Yahoo Finance SmartRent, Inc. (NYSE:SMRT) Q1 2024 Earnings Call Transcript
SmartRent, Inc. (NYSE:SMRT) Q1 2024 Earnings Call Transcript May 8, 2024
SmartRent, Inc. misses on earnings expectations. Reported EPS is $-0.0378 EPS, expectations were $-0.02. SMRT isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
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 like to start our call and turn our call over to Kristen Lee, General Counsel for SmartRent. Kristen, you may begin.
Kristen Lee: Hello, and thank you for joining us today. My name is Kristen Lee, General Counsel for SmartRent. I'm joined today by Lucas Haldeman, Chairman and CEO; and Daryl Stemm, CFO, who will be taking you through our financial results as well as discussing guidance. Before the market opened today, we issued our earnings release and filed our 10-Q with the SEC, both of which are available on the Investor Relations section of our website, smartrent.com. Before I turn the call over to Lucas, I would like to remind everyone that the discussion today may contain certain forward-looking statements that involve risks and uncertainties. Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements.
These factors are discussed in our SEC filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q. We undertake no obligation to provide updates regarding forward-looking statements made during this call, and we recommend that all investors review reports thoroughly before taking a financial position in SmartRent. Also, during today's call, we will refer to certain non-GAAP financial measures. A discussion of these non-GAAP financial measures, along with the reconciliation to the most directly comparable GAAP measure is included in today's earnings release. We would also like to highlight that our first quarter earnings presentation is available on the Investor Relations section of our website. And with that, I will turn the call over to Lucas.
Lucas Haldeman: Good morning. Thank you to everyone for joining us today. This morning, we reported revenue of $50.5 million for the quarter with nearly $12 million coming from SaaS recurring revenue products. Our SaaS business improved by 32% year over year, driven by a combination of increased total deployed units as well as continued gains in our cross selling strategy. We reported positive adjusted EBITDA of almost $400,000, beating our guidance and marking our second consecutive quarter of positive adjusted EBITDA. Additionally, we ended the quarter with almost 750,000 deployed units, a 24% increase from the previous year. We continue to see increasing demand in the market for Community WiFi. And as we previously announced, we are taking advantage of our strong financial position by investing in projects aimed at significantly expanding our Community WiFi offerings.
This initiative involves onboarding new talent as well as developing advanced technologies, aligning with our vision to dominate the early-stage multifamily community WiFi market. As we look to the future, our strategy remains steadfast in scaling our solutions to meet the growing demands of the rental housing industry. This scalability is facilitated by our deep understanding of our clients' needs, as demonstrated by the launch of a new software feature in the quarter that allows self-guided tour customers to take advantage of key functionality and answer automation, making it easier for residents to tour properties and saving significant time for leasing teams. We prioritize innovations and SaaS that encourage deeper adoption of our solutions and facilitate cross-selling amongst our portfolio of offerings.
Beyond our innovative software features a key differentiator for SmartRent and a critical purchasing factor for clients is our commitment to creating true integrations with leading property management systems. Integrations are essential for our customers because they ensure smooth data flow between their existing systems and the SmartRent platform, driving automation and saving time. We offer an extensive array of integrations and similar to new products we have a road map of integrations, we plan to add and enhanced to better serve our customers. Our approach to deeply integrating with leading rental housing platforms, reduces vendor fatigue, automates processes and delights residents, ultimately leading to increased adoption of our solutions.
As we progress through 2024, our strategic vision remains sharply defined and our approach resilient. We are not merely participants in the market, but at its forefront, spearheading innovation and consistently delivering substantial value. Now I will pass the discussion to Daryl, who will provide detailed insights into our financial performance and share our outlook.
Daryl Stemm: Thank you, Lucas. The first quarter marked another period of significant progress for smart rent. We continue to demonstrate strong SaaS revenue growth expansion in our gross margins and sustained adjusted EBITDA profitability amidst the complex dynamics of the markets we serve. Total revenue for the quarter reached $50.5 million, which reflected a strategic realignment from last year's record Q1 with revenue streams diversifying further into more sustainable recurring sources. By revenue stream, hardware revenue was $29.1 million, professional services was $3.5 million and hosted services was $18 million for Q1 of 2024. Hardware and professional services revenue were both down year over year. The decrease in hardware revenue was almost equally attributable to a decrease in hardware RPU, primarily driven by the change in our product mix, which was more heavily weighted to our Alloy SmartHome hardware and a decrease in the number of units shipped.
The decrease in professional services revenue was primarily attributable to a decrease in new units deployed. Saas ARR increased to $47.6 million in Q1 from $36 million in Q1 of 2023, an increase of 32% year over year. Primary drivers of SaaS growth were a 24% increase in total units deployed and upselling and cross-selling our comprehensive platform solutions. SaaS ARPU was $5.41 in Q1, a 4% increase year over year. During the first quarter of 2024, we increased our total deployments to nearly 750,000 units with about 30,000 new units deployed. Shipments for the quarter were just under 52,000 units. Additionally, our smart operation solution is servicing roughly 1.3 million units. Bookings for the quarter were approximately $38.8 million, including more than 46,000 new units booked.
Bookings ARR was $4 million, and units booked ARPU was $7.16 per unit, leading us to believe SaaS ARPU will continue to increase. In the first quarter of 2024, gross margin increased to 38.5% from 14% in the same quarter of the previous year. This substantial improvement can be attributed to a favorable change in our product mix, which was more heavily weighted to our Alloy SmartHome hardware. Gross profit increased by over $10 million in Q1 to $19.4 million from $9.1 million in the same period of 2023. Hardware gross profit more than doubled to $10.4 million from $4.8 million as product mix drove expanded margins. Within our SaaS business, gross margin improved to 75.1% from 73.4% a year ago. Hosted services gross profit increased to $12 million from $9.2 million last year and continues to be our most profitable revenue stream.
Professional services gross loss narrowed to $3 million from $4.9 million in the same quarter of the previous year. Total operating expenses were $29.6 million in the first quarter of 2024, increasing from $24.4 million in Q1 of 2023. The 2024 results included a onetime accrual of $5.3 million, resulting from an ongoing contractual dispute with a supplier as disclosed in our filings, $5 million of which is attributable to our expected return of inventory, which we believe is not satisfactory for our customer needs, and a cash payment of approximately $300,000. Excluding this accrual, our operating expenses were similar to last year's first quarter. Improved gross margins and continued cost controls helped us achieve positive adjusted EBITDA for the second consecutive quarter and an improvement from a loss of $8.5 million in Q1 2023.
At the end of Q1 2024, our total cash balance was $205 million, a reduction of $11 million from the prior quarter. The decrease in cash this quarter was primarily due to the repurchasing of approximately $4.4 million in stock and the payment of annual cash bonuses to our employees. Our guidance for the second quarter and full year 2024 are as follows. Q2 guidance for revenue in the range of $49 million to $55 million and adjusted EBITDA in the range of negative $500,000 to positive $500,000. Full year 2024 guidance is unchanged with revenue in the range of $260 million to $290 million and adjusted EBITDA in the range of $5 million to $8 million. Our financial strategy is designed to secure a durable and resilient future for SmartRent, ensuring stable long-term earnings to create shareholder value.
And I'll now pass the call back to Lucas, for closing remarks.
Lucas Haldeman: Thank you, Daryl. Before we turn the call over to questions, I want to provide some color on the macro trends we are seeing in the rental housing industry. Factors such as persistently higher interest rates, slowing rent growth and increasing supply are creating headwinds for many of our customers. Customers are taking markedly different approaches to navigate the landscape. On the one side, we see a group of customers who are seizing the opportunity to accelerate their investments and leveraging our technology to gain a competitive edge in challenging times. Conversely, we are also seeing a segment of our customer base, taking a more cautious stance, cutting back on investments and focusing on cash preservation.
For those customers focused on cost savings, SmartRent is uniquely positioned to provide asset protection solutions to safeguard against potential water damage and lower insurance premiums. In addition, our self-guided tour platform has allowed our customers to significantly reduce the number of on-site employees. One customer publicly stated they reduced leasing staff by more than 40%. Another client who is investing a , who recently piloted 10 communities with our smart apartment solutions, including smart locks, thermostats, leak sensors and our resident mobile app, all powered by the SmartRent manager platform. The pilot yielded such positive results that Centerspaces implementing our solutions and 38 additional communities in its next phase, and they have shared with investors and expect to generate an additional $3 million or more in cash flow due to rent premiums and savings on water leaks.
Centerspace is just one example of why smart rent stands out as a leader shaping the future of the rental housing industry. Our unique position stems from being the only provider to deliver purpose-built hardware software and in the end implementation and support. These competitive advantages are deeply embedded into the experience of our customers offering the most comprehensive solution that is unmatched in the market. As we look to the second half of 2024, our outlook is reinforced by the durable, scalable nature of our offerings and our proven track record as a trusted provider to the top names in real estate. This positions us exceptionally well to capture significant market share and sustain our growth. Before we conclude, I want to extend my deepest thanks to our dedicated team at SmartRent, your creativity and commitment our pivotal in driving our success and continuing to innovate solutions that create connected communities our customers are proud to manage.
Thank you to everyone for joining today's call. We'll now open the line and take your questions.
Operator: [Operator Instructions]. Our first question for today comes from the line of Erik Woodring with Morgan Stanley.
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