mainly due to a $18.8 million reduction in personnel-related expenses[362] - Sales and marketing expenses decreased by $30.195 million or 66.2%, primarily due to a $19.3 million decrease in personnel-related expenses[363] - General and administrative expenses increased by $10.919 million or 19.7%, driven by a $7.3 million increase in legal fees and a $5.8 million increase in professional fees related to investigations[364] Cash Flow and Liquidity - The company had approximately $179.5 million in unrestricted cash and cash equivalents as of December 31, 2023[367] - Net cash used in operating activities in 2023 decreased by $69.7 million compared to 2022, primarily due to a decrease in net loss of $54.8 million and a decrease in inventories of $36.3 million[384] - The company plans to monitor its cash flow forecast closely and may implement cost-saving measures to preserve liquidity[374] Debt and Financing - The company incurred $5.8 million in restructuring costs in connection with the July 2023 reduction in force (RIF)[368] - In July 2023, the company issued $22.0 million in unsecured Promissory Notes as part of the HDW Acquisition[370] - The company entered into a Loan Agreement with Customers Bank for a term loan of $6.0 million, with a maturity date of July 15, 2029[379] - The company did not conduct any financing activities in 2023, while in 2022, net cash used in financing activities was primarily due to the repayment of $3.4 million of the revolving credit facility[386] Goodwill and Fair Value - The company recorded $25.3 million of goodwill and $4.8 million of other intangible assets on the Consolidated Balance Sheets as of December 31, 2023[399] - The estimated fair value of the company as of December 31, 2023, is $204.0 million, exceeding the carrying value of $169.1 million by $34.9 million, or 20.6%[404] - The company's market capitalization as of December 31, 2023, was $118.1 million, approximately 73% less than the estimated fair value[405] - A sensitivity analysis indicated a fair value of $192.5 million, exceeding the carrying value by $23.4 million, or 14%, confirming no goodwill impairment as of December 31, 2023[406] - The company expects potential goodwill impairment during the year ended December 31, 2024, due to lower revenue projections and a decline in stock price[407] - The company has not finalized its financial statements for the year ended December 31, 2024, including any additional goodwill related to business combinations[408] - Business combinations are accounted for using the acquisition method, with significant assumptions made regarding the fair value of acquired intangible assets[409] Legal and Regulatory Matters - The company is subject to various legal proceedings, with accrued expenses related to stockholder lawsuits based on settlement amounts pending court approval[410] - As a smaller reporting company, the company is not required to provide detailed market risk disclosures[412] Strategic Focus - The company is focused on evolving its go-to-market strategy to enhance sales efficiency and customer satisfaction[329] - Continued investment in research and development is critical for the company to innovate and maintain its market position[330]