SmartRent(SMRT) - 2025 Q2 - Quarterly Report

PART I - Financial Information Item 1. Financial Statements (Unaudited) This section presents SmartRent, Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and cash flows Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :-------------- | :------------------ | | ASSETS | | | | Cash and cash equivalents | $105,044 | $142,482 | | Total current assets | $217,543 | $257,650 | | Property and equipment, net | $5,583 | $2,451 | | Goodwill | $92,339 | $117,268 | | Total assets | $353,969 | $420,176 | | LIABILITIES & EQUITY | | | | Total current liabilities | $80,059 | $71,032 | | Total liabilities | $115,120 | $130,741 | | Total stockholders' equity | $238,849 | $289,435 | | Total liabilities, convertible preferred stock and stockholders' equity | $353,969 | $420,176 | - Total assets decreased by 15.76% from $420.176 million as of December 31, 2024, to $353.969 million as of June 30, 2025, primarily due to a decrease in cash and cash equivalents and a goodwill impairment charge[17] - Cash and cash equivalents decreased by 26.3% from $142.482 million at December 31, 2024, to $105.044 million at June 30, 2025[17] - Goodwill decreased by 21.3% from $117.268 million at December 31, 2024, to $92.339 million at June 30, 2025, due to an impairment charge[17][49] Condensed Consolidated Statements of Operations and Comprehensive Loss This section details the company's financial performance over specific periods, including revenue, expenses, and net loss Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total revenue | $38,308 | $48,518 | $79,652 | $99,007 | | Total cost of revenue | $25,640 | $31,213 | $53,422 | $62,279 | | Total operating expense | $24,353 | $24,223 | $54,275 | $53,805 | | Impairment charge | $- | $- | $24,929 | $- | | Loss from operations | $(11,685) | $(6,918) | $(52,974) | $(17,077) | | Net loss | $(10,860) | $(4,605) | $(51,044) | $(12,297) | | Basic and diluted net loss per common share | $(0.06) | $(0.02) | $(0.27) | $(0.06) | - Total revenue decreased by 21% for the three months ended June 30, 2025, and by 20% for the six months ended June 30, 2025, compared to the same periods in 2024, primarily due to decreased hardware sales and professional services[19][219] - Net loss significantly widened by 136% to $(10.860) million for the three months ended June 30, 2025, and by 315% to $(51.044) million for the six months ended June 30, 2025, largely due to a $24.929 million goodwill impairment charge in the six-month period[19][218] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Balance, December 31, 2024 | Balance, June 30, 2025 | | :---------------------------------- | :------------------------- | :--------------------- | | Class A Common Stock (Par Value) | $19 | $19 | | Additional Paid-In Capital | $637,361 | $642,010 | | Accumulated Deficit | $(347,847) | $(403,809) | | Accumulated Other Comprehensive Loss | $(98) | $629 | | Total Stockholders' Equity | $289,435 | $238,849 | - Total stockholders' equity decreased by 17.48% from $289.435 million at December 31, 2024, to $238.849 million at June 30, 2025, primarily due to net losses and stock repurchases[21] - The accumulated deficit increased from $(347.847) million at December 31, 2024, to $(403.809) million at June 30, 2025, reflecting the net loss incurred during the period[21] Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(27,099) | $(17,214) | | Net cash used in investing activities | $(5,850) | $(1,997) | | Net cash used in financing activities | $(5,266) | $(8,839) | | Net decrease in cash, cash equivalents, and restricted cash | $(37,438) | $(28,027) | | Cash, cash equivalents, and restricted cash - end of period | $105,044 | $187,682 | - Net cash used in operating activities increased to $(27.099) million for the six months ended June 30, 2025, from $(17.214) million in the prior year, primarily due to a higher net loss and changes in operating assets and liabilities[26][266][267] - Cash, cash equivalents, and restricted cash decreased by $37.438 million, ending the period at $105.044 million, compared to $187.682 million in the prior year[26] Notes to the Condensed Consolidated Financial Statements (Unaudited) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements NOTE 1. Description of Business This note describes SmartRent, Inc.'s core business as an enterprise real estate technology provider offering smart building hardware and cloud-based SaaS solutions - SmartRent, Inc. is an enterprise real estate technology company providing comprehensive management software and applications, including smart building hardware and cloud-based SaaS solutions, for property owners, managers, and residents[31] - The Company's solutions aim to lower operating costs, increase revenue, mitigate operational friction, and protect assets, while enhancing the living experience for residents[31] NOTE 2. Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements, including policies on unaudited interim reporting, functional currency, going concern, and goodwill impairment - The financial statements are unaudited and prepared in accordance with GAAP, with certain notes condensed or omitted for interim reporting[32] - The Company's functional currency is USD, with foreign subsidiaries using local currencies, and translation adjustments are included in accumulated other comprehensive loss[33] - Management believes current resources are sufficient for at least one year, but additional capital may be needed for future operations[34] - A goodwill impairment charge of $24.929 million was recorded during the three months ended March 31, 2025, due to a sustained decline in stock price and market capitalization[47][48] NOTE 3. Fair Value Measurements and Fair Value of Instruments This note explains how the company measures financial instruments at fair value using a three-level hierarchy and details changes in specific liabilities - The Company measures financial instruments at fair value using a three-level hierarchy based on observable or unobservable inputs[54][55][56][57] - The acquisition earnout payment liability, measured using Level 3 unobservable inputs, decreased from $1.760 million at December 31, 2024, to $1.466 million at June 30, 2025, with the final payment made in July 2025[84][85][86] NOTE 4. Revenue and Deferred Revenue This note provides a breakdown of revenue by type and details the changes in deferred revenue, including expected recognition Revenue by Type (in thousands) | Revenue Type | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Hardware | $15,143 | $24,676 | $33,973 | $53,753 | | Professional services | $4,327 | $5,816 | $8,220 | $9,274 | | Hosted services | $18,838 | $18,026 | $37,459 | $35,980 | | Total revenue | $38,308 | $48,518 | $79,652 | $99,007 | - Deferred revenue decreased from $87.659 million at January 1, 2025, to $66.357 million at June 30, 2025. The Company expects to recognize 57% of total deferred revenue within the next 12 months[93] NOTE 5. Other Balance Sheet Information This note presents detailed breakdowns of inventory and intangible assets, net, and their changes over the reporting periods Inventory (in thousands) | Inventory Type | June 30, 2025 | December 31, 2024 | | :--------------- | :-------------- | :------------------ | | Finished Goods | $32,967 | $34,876 | | Raw Materials | $385 | $385 | | Total inventory | $33,352 | $35,261 | - Total inventory decreased by 5.4% from $35.261 million at December 31, 2024, to $33.352 million at June 30, 2025[95] Intangible Assets, Net (in thousands) | Intangible Asset | June 30, 2025 (Net) | December 31, 2024 (Net) | | :------------------- | :-------------------- | :---------------------- | | Customer relationships | $15,655 | $16,767 | | Developed technology | $5,482 | $6,217 | | Trade name | $301 | $391 | | Total intangible assets, net | $21,438 | $23,375 | - Total intangible assets, net, decreased by 8.3% from $23.375 million at December 31, 2024, to $21.438 million at June 30, 2025[100] NOTE 6. Debt This note describes the company's Senior Revolving Facility, including its terms, interest rates, and compliance with covenants - The Company has a $75.0 million Senior Revolving Facility with a five-year term, terminating in December 2026, which has not been drawn upon as of June 30, 2025[107][112] - Interest rates for draws are based on SOFR or ABR, with applicable margins of 1.75% for SOFR Loans and (0.50%) for ABR Loans as of June 30, 2025[108] - The Company pays a facility fee of 0.25% per annum on the unused commitment and was in compliance with all financial covenants as of June 30, 2025[109][111] NOTE 7. Convertible Preferred Stock and Equity This note details the company's equity structure, including the absence of preferred stock and activity under its stock repurchase program - The Company has no preferred stock issued or outstanding as of June 30, 2025[113] - Under a stock repurchase program authorized in March 2024 for up to $50.0 million, the Company repurchased 4,066 thousand Class A common shares for $3.684 million (average $0.91/share) during Q2 2025, and 5,084 thousand shares for $4.886 million (average $0.96/share) during H1 2025[114][115] - As of June 30, 2025, approximately $16.751 million remained available for stock repurchases[115] NOTE 8. Stock-Based Compensation This note provides information on stock-based compensation expense, unrecognized compensation, and changes to the equity incentive plan - Total stock-based compensation expense was $2.161 million for Q2 2025 and $4.997 million for H1 2025, a decrease from $3.284 million and $6.565 million in the respective prior-year periods[141] - As of June 30, 2025, unrecognized compensation expense for stock options was $2.192 million (expected over 2.3 years) and for restricted stock units (RSUs) was $17.258 million (expected over 2.5 years)[125][129] - The 2021 Equity Incentive Plan was amended to increase authorized shares by 8,900 thousand, totaling 24,400 thousand shares, with 8,473 thousand shares available for future issuance as of June 30, 2025[120][123] NOTE 9. Income Taxes This note discusses the company's effective tax rate, valuation allowance for deferred tax assets, and the impact of new tax legislation - The effective tax rate (ETR) from continuing operations was 0.30% for Q2 2025 and (0.15%) for H1 2025, differing from the federal statutory rate of 21% primarily due to changes in valuation allowance and foreign taxes[142] - A full valuation allowance has been established for net deferred U.S. federal and state tax assets, including net operating loss carryforwards, which will be maintained until realization is more likely than not[143] - The recently enacted One Big Beautiful Bill Act (OBBBA) in the U.S. will impact the Company's consolidated financial statements, with certain provisions effective in 2025 and others through 2027[144] NOTE 10. Net Loss Per Share This note reports the basic and diluted net loss per common share and explains the exclusion of anti-dilutive shares - Basic and diluted net loss per common share was $(0.06) for Q2 2025 and $(0.27) for H1 2025[19] - Potentially dilutive shares, including 17,067 thousand common stock options and restricted stock units, were excluded from diluted net loss per share computation for the periods presented because their inclusion would have been anti-dilutive[145][146] NOTE 11. Related-Party Transactions This note discloses information about transactions with related parties, including the cessation of a specific related-party relationship - A related-party relationship with a SmartRent customer, where a Board member served on their board, ceased as of June 30, 2025[147] - Revenue from this customer was $618 thousand for Q2 2024 and $1.298 million for H1 2024, with all dealings on terms no more favorable than those with unaffiliated third parties[147] NOTE 12. Commitments and Contingencies This note details the company's involvement in legal proceedings, including a class action settlement and related financial accruals - The Company is involved in various legal proceedings, including a class action complaint related to the 2021 business combination, which was agreed to be settled for $11.375 million[150] - Legal expenses for H1 2025 included $3.462 million in legal fees and $11.375 million in accrued settlement costs, partially offset by $7.500 million in committed insurance and third-party contributions[152] - An accrual of $11.375 million was included in accrued expenses and other current liabilities as of June 30, 2025, related to legal matters, with a corresponding receivable of $6.500 million for contributions[156] NOTE 13. Segment Reporting This note clarifies that the company operates as a single reportable segment and outlines the key financial measures reviewed by management - The Company operates as a single operating and reportable segment, with its Chief Operating Decision Maker (CODM) reviewing financial information on a consolidated basis[157] - Key financial performance measures used by the CODM include revenue, gross profit, operating expenses, and net income[159] - The Company's principal operations and long-lived assets are primarily located in the United States, with $8.863 million of assets outside the U.S. as of June 30, 2025[157] NOTE 14. Subsequent Events This note reports on significant events that occurred after the balance sheet date, including stock issuances and NYSE compliance - In July and August 2025, 132 thousand shares of Class A Common Stock were issued to employees for vested RSUs and ESPP purchases[164] - On August 1, 2025, the Company regained compliance with the NYSE minimum share price requirement (Section 802.01C) as of July 31, 2025[164] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of SmartRent's business, its operational model, key factors influencing performance, and recent developments Overview This section introduces SmartRent as an enterprise real estate technology company, detailing its platform and market presence - SmartRent is an enterprise real estate technology company offering a comprehensive management platform with cloud-based SaaS solutions and smart building hardware[167] - The platform integrates with third-party smart devices via a Hub Device, using an open-architecture approach for seamless management[168] - As of June 30, 2025, SmartRent had 847,956 Units Deployed and approximately 600 customers, representing about 14% of the U.S. institutionally owned multifamily and single-family rental market[169] Our Business Model This section describes how SmartRent generates revenue through sales of smart home systems, subscription fees, and installation services - Revenue is primarily generated from sales of smart home systems, including monthly subscription fees for Hosted Services (access controls, asset monitoring, WiFi), direct sales of smart home devices (Hub Devices, locks, thermostats), and installation services[170] - Subscription arrangements range from one month to ten years, with a weighted average contract length of 4.2 years for recurring revenue[170] Key Factors Affecting Our Performance This section identifies critical elements influencing the company's success, such as customer growth, product offerings, supply chain, R&D, and market conditions - Success depends on growing the customer base, expanding hardware and hosted service offerings to increase revenue per Unit Deployed, and providing high-quality products to leverage the business model[171] - Improvements in the global supply chain have reduced backlogged Access Control and made-to-order lock units, but potential new tariffs could impact cost structure and supply chain[172][173][174] - Ongoing investment in R&D is crucial for developing innovative software and hardware, including the recently introduced AI-powered intelligence layer and enhanced energy management tools[175][176] - Category adoption and market growth are vital, though macroeconomic conditions and leadership changes have led to deferred capital expenditures and decreased Units Shipped and New Units Deployed in 2024[178] Recent Developments This section highlights significant recent events, including leadership changes and compliance with NYSE listing requirements - Michael Shane Paladin departed as President and CEO in April 2025, with John Dorman serving as Interim CEO, followed by the appointment of Frank Martell as the new President and CEO in June 2025[179] - The Company received a NYSE notification in May 2025 for non-compliance with the minimum share price requirement ($1.00 average over 30 trading days) but regained compliance as of July 31, 2025[180] Key Metrics This section presents a summary of critical operational and financial metrics, including Units Deployed, Bookings, and Annual Recurring Revenue Key Metrics Summary | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (%) | | :--------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Hardware Units Shipped | 26,543 | 48,780 | (46)% | 69,961 | 100,524 | (30)% | | Hardware ARPU | $571 | $506 | 13% | $486 | $535 | (9)% | | New Units Deployed | 21,068 | 22,469 | (6)% | 39,182 | 52,179 | (25)% | | Professional services ARPU | $365 | $327 | 12% | $392 | $278 | 41% | | Units Deployed | 847,956 | 771,870 | 10% | 847,956 | 771,870 | 10% | | SaaS ARPU | $5.66 | $5.63 | 0% | $5.67 | $5.53 | 2% | | Units Booked | 24,319 | 37,691 | (35)% | 42,529 | 83,981 | (49)% | | Bookings (in thousands) | $30,460 | $45,511 | (33)% | $57,640 | $84,272 | (32)% | | Units Booked SaaS ARPU | $8.21 | $8.07 | 2% | $9.10 | $7.57 | 20% | | Annual Recurring Revenue (ARR) | $56.9 million | $51.2 million | 11% | $56.9 million | $51.2 million | 11% | | Customer Churn (Smart Communities) | 0.08% | 0.03% | 167% | 0.10% | 0.05% | 100% | | Property Net Revenue Retention | 102% | 103% | (1)% | 102% | 103% | (1)% | | Customer Net Revenue Retention | 108% | N/A | N/A | 108% | N/A | N/A | - Units Deployed increased by 10% YoY to 847,956 as of June 30, 2025, indicating continued growth in active subscriptions[197] - Bookings decreased by 33% for Q2 2025 and 32% for H1 2025, reflecting a decline in new binding orders[197] Components of Results of Operations This section explains the various revenue streams, cost of revenue components, and operating expenses that contribute to the company's financial results - Revenue is generated from hardware sales, professional installation services, and Hosted Services (monthly subscription fees and amortization of non-distinct Hub Devices)[198][201][202][203] - Cost of revenue includes direct product costs, shipping, warehouse expenses, personnel, and estimated warranty expenses for hardware; personnel, contractor, and travel expenses for professional services; and amortization of non-distinct Hub Devices and infrastructure costs for Hosted Services[205][206][208][209] - Operating expenses comprise research and development (capitalized qualifying costs, expensed preliminary/post-development costs), sales and marketing (personnel, commissions, programs), and general and administrative (personnel, professional fees, public company expenses, legal settlements)[210][211][212] - Other income/expenses include interest income/expense, foreign currency gains/losses, and other income from foreign subsidiaries[214] Comparison of the three and six months ended June 30, 2025 and 2024 This section provides a detailed comparative analysis of the company's financial performance for the three and six months ended June 30, 2025, versus 2024 Revenue Comparison (in thousands) | Revenue Type | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Hardware | $15,143 | $24,676 | $(9,533) | (39)% | $33,973 | $53,753 | $(19,780) | (37)% | | Professional services | $4,327 | $5,816 | $(1,489) | (26)% | $8,220 | $9,274 | $(1,054) | (11)% | | Hosted services | $18,838 | $18,026 | $812 | 5% | $37,459 | $35,980 | $1,479 | 4% | | Total revenue | $38,308 | $48,518 | $(10,210) | (21)% | $79,652 | $99,007 | $(19,355) | (20)% | - Hardware revenue decreased by 39% for Q2 2025 and 37% for H1 2025, primarily due to a 46% decrease in Units Shipped for Q2 2025 and a 30% decrease for H1 2025[222][223] - Hosted Services revenue increased by 5% for Q2 2025 and 4% for H1 2025, driven by a 10% increase in Units Deployed, partially offset by decreasing hub amortization revenue[226][227] Cost of Revenue Comparison (in thousands) | Cost of Revenue Type | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Hardware | $12,868 | $16,318 | $(3,450) | (21)% | $26,828 | $35,002 | $(8,174) | (23)% | | Professional services | $6,237 | $8,869 | $(2,632) | (30)% | $13,530 | $15,317 | $(1,787) | (12)% | | Hosted services | $6,535 | $6,026 | $509 | 8% | $13,064 | $11,960 | $1,104 | 9% | | Total cost of revenue | $25,640 | $31,213 | $(5,573) | (18)% | $53,422 | $62,279 | $(8,857) | (14)% | Operating Expenses Comparison (in thousands) | Operating Expense Type | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :----------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Research and development | $6,465 | $7,484 | $(1,019) | (14)% | $14,723 | $15,846 | $(1,123) | (7)% | | Sales and marketing | $6,375 | $4,716 | $1,659 | 35% | $11,145 | $9,270 | $1,875 | 20% | | General and administrative | $11,513 | $12,023 | $(510) | (4)% | $28,407 | $28,689 | $(282) | (1)% | - Sales and marketing expenses increased by 35% for Q2 2025 and 20% for H1 2025, driven by higher third-party consultant and personnel-related expenses[240][241] - A goodwill impairment charge of $24.929 million was recorded for the six months ended June 30, 2025[244] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures, specifically EBITDA and Adjusted EBITDA, to their most directly comparable GAAP measures - EBITDA is defined as net income (loss) before interest income, net, income tax expense (benefit), and depreciation and amortization[251] - Adjusted EBITDA further excludes non-recurring legal matters, stock-based compensation, impairment of investment in non-affiliate, goodwill impairment, non-recurring warranty provisions, other acquisition expenses, and other unusual non-recurring events[252] EBITDA and Adjusted EBITDA Reconciliation (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(10,860) | $(4,605) | $(51,044) | $(12,297) | | EBITDA | $(9,839) | $(5,242) | $(49,172) | $(13,797) | | Adjusted EBITDA | $(7,349) | $902 | $(13,721) | $1,299 | - Adjusted EBITDA decreased significantly to $(7.349) million for Q2 2025 from $0.902 million for Q2 2024, and to $(13.721) million for H1 2025 from $1.299 million for H1 2024, primarily due to the goodwill impairment and increased legal expenses[256] Liquidity and Capital Resources This section discusses the company's cash position, available credit facilities, and cash flow activities, assessing its ability to fund operations - As of June 30, 2025, the Company had $105.0 million in cash and cash equivalents, primarily held in money market funds[258] - The Company has a $75.0 million Senior Revolving Facility, undrawn as of June 30, 2025, which, along with current cash, is expected to fund operations for at least the next 12 months[259][260] - Cash used in operating activities increased to $27.1 million for H1 2025 from $17.2 million for H1 2024, driven by net loss and changes in operating assets and liabilities[266][267] - Cash used in financing activities decreased to $5.3 million for H1 2025 from $8.8 million for H1 2024, mainly due to lower Class A common stock repurchases and no earnout payments in 2025[270][271] Critical Accounting Estimates This section outlines the key accounting estimates that require significant judgment, including revenue recognition, goodwill impairment, inventory valuation, and stock-based compensation - Revenue recognition involves estimating standalone selling prices for hardware, professional services, and Hosted Services, and allocating transaction prices based on these estimates[274][278][279] - Goodwill is tested for impairment annually (September 30) and when impairment indicators arise; a $24.929 million charge was recorded in Q1 2025 due to a decline in stock price and market capitalization[280][281] - Inventory is valued at the lower of cost or net realizable value, with adjustments for obsolescence based on demand forecasts and product life cycles[285] - Stock-based compensation for options is valued using the Black-Scholes model, and RSUs are valued at grant date fair value, with expense recognized over the vesting period[286][287] Emerging Growth Company Status This section explains SmartRent's status as an "emerging growth company" under the JOBS Act and its implications for financial reporting - SmartRent is an 'emerging growth company' under the JOBS Act and has elected to use the extended transition period for complying with new or revised financial accounting standards[289] - This status allows for different accounting standards compared to non-emerging growth companies, potentially affecting comparability of financial results[290] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines SmartRent's exposure to market risks, primarily from fluctuations in interest rates and foreign currency exchange rates - The Company is exposed to market risks from fluctuations in interest rates and foreign currency exchange rates[294] - A hypothetical 10% change in interest rates would increase annual interest income by $10.5 million or decrease it by $4.4 million, based on the cash position as of June 30, 2025[296] - Foreign currency exchange rate fluctuations are not expected to have a material impact on historical consolidated financial statements, and the Company currently does not engage in hedging strategies[297] Item 4. Controls and Procedures This section confirms that SmartRent's management evaluated the effectiveness of disclosure controls and procedures and found no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025, at the reasonable assurance level[298] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[299] PART II - Other Information Item 1. Legal Proceedings This section reiterates that SmartRent is subject to various legal claims in the ordinary course of business - The Company is subject to various legal proceedings and claims arising in the ordinary course of business[300] - Management believes that the outcome of these matters will not have a material adverse effect on the Company's business, financial condition, results of operations, or prospects[300] Item 1A. Risk Factors This section highlights specific risks and uncertainties facing SmartRent, including challenges related to the new CEO's leadership transition and NYSE listing compliance - The Company's success depends on successfully managing the leadership transition to the new CEO, Frank Martell, appointed June 16, 2025[302] - Failure to effectively manage this transition could negatively impact customers, employees, investors, and third-party partners, affecting business, results of operations, or stock price[302] - The Company regained compliance with the NYSE minimum share price requirement ($1.00 average over 30 trading days) as of July 31, 2025, but continued volatility could lead to future non-compliance and potential delisting[303][304] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's share repurchase activity for the three months ended June 30, 2025, under its authorized stock repurchase program Share Repurchase Activity (3 Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) | | :----------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :------------------------------------------------------------------------------------ | | April 1 - April 30, 2025 | 3,326 | $0.84 | 2,777 | $17,450 | | May 1 - May 31, 2025 | 740 | $0.95 | 707 | $16,751 | | June 1 - June 30, 2025 | - | $- | - | $16,751 | | Total | 4,066 | | 3,484 | | - During Q2 2025, the Company repurchased 4,066 thousand shares of Class A common stock at an average price of $0.84-$0.95 per share[307] - As of June 30, 2025, $16.751 million remained available under the $50.0 million stock repurchase program authorized in March 2024[307] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[309] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[310] Item 5. Other Information This section reports on securities trading plans of directors and executive officers and announces the departure of the Chief Legal Officer - No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[311] - Kristen Lee, Chief Legal Officer and Corporate Secretary, will step down effective August 15, 2025, and will receive a cash severance payment of $100 thousand as per a transition agreement[312][313] Item 6. Exhibits This section lists all exhibits filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q - The report includes various exhibits such as the Third Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and several employment and transition agreements[316] - Certifications from the Principal Executive Officer and Principal Financial Officer, as required by the Sarbanes-Oxley Act, are filed as exhibits[316] - Inline XBRL Instance Document, Taxonomy Extension Schema, and Cover Page Interactive Data File are included for electronic data submission[316] Signatures This section confirms the signing of the Quarterly Report on Form 10-Q by the President and CEO and the Chief Financial Officer - The Quarterly Report on Form 10-Q was signed on August 6, 2025, by Frank Martell, President and Chief Executive Officer, and Daryl Stemm, Chief Financial Officer[320][322]