SmartRent(SMRT) - 2022 Q4 - Annual Report

Part I Item 1. Business SmartRent offers an integrated smart hardware and SaaS platform for real estate, enhancing efficiency and resident experience, with 547,196 units deployed and a recurring revenue model - SmartRent provides an integrated platform combining smart building hardware and cloud-based SaaS solutions for the real estate industry, aiming to improve operational efficiency, generate incremental revenue, reduce costs, and protect assets for property owners14 16 17 - The company's solutions are built on an open-architecture, hardware-agnostic platform that integrates with existing property management systems and third-party smart devices like Google Home and Amazon Alexa15 27 - The business operates on a SaaS model with recurring revenue contracts typically ranging from one month to ten years, with an average term of 2.6 years. In 2022, approximately 38% of customers prepaid their software contracts25 Key Metrics as of December 31, 2022 | Metric | Value | | :--- | :--- | | Units Deployed | 547,196 | | Committed Units | 851,815 | | Customers | 501 | | Customer-owned Units | ~6.7 million | Item 1A. Risk Factors SmartRent faces risks from persistent net losses, supply chain dependencies, data privacy compliance, product liability, intense competition, and stock price volatility - The company has a history of net losses, reporting a net loss of $96.3 million in 2022 and $72.0 million in 2021, and may not achieve or maintain profitability in the future as it continues to invest in growth73 - SmartRent relies on a limited number of third-party suppliers, including a single-source manufacturer for Z-wave chips and the main CPU in its Hub Devices, creating significant risk of disruption from supply chain issues66 82 83 - The company is subject to numerous data privacy and security laws, such as the CCPA and CPRA in California. Failure to comply could result in significant liabilities, governmental investigations, and harm to the business68 138 139 - The business is exposed to product liability, warranty, and personal injury claims due to the nature of its products (e.g., smart locks, hubs). A major defect or recall could result in significant costs and reputational damage70 90 91 Item 1B. Unresolved Staff Comments The company has no unresolved staff comments from the SEC - None190 Item 2. Properties SmartRent's primary facilities are leased, including its 40,893 sq ft corporate headquarters in Scottsdale, AZ, and other offices/warehouses - The company's primary facilities are leased and include its corporate headquarters in Scottsdale, AZ (40,893 sq ft), an office in Orlando, FL (9,928 sq ft), a warehouse in Avondale, AZ (60,820 sq ft), and international facilities in Zagreb, Croatia191 Item 3. Legal Proceedings SmartRent is involved in routine legal matters, none of which are expected to materially impact its financial condition or operations - SmartRent is involved in various legal matters arising from normal business operations but does not expect them to have a material adverse impact192 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable194 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities SmartRent's Class A Common Stock trades on the NYSE under "SMRT"; the company has never paid dividends and plans to retain earnings for growth - The company's Class A Common Stock trades on the New York Stock Exchange (NYSE) under the ticker symbol "SMRT"196 - SmartRent has never declared or paid cash dividends and does not intend to in the foreseeable future, retaining funds for business development and growth198 Item 6. Selected Financial Data This section has been intentionally omitted from the report - This item was intentionally omitted205 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In 2022, revenue grew 52% to $167.8 million, but net loss widened to $96.3 million due to increased operating expenses, with $210.4 million cash on hand Key Operating Metrics Key metrics show Units Deployed at 547,196, ARR at $32.3 million, and Adjusted EBITDA at negative $74.7 million in 2022 Key Operating Metrics Comparison (2020-2022) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Units Deployed (End of Period) | 547,196 | 339,485 | 155,105 | | New Units Deployed (Annual) | 207,711 | 167,743 | 83,293 | | Units Booked (Annual) | 282,512 | 219,901 | 112,555 | | Annual Recurring Revenue (ARR) | $32.3M | $10.6M | $4.9M | Adjusted EBITDA Reconciliation Summary (in thousands) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net loss | $(96,322) | $(71,961) | $(37,109) | | EBITDA | $(99,394) | $(71,134) | $(36,106) | | Adjusted EBITDA | $(74,709) | $(55,615) | $(26,679) | Results of Operations Total revenue grew 52% to $167.8 million in 2022, but operating expenses rose 71%, leading to a 34% increase in net loss to $96.3 million Consolidated Results of Operations (in thousands) | Line Item | 2022 | 2021 | YoY Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $167,821 | $110,637 | 52% | | Total Cost of Revenue | $166,473 | $120,710 | 38% | | Total Operating Expenses | $105,599 | $61,579 | 71% | | Loss from Operations | $(104,251) | $(71,652) | 45% | | Net Loss | $(96,322) | $(71,961) | 34% | - Hosted services revenue saw the largest growth, increasing 163% to $48.1 million in 2022, driven by a higher number of deployed units and a 93% increase in SaaS ARPU, with approximately $9.9 million of the increase attributable to the iQuue and SightPlan acquisitions249 - General and administrative expenses more than doubled, increasing 113% to $55.3 million in 2022. This was primarily due to higher personnel costs ($10.3M), asset impairment ($4.4M), stock-based compensation ($4.2M), and business insurance ($3.6M)258 Liquidity and Capital Resources SmartRent held $210.4 million in cash as of December 31, 2022, with a $75.0 million undrawn credit facility, and believes it has sufficient liquidity for the next 12 months - The company's cash and cash equivalents decreased to $210.4 million as of December 31, 2022, from $430.8 million at the end of 2021271 326 - Net cash used in operating activities increased to $81.0 million in 2022, primarily due to the net loss of $96.3 million and a $42.8 million increase in inventory, partially offset by a $43.7 million increase in deferred revenue281 - The company has a $75.0 million senior secured revolving credit facility established in December 2021, which was undrawn as of December 31, 2022272 430 Cash Flow Summary (in thousands) | Cash Flow Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Operating Activities | $(81,037) | $(70,376) | $(28,490) | | Investing Activities | $(130,789) | $(9,373) | $(2,680) | | Financing Activities | $(2,801) | $473,926 | $48,221 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk SmartRent faces interest rate risk on its $217.7 million cash balance and minor foreign currency risk, but does not currently use hedging strategies - The company is exposed to interest rate risk on its cash, cash equivalents, and restricted cash balance of approximately $217.7 million as of December 31, 2022312 - Foreign currency exchange rate risk exists from operations, primarily in Croatia, but the effect of a hypothetical 10% change in exchange rates is not expected to have a material impact on financial statements314 - Inflation is not believed to have had a material effect on the business to date, but significant inflationary pressures could harm future results if costs cannot be fully offset311 Item 8. Financial Statements and Supplementary Data This section presents SmartRent's audited consolidated financial statements for 2020-2022, including balance sheets, statements of operations, equity, cash flows, and notes Consolidated Balance Sheets Total assets decreased to $560.8 million in 2022, driven by reduced cash to $210.4 million, while goodwill and intangible assets significantly increased due to acquisitions Consolidated Balance Sheet Summary (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $210,409 | $430,841 | | Total current assets | $378,356 | $536,007 | | Goodwill | $117,268 | $12,666 | | Total Assets | $560,845 | $579,683 | | Total current liabilities | $132,776 | $70,568 | | Deferred revenue (non-current) | $59,928 | $53,412 | | Total Liabilities | $196,645 | $130,181 | | Total Stockholders' Equity | $364,200 | $449,502 | Consolidated Statements of Operations and Comprehensive Loss Total revenue grew 52% to $167.8 million in 2022, but net loss widened to $96.3 million, resulting in a $0.49 net loss per share Statement of Operations Summary (in thousands) | Line Item | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Revenue | $167,821 | $110,637 | $52,534 | | Total Cost of Revenue | $166,473 | $120,710 | $56,831 | | Loss from Operations | $(104,251) | $(71,652) | $(35,716) | | Net Loss | $(96,322) | $(71,961) | $(37,109) | | Net Loss Per Share (Basic & Diluted) | $(0.49) | $(0.96) | $4.32 | Consolidated Statements of Cash Flows Net cash used in operating activities was $81.0 million in 2022, with $130.8 million used in investing, leading to a $214.9 million net decrease in cash Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(81,037) | $(70,376) | | Net cash used in investing activities | $(130,789) | $(9,373) | | Net cash (used in) provided by financing activities | $(2,801) | $473,926 | | Net (decrease) increase in cash | $(214,891) | $393,986 | | Cash at end of period | $217,713 | $432,604 | Note 13. Acquisitions In 2022, SmartRent acquired SightPlan for $135 million, recognizing $104.6 million goodwill and $30.9 million intangible assets, following prior acquisitions of iQuue and Zenith - On March 22, 2022, the Company acquired SightPlan for approximately $135 million, recognizing $104.6 million in goodwill and $30.9 million in intangible assets (customer relationships and developed technology)491 496 500 - On December 31, 2021, the Company acquired iQuue for total consideration of $12.95 million, including $7.2 million in cash and $5.2 million in contingent consideration. The acquisition resulted in $8.5 million of goodwill506 508 511 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no disagreements with its accountants regarding accounting principles, financial disclosure, or auditing procedures - None528 Item 9A. Controls and Procedures Management concluded disclosure controls were effective as of December 31, 2022, having fully remediated prior material weaknesses - Management concluded that disclosure controls and procedures were effective as of December 31, 2022529 - The company has fully remediated material weaknesses identified in 2020 concerning non-routine transaction accounting, journal entry review, and IT controls as of December 31, 2022530 531 Item 9B. Other Information The company reports no other information for this item - None535 Part III Items 10-14 Information for Items 10-14 is incorporated by reference from the forthcoming 2023 Proxy Statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the forthcoming 2023 Proxy Statement538 539 540 Part IV Item 15. Exhibits, Financial Statement Schedules This item lists financial statements from Item 8 and all exhibits filed with or incorporated by reference into the 10-K report - This item contains the index to financial statements from Item 8 and a list of all exhibits filed with or incorporated by reference into the 10-K report544 546 Item 16. Form 10-K Summary The company has not provided a summary for Form 10-K - None552