UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
or
Commission file number:
(Exact name of Registrant as specified in its charter)
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(State or Other Jurisdiction of |
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(I.R.S. Employer Identification No.) |
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(Address of Principal Executive Offices) |
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(Zip Code) |
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(Registrant’s Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
As of November 3, 2023, there were
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). All statements contained in this Report, other than statements of historical fact, are forward-looking statements, including statements regarding our future operating results and financial position, our business strategy and plans, products, services, and technology offerings, market conditions, growth, and expansion plans and opportunities. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “preliminary,” “likely” and similar expressions, and the negatives of these expressions, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations and business strategy.
These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part II, Item 1A "Risk Factors" of this Report and in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 8, 2023, as amended. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the effect of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include, among other things, our ability to:
You should not rely on forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to update any forward-looking statements for any reason after the date of this Report or to conform these statements to actual results or to changes in our expectations. You should read this Report and the documents that we reference in this Report and have filed as exhibits to this Report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (investors.smartrent.com), SEC filings, webcasts, press releases, and conference calls. We use these mediums to communicate with investors and the general public about our company, our products and services, and other issues. It is possible that the information that we make available may be deemed to be material information. We therefore encourage investors, the media and others interested in our company to review the information that we post on our investor relations website.
SmartRent, the SmartRent logo and other trade names, trademarks or service marks of SmartRent appearing in this Report are the property of SmartRent. Trade names, trademarks and service marks of other companies appearing in this Report are the property of their respective holders.
1
Unless the context indicates otherwise, the terms “SmartRent,” the “Company,” “we,” “us,” and “our” as used in this Report refer to SmartRent, Inc., a Delaware corporation, and its subsidiaries taken as a whole.
2
Part I. Financial Information
Item 1 - Financial Statements (Unaudited)
SMARTRENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except per share amounts)
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September 30, 2023 |
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December 31, 2022 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash, current portion |
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Accounts receivable, net |
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Inventory |
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Deferred cost of revenue, current portion |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Deferred cost of revenue |
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Goodwill |
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Intangible assets, net |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Deferred revenue, current portion |
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Total current liabilities |
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Deferred revenue |
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Other long-term liabilities |
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Total liabilities |
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Convertible preferred stock, $ |
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Stockholders' equity |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
) |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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Total stockholders' equity |
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Total liabilities, convertible preferred stock and stockholders' equity |
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$ |
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$ |
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See accompanying Notes to Consolidated Financial Statements. |
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3
SMARTRENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except per share amounts)
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For the three months ended September 30, |
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For the nine months ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenue |
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Hardware |
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$ |
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$ |
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$ |
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$ |
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Professional services |
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Hosted services |
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Total revenue |
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Cost of revenue |
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Hardware |
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Professional services |
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Hosted services |
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Total cost of revenue |
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Operating expense |
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Research and development |
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Sales and marketing |
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General and administrative |
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Total operating expense |
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Loss from operations |
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( |
) |
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( |
) |
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( |
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( |
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Interest income, net |
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Other (expense) income, net |
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( |
) |
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( |
) |
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Loss before income taxes |
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( |
) |
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( |
) |
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( |
) |
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( |
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Income tax benefit (expense) |
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( |
) |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Other comprehensive loss |
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Foreign currency translation adjustment |
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( |
) |
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( |
) |
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( |
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( |
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Comprehensive loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Net loss per common share |
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Basic and diluted |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Weighted-average number of shares used in computing net loss per share |
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Basic and diluted |
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See accompanying Notes to Consolidated Financial Statements. |
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4
SMARTRENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)
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Convertible Preferred Stock |
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Common Stock |
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Shares |
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Amount (Par Value $0.0001) |
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Shares |
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Amount (Par Value $0.0001) |
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Additional Paid In Capital |
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Accumulated Deficit |
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Accumulated other comprehensive (loss) income |
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Total Stockholders' Equity |
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Balance, December 31, 2022 |
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- |
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$ |
- |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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- |
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Issuance of common stock upon vesting of equity awards |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Tax withholdings related to net share settlement of equity awards |
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- |
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- |
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( |
) |
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- |
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( |
) |
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- |
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- |
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( |
) |
Exercise of options |
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- |
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- |
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- |
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- |
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- |
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ESPP purchases |
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- |
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- |
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- |
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- |
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- |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Other comprehensive income |
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- |
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- |
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Balance, March 31, 2023 |
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- |
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- |
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( |
) |
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( |
) |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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- |
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|
||
Issuance of common stock upon vesting of equity awards |
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- |
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- |
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- |
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- |
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- |
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- |
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- |
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Tax withholdings related to net share settlement of equity awards |
|
|
- |
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|
- |
|
|
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|
( |
) |
|
|
- |
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|
( |
) |
|
|
- |
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|
- |
|
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( |
) |
Exercise of options |
|
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- |
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|
- |
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|
- |
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- |
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- |
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|||
Net loss |
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- |
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- |
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- |
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- |
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|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Other comprehensive loss |
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|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance, June 30, 2023 |
|
|
- |
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- |
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( |
) |
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( |
) |
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||||
Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
|
|
|
- |
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||
Issuance of common stock upon vesting of equity awards |
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|
- |
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|
- |
|
|
|
|
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|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Tax withholdings related to net share settlement of equity awards |
|
|
- |
|
|
|
- |
|
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Exercise of options |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
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|
- |
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|
|||
Net settlement related to exercise of options |
|
|
- |
|
|
|
- |
|
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
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- |
|
ESPP purchases |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
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|
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|
|
- |
|
|
|
- |
|
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|
|||
Net Loss |
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|
- |
|
|
|
- |
|
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|
|
- |
|
|
|
- |
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|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Other comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2023 |
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
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||||
5
SMARTRENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)
|
|
Convertible Preferred Stock |
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Common Stock |
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Shares |
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Amount (Par Value $0.0001) |
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Shares |
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Amount (Par Value $0.0001) |
|
|
Additional Paid In Capital |
|
|
Accumulated Deficit |
|
|
Accumulated other comprehensive (loss) income |
|
|
Total Stockholders' Equity (Deficit) |
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Balance, December 31, 2021 |
|
|
- |
|
|
$ |
- |
|
|
|
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|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
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|
|
- |
|
|
|
- |
|
|
|
|
||||
Common stock warrants issued to customers as consideration |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Common stock warrants related to marketing expense |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Reverse recapitalization, net of transaction costs |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Exercise of options |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
ESPP purchases |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Other comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance, March 31, 2022 |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||
Stock-based compensation |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Tax withholdings related to net share settlement of equity awards |
|
|
- |
|
|
|
- |
|
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Issuance of common stock upon vesting of equity awards |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Common stock warrants issued to customers as consideration |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Exercise of options |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Net settlement related to exercise of options |
|
|
- |
|
|
|
- |
|
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Exercise of warrants |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Other comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance, June 30, 2022 |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||
Stock-based compensation |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Tax withholdings related to net share settlement of equity awards |
|
|
- |
|
|
|
- |
|
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Issuance of common stock upon vesting of equity awards |
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|||
Common stock warrants issued to customers as consideration |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Exercise of options |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
ESPP purchases |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Other comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2022 |
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
See accompanying Notes to Consolidated Financial Statements. |
|
||||||||||||||||||||||||||||||||
6
SMARTRENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
|
|
For the nine months ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used by operating activities |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Asset Impairment |
|
|
- |
|
|
|
|
|
Non-employee warrant expense |
|
|
- |
|
|
|
|
|
Non-cash lease expense |
|
|
|
|
|
|
||
Stock-based compensation related to acquisition |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Compensation expense related to acquisition |
|
|
|
|
|
|
||
Change in fair value of earnout related to acquisition |
|
|
|
|
|
|
||
Deferred tax benefit |
|
|
- |
|
|
|
( |
) |
Non-cash interest expense |
|
|
|
|
|
|
||
Provision for excess and obsolete inventory |
|
|
|
|
|
|
||
Provision for doubtful accounts |
|
|
|
|
|
|
||
Change in operating assets and liabilities |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Inventory |
|
|
|
|
|
( |
) |
|
Deferred cost of revenue |
|
|
|
|
|
( |
) |
|
Prepaid expenses and other assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accrued expenses and other liabilities |
|
|
( |
) |
|
|
|
|
Deferred revenue |
|
|
( |
) |
|
|
|
|
Lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
||
Payments for SightPlan acquisition, net of cash acquired |
|
|
- |
|
|
|
( |
) |
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Capitalized software costs |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Proceeds from warrant exercise |
|
|
- |
|
|
|
|
|
Proceeds from options exercise |
|
|
|
|
|
|
||
Proceeds from ESPP purchases |
|
|
|
|
|
|
||
Taxes paid related to net share settlements of stock-based compensation awards |
|
|
( |
) |
|
|
( |
) |
Payments for business combination and private offering transaction costs |
|
|
- |
|
|
|
( |
) |
Payment of earnout related to acquisition |
|
|
( |
) |
|
|
- |
|
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Net decrease in cash, cash equivalents, and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents, and restricted cash - beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash - end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash, current portion |
|
|
|
|
|
|
||
Restricted cash, included in other long-term assets |
|
|
|
|
|
|
||
Total cash, cash equivalents, and restricted cash |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
See accompanying Notes to Consolidated Financial Statements. |
|
|||||||
7
SMARTRENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited)
(in thousands)
|
|
For the nine months ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
||
Schedule of non-cash investing and financing activities |
|
|
|
|
|
|
||
Accrued property and equipment at period end |
|
$ |
|
|
$ |
|
||
Acquisition consideration held in escrow |
|
$ |
- |
|
|
$ |
|
|
|
|
|
|
|
|
|
||
See accompanying Notes to Consolidated Financial Statements. |
|
|||||||
8
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
NOTE 1. DESCRIPTION OF BUSINESS
SmartRent, Inc., and its wholly owned subsidiaries (collectively, the "Company"), is an enterprise real estate technology company that provides comprehensive management software and applications designed for property owners, managers and residents. Its suite of products and services, which includes both smart building hardware and cloud-based software-as-a-service ("SaaS") solutions, provides seamless visibility and control over real estate assets. The Company’s platform lowers operating costs, increases revenues, mitigates operational friction and protects assets for owners and operators, while providing a differentiated, elevated living experience for residents. The Company is headquartered in Scottsdale, Arizona.
The Company, formerly known as Fifth Wall Acquisition Corp. I (“FWAA”), was originally incorporated in Delaware on November 23, 2020, as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and include the consolidated accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation. The Consolidated Balance Sheet at December 31, 2022 has been derived from the audited consolidated financial statements as of December 31, 2022, as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 8, 2023, as amended. Certain notes and other information have been condensed or omitted from the interim financial statements presented herein. The financial data and other information disclosed in these Notes to Consolidated Financial Statements related to the three and nine months ended September 30, 2023 and 2022 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which are of a normal recurring nature, necessary for a fair statement of the Company’s financial condition and results of operations and cash flows for the interim period presented. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023 or any future period.
Immaterial Restatement of Prior Period Financial Statements
Subsequent to the issuance of the Company’s financial statements for the year ended December 31, 2022, the Company’s management identified an error in the classification of cash paid for capitalized software costs that had previously been included in operating activities but should have been included in investing activities within the statement of cash flows. As a result, the accompanying condensed consolidated statement of cash flows for the nine months ended September 30, 2022 has been restated from amounts previously reported. Management determined that the error was not material to previously issued financial statements.
9
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
|
As Previously Reported |
|
|
Adjustment |
|
|
As Restated |
|
|||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|||
Change in Prepaid expenses and other Assets |
$ |
|
|
$ |
|
|
$ |
|
|||
Net cash used in operating activities |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|||
Capitalized software costs |
|
- |
|
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Foreign Currency
SmartRent, Inc.'s functional and reporting currency is United States Dollars (“USD”) and its foreign subsidiaries have a functional currency other than USD. Financial position and results of operations of the Company's international subsidiaries are measured using local currencies as the functional currency. Assets and liabilities of these operations are translated at the exchange rates in effect at the end of each reporting period. The Company's international subsidiaries' statements of operations accounts are translated at the weighted-average rates of exchange prevailing during each reporting period. Translation adjustments arising from the use of differing currency exchange rates from period to period are included in accumulated other comprehensive loss in stockholders’ equity. Gains and losses on foreign currency exchange transactions, as well as translation gains or losses on transactions denominated in currencies other than an entity’s functional currency, are reflected in the Consolidated Statements of Operations and Comprehensive Loss.
Liquidity
The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. Management believes that currently available resources will provide sufficient funds to enable the Company to meet its obligations for at least one year past the issuance date of these financial statements. The Company may need to raise additional capital through equity or debt financing to fund future operations until it generates positive operating cash flows. There can be no assurance that such additional equity or debt financing will be available on terms acceptable to the Company, or at all.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expense during the reporting period. These estimates made by management include valuing the Company’s inventories on hand, allowance for doubtful accounts, intangible assets, earnout liabilities, warranty liabilities, stand-alone selling price of items sold, and certain assumptions used in the valuation of equity awards, including the estimated fair value of common stock warrants, and assumptions used to estimate the fair value of stock-based compensation expense. Actual results could differ materially from those estimates.
10
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Acquisitions
In March 2022, the Company purchased all of the outstanding equity interests of SightPlan Holdings, Inc. ("SightPlan") in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used (see Note 13). The acquisition was recorded on the date that the Company obtained control over the acquired business. The consideration paid was determined on the acquisition date. The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and were recorded as expense in the period incurred. Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed.
In December 2021, the Company purchased all of the outstanding equity interests of iQuue, LLC (“iQuue”) in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used. The acquisition was recorded on the date that the Company obtained control over the acquired business. The consideration paid was determined on the acquisition date. The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and recorded as expense in the period incurred. Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed.
In February 2020, Legacy SmartRent purchased all of the outstanding equity interests of Zenith Highpoint, Inc. in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used. The acquisition was recorded on the date that the Company obtained control over the acquired business. The consideration paid was determined on the acquisition date. The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and recorded as expense in the period incurred. Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed.
Net Loss Per Share Attributable to Common Stockholders
The Company follows the two-class method to include the dilutive effect of securities that participated in dividends, if and when declared, when computing net income per common share. The two-class method determines net income per common share for each class of common stock and participating securities according to dividends, if and when declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The anti-dilutive effect of potentially dilutive securities is excluded from the computation of net loss per share because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive.
The Company considers any unvested common shares subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of unvested common shares subject to repurchase do not have a contractual obligation to share in losses.
Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase and any shares issuable by the exercise of warrants for nominal consideration.
Diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. For periods in which the Company reports a net loss, the diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive.
11
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Cash and Cash Equivalents
The Company considers financial instruments with an original maturity of three months or less to be cash and cash equivalents. The Company maintains cash and cash equivalents at multiple financial institutions, and, at times, these balances exceed federally insurable limits. As a result, there is a concentration of credit risk related to amounts on deposit. The Company believes any risks are mitigated through the size and security of the financial institution at which its cash balances are held.
Restricted Cash
The Company considers cash to be restricted when withdrawal or general use is legally restricted. The Company reports the current portion of restricted cash as a separate item in the Consolidated Balance Sheets and the non-current portion is a component of other long-term assets in the Consolidated Balance Sheets. The Company determines current or non-current classification based on the expected duration of the restriction.
Accounts Receivable, net
Accounts receivable consist of balances due from customers resulting from the sale of hardware, professional services and hosted services. Accounts receivable are recorded at invoiced amounts, are non-interest bearing and are presented net of the associated allowance for doubtful accounts on the Consolidated Balance Sheets. The allowance for doubtful accounts totaled $
Significant Customers
A significant customer represents
|
|
Accounts Receivable |
|
Revenue |
||||||||
|
|
As of |
|
For the three months ended |
|
For the nine months ended |
||||||
|
|
September 30, 2023 |
|
December 31, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
|
September 30, 2023 |
|
September 30, 2022 |
Customer A |
|
* |
|
|
* |
|
* |
|
* |
|
||
Customer B |
|
* |
|
* |
|
* |
|
* |
|
* |
|
|
Customer C |
|
|
* |
|
|
|
|
* |
||||
* Total less than 10% for the respective period
Inventory
Inventories, which are comprised of smart home equipment and components, are stated at the lower of cost or net realizable value with cost determined under the first-in, first-out method. The Company adjusts the inventory balance based on anticipated obsolescence, usage and historical write-offs.
12
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Goodwill
Goodwill represents the excess of cost over net assets of the Company's completed business combinations. The Company tests for potential impairment of goodwill on an annual basis in November to determine if the carrying value is less than the fair value. The Company will conduct additional tests between annual tests if there are indications of potential goodwill impairment.
Intangible Assets
The Company recorded intangible assets with finite lives, including customer relationships and developed technology, as a result of acquisitions made in prior years.
|
|
Estimated useful life (in years) |
|
Trade name |
|
|
|
Customer relationships |
|
|
|
Developed technology |
|
|
Warranty Allowance
The Company provides its customers with limited-service warranties associated with product replacement and related services. The warranty typically lasts
During the year ended December 31, 2020, the Company identified a deficiency with batteries contained in certain hardware sold and has included an estimate of the expected cost to remove these batteries, which were acquired from one supplier, in its warranty allowance. During the year ended December 31, 2021, the Company identified additional deficient batteries, and while the number of deficient batteries is less than one percent of the total number of all batteries deployed, the Company has elected to replace all such batteries from previously deployed hardware devices. As of September 30, 2023, and December 31, 2022, $
Fair Value of Financial Instruments
Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities subject to on-going fair value measurement are categorized and disclosed into one of three categories depending on observable or unobservable inputs employed in the measurement. These two types of inputs have created the following fair value hierarchy.
Level 1: Quoted prices in active markets that are accessible at the measurement date for assets and liabilities.
Level 2: Observable prices that are based on inputs not quoted in active markets but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available.
This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. The Company recognizes transfers between levels of the hierarchy based on the fair values of the respective financial measurements at the end of the reporting period in which the transfer occurred. There were no transfers between levels of the fair value hierarchy during the three or nine months ended September 30, 2023 or 2022. The carrying amounts of the Company’s accounts receivable, accounts payable and accrued and other liabilities approximate their fair values due to their short maturities.
13
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Revenue Recognition
The Company derives its revenue primarily from sales of systems that consist of hardware devices, professional services and hosted services to assist property owners and property managers with visibility and control over assets, while providing all-in-one home control offerings for residents. Revenue is recorded when control of these products and services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those products and services.
The Company may enter into contracts that contain multiple distinct performance obligations. The transaction price for a typical arrangement includes the price for: smart home hardware devices, professional services, and a subscription for use of the Company's proprietary software (“Hosted Services”). Included in these contracts are centrally connected devices ("Hub Devices"), which integrate the Company’s proprietary enterprise software with third party smart devices. Historically, the Company sold Hub Devices which only functioned with a subscription to its proprietary software (“non-distinct Hub Devices"). During the year ended December 31, 2022, the Company began shipping Hub Devices with features that function independently from its proprietary software subscription (“distinct Hub Devices"). Non-distinct Hub Devices are recognized as a single performance obligation with the Company’s proprietary software in Hosted Services revenue, while distinct Hub Devices are recognized as a separate performance obligation in hardware revenue. When distinct Hub Devices are included in a contract, the Hosted Services performance obligation is comprised of only the Company’s proprietary software.
The Company considers delivery for each of the hardware, professional services and Hosted Services to be separate performance obligations. The hardware performance obligation includes the delivery of smart home hardware and distinct Hub Devices. The professional services performance obligation includes the services to install the hardware. The Hosted Services performance obligation provides a subscription that allows the customer access to software during the contracted-use term when the promised service is provided to the customer. Also included in the hosted service performance obligation are non-distinct Hub Devices that only function with a subscription to the Company’s proprietary software.
Payments are received by the Company by credit card, check or automated clearing house payments and payment terms are determined by individual contracts and generally range from due upon receipt to net
14
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Timing of Revenue Recognition is as follows.
Hardware revenue results from the direct sale to customers of hardware smart home devices, which devices generally consist of a distinct Hub Device, door-locks, thermostats, sensors, and light switches. These hardware devices provide features that function independently without subscription to the Company's proprietary software, and the performance obligation for hardware revenue is considered satisfied and revenue is recognized at a point in time when the hardware device is shipped to the customer. The Company generally provides a one-year warranty period on hardware devices that are delivered and installed. The cost of the warranty is recorded as a component of cost of hardware revenue.
Professional services revenue results from installing smart home hardware devices, which does not result in significant customization of the product and is generally performed over a period from two to four weeks. Installations can be performed by the Company's employees, contracted out to a third-party with the Company's employees managing the engagement, or the customer can perform the installation themselves. The Company’s professional services contracts are generally arranged on a fixed price basis and revenue is recognized over the period in which the installations are completed.
Hosted Services revenue primarily consists of monthly subscription revenue generated from fees that provide customers access to one or more of the Company’s proprietary software applications including access controls, asset monitoring and related services. These subscription arrangements have contractual terms ranging from
Also included in Hosted Services revenue are non-distinct Hub Devices. The Company considers those devices and hosting services subscription a single performance obligation and therefore defers the recognition of revenue for those devices upon shipment to the customer. The revenue is then amortized over its average service life. When a non-distinct Hub Device is included in a contract that does not require a long-term service commitment, the customer obtains a material right to renew the service because purchasing a new device is not required upon renewal. If a contract contains a material right, proceeds are allocated to the material right and recognized over the period of benefit, which is generally
15
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Cost of Revenue
Cost of revenue consists primarily of direct costs of products and services together with the indirect cost of estimated warranty expense and customer care and support over the life of the service arrangement.
Cost of hardware revenue consists primarily of direct costs of proprietary products, such as the distinct Hub Device, hardware devices, supplies purchased from third-party providers, and shipping costs, together with indirect costs related to warehouse facilities (including depreciation and amortization of capitalized assets and right-of-use assets), infrastructure costs, personnel-related costs associated with the procurement and distribution of products and warranty expenses together with the indirect cost of customer care and support.
Cost of professional services revenue consists primarily of direct costs related to personnel-related expenses for installation and supervision of installation services, general contractor expenses and travel expenses associated with the installation of products and indirect costs that are also primarily personnel-related expenses in connection with training of and ongoing support for customers and residents.
Cost of Hosted Services revenue consists primarily of the amortization of the direct costs of non-distinct Hub Devices, consistent with the revenue recognition period noted above in "Hosted Services Revenue", and infrastructure costs associated with providing software applications together with the indirect cost of customer care and support over the life of the service arrangement.
Deferred Cost of Revenue
Deferred cost of revenue includes all direct costs included in cost of revenue for Hosted Services and non-distinct Hub Devices that have been deferred to future periods.
Research and Development
These expenses relate to the research and development of new products and services and enhancements to the Company’s existing product offerings. The Company accounts for the cost of research and development by capitalizing qualifying costs, which are incurred during the product development stage, and amortizing those costs over the product’s estimated useful life. The Company expenses preliminary evaluation costs as they are incurred before the product development stage, as well as post development implementation and operation costs, such as training, maintenance and minor upgrades. As of September 30, 2023, the Company had capitalized $
16
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Advertising
Advertising costs are expensed as incurred and recorded as a component of sales and marketing expense. The Company incurred $
Segments
The Company has
Recent Accounting Guidance
Recently Adopted Accounting Guidance
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-12, “Income Taxes (Topic 740)”, which simplifies the accounting for income taxes, primarily by eliminating certain exceptions found in the Accounting Standards Codification, section 740. This standard is effective for fiscal periods beginning after December 15, 2021. The Company
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” which modifies the measurement of expected credit losses of certain financial instruments. This update is effective for fiscal years beginning after December 15, 2022 and must be applied using a modified-retrospective approach, with early adoption permitted. The requirement to disclose credit quality indicators by year or origination is not applicable to trade receivables due in one year or less that result from revenue transactions within the scope of ASC 606. The Company
NOTE 3. FAIR VALUE MEASUREMENTS AND FAIR VALUE OF INSTRUMENTS
The following tables display the carrying values and fair values of financial instruments.
|
|
|
|
As of September 30, 2023 |
|
|
As of December 31, 2022 |
|
||||||||||||||||||
Assets on the Consolidated Balance Sheets |
|
|
|
Carrying Value |
|
|
Unrealized |
|
|
Fair |
|
|
Carrying |
|
|
Unrealized Losses |
|
|
Fair |
|
||||||
Cash and cash equivalents |
|
Level 1 |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
||||
Restricted cash |
|
Level 1 |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
$ |
|
||||
Total |
|
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
||||
The Company reports the current portion of restricted cash as a separate item in the Consolidated Balance Sheets and the non-current portion is a component of other long-term assets in the Consolidated Balance Sheets.
|
|
|
|
As of September 30, 2023 |
|
|
As of December 31, 2022 |
|
||||||||||
Liabilities on the Consolidated Balance Sheets |
|
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
||||
Acquisition earnout payment |
|
Level 3 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total liabilities |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
17
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
The Company reports the current portion of the acquisition earnout payment as a component of other current liabilities in the Consolidated Balance Sheets and the non-current portion is a component of other long-term liabilities on the Consolidated Balance Sheets. Earnout payments related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs.
|
|
|
|
As of |
|
|||||
|
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Balance at beginning of period |
|
|
|
$ |
|
|
$ |
|
||
Payment of earnout in connection with the iQuue acquisition |
|
|
|
|
( |
) |
|
|
- |
|
Change in fair value of earnout |
|
|
|
|
|
|
|
|
||
Balance at end of period |
|
|
|
$ |
|
|
$ |
|
||
The fair value of the earnout payment is measured on a recurring basis at each reporting date. The following inputs and assumptions were used in the Monte Carlo simulation model to estimate the fair value of the earnout payment as of September 30, 2023 and December 31, 2022. During the three months ended September 30, 2023, the Company determined there was an $
|
|
|
|
As of |
|
|||||
|
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Discount Rate |
|
|
|
|
% |
|
|
% |
||
Volatility |
|
|
|
|
% |
|
|
% |
||
NOTE 4. REVENUE AND DEFERRED REVENUE
Disaggregation of Revenue
In the following tables, revenue is disaggregated by primary geographical market and type of revenue.
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Revenue by geography |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
International |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Revenue by type |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Hardware |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Hosted services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
18
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Remaining Performance Obligations
Advance payments received from customers are recorded as deferred revenue and are recognized upon the completion of related performance obligations over the period of service. Advance payments for non-distinct Hub Devices are recorded as deferred revenue and recognized over their average in-service life. Advance payments received from customers for subscription services are recorded as deferred revenue and recognized over the term of the subscription.
|
|
For the nine months ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Deferred revenue balance as of January 1 |
|
$ |
|
|
$ |
|
||
Revenue recognized from balance of deferred revenue |
|
|
( |
) |
|
|
( |
) |
Revenue deferred during the period |
|
|
|
|
|
|
||
Revenue recognized from revenue originated |
|
|
( |
) |
|
|
( |
) |
Deferred revenue balance as of March 31 |
|
|
|
|
|
|
||
Revenue recognized from balance of deferred revenue |
|
|
( |
) |
|
|
( |
) |
Revenue deferred during the period |
|
|
|
|
|
|
||
Revenue recognized from revenue originated |
|
|
( |
) |
|
|
( |
) |
Deferred revenue balance as of June 30 |
|
|
|
|
|
|
||
Revenue recognized from balance of deferred revenue |
|
|
( |
) |
|
|
( |
) |
Revenue deferred during the period |
|
|
|
|
|
|
||
Revenue recognized from revenue originated |
|
|
( |
) |
|
|
( |
) |
Deferred revenue balance as of September 30 |
|
$ |
|
|
$ |
|
||
As of September 30, 2023, the Company expects to recognize
Deferred cost of revenue includes all direct costs included in cost of revenue that have been deferred to future periods.
NOTE 5. OTHER BALANCE SHEET INFORMATION
Inventory consisted of the following.
|
|
As of |
|
|||||
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Finished Goods |
|
$ |
|
|
$ |
|
||
Raw Materials |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
19
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
The Company writes-down inventory for any excess or obsolete inventories or when the Company believes the net realizable value of inventories is less than the carrying value. During the three and nine months ended September 30, 2023, the Company recorded write-downs of $
Prepaid expenses and other current assets consisted of the following.
|
|
As of |
|
|||||
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Prepaid expenses |
|
$ |
|
|
$ |
|
||
Other current assets |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Property and equipment, net consisted of the following.
|
|
As of |
|
|||||
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Computer hardware |
|
$ |
|
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Warehouse and other equipment |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Property and equipment |
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation and amortization expense on all property, plant and equipment was $
Intangible assets, net consisted of the following.
|
|
As of |
|
|||||||||||||||||||||
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||
|
|
Gross |
|
|
Accumulated Amortization |
|
|
Net |
|
|
Gross |
|
|
Accumulated Amortization |
|
|
Net |
|
||||||
Customer relationships |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Developed technology |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Trade name |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Total intangible assets, net |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Amortization expense on all intangible assets was $
|
|
Amortization Expense |
|
|
2023 - Remaining |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
20
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
Other long-term assets consisted of the following.
|
|
As of |
|
|||||
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Capitalized software costs |
|
$ |
|
|
$ |
|
||
Operating lease - |
|
|
|
|
|
|
||
Restricted cash, long-term portion |
|
|
|
|
|
|
||
Other long-term assets |
|
|
|
|
|
|
||
Total other long-term assets |
|
$ |
|
|
$ |
|
||
Amortization expense on all other long-term assets was $
Accrued expenses and other current liabilities consisted of the following.
|
|
As of |
|
|||||
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Accrued compensation costs |
|
$ |
|
|
$ |
|
||
Accrued expenses |
|
|
|
|
|
|
||
Warranty allowance |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
NOTE 6. DEBT
Term Loan and Revolving Line of Credit Facility
In December 2021, the Company entered into a $
Interest rates for draws upon the Senior Revolving Facility are determined by whether the Company elects a secured overnight financing rate loan (“SOFR Loan”) or alternate base rate loan (”ABR Loan”). For SOFR Loans, the interest rate is based upon the forward-looking term rate based on SOFR as published by the CME Group Benchmark Administration Limited (CBA) plus
21
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
In addition to paying interest on the outstanding principal balance under the Senior Revolving Facility, the Company is required to pay a facility fee to the lender in respect of the unused commitments thereunder. The facility fee rate is based on the daily unused amount of the Senior Revolving Facility and is one fourth of one percent (
The Senior Revolving Facility also requires the Company, on a consolidated basis with its subsidiaries, to maintain a minimum cash balance. If the minimum cash balance is not maintained, the Company is required to maintain a minimum liquidity ratio. If an event of default occurs, the lender is entitled to take various actions, including the acceleration of amounts due under the Senior Revolving Facility and all actions permitted to be taken by a secured creditor. As of September 30, 2023, and through the date these consolidated financial statements were issued, the Company believes it was in compliance with all financial covenants.
The Senior Revolving Facility is collateralized by first priority or equivalent security interests in substantially all the property, rights, and assets of the Company.
As of September 30, 2023 and December 31, 2022, there was
NOTE 7. CONVERTIBLE PREFERRED STOCK AND EQUITY
Preferred Stock
The Company is authorized to issue
Warrants
As of September 30, 2023, warrants issued as consideration to certain customers to purchase
As of September 30, 2023, warrants issued to a former investor to purchase
22
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
NOTE 8. STOCK-BASED COMPENSATION
2018 Stock Plan
Legacy SmartRent’s board of directors adopted, and its stockholders approved, the SmartRent.com, Inc. 2018 Stock Plan (the “2018 Stock Plan”), effective March 2018. The purpose of the 2018 Stock Plan was to advance the interests of Legacy SmartRent and its stockholders by providing an incentive to attract, retain and reward persons performing services for Legacy SmartRent and by motivating such persons to contribute to the growth and profitability of Legacy SmartRent. The 2018 Stock Plan seeks to achieve this purpose by providing awards in the form of options, restricted stock purchase rights or restricted stock bonuses. Awards granted under the 2018 Stock Plan generally expire
Amendment to the 2018 Stock Plan
In April 2021, the board of directors of Legacy SmartRent executed a unanimous written consent to provide an additional incentive to certain employees of Legacy SmartRent by amending the 2018 Stock Plan to allow for the issuance of RSUs and granted a total of
2021 Equity Incentive Plan
In connection with the Business Combination, the Company's board of directors (the "Board") approved and implemented the SmartRent, Inc. 2021 Equity Incentive Plan (the "2021 Plan"). The purpose of the 2021 Plan is to enhance the Company's ability to attract, retain and motivate persons who make, or are expected to make, important contributions to the Company by providing these individuals with equity ownership opportunities and equity-linked compensation opportunities.
The 2021 Plan authorizes the compensation committee to provide incentive compensation in the form of stock options, restricted stock and stock units, performance shares and units, other stock-based awards and cash-based awards. Under the 2021 Plan, the Company is authorized to issue up to
The table below summarizes the activity related to stock options, pursuant to the 2018 Plan and 2021 Plan, for the nine months ended September 30, 2023.
|
Options Outstanding |
|
|||||||||||||
|
Number of |
|
|
Weighted- |
|
|
Weighted |
|
|
Aggregate |
|
||||
December 31, 2022 |
|
|
|
$ |
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|
$ |
|
||||
Granted |
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|
$ |
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|
|
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||||
Exercised |
|
( |
) |
|
$ |
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|
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|
|
|||
March 31, 2023 |
|
|
|
$ |
|
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|
|
|
$ |
|
||||
Exercised |
|
( |
) |
|
$ |
|
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|||
Forfeited |
|
( |
) |
|
$ |
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|
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|
|||
June 30, 2023 |
|
|
|
$ |
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|
|
|
$ |
|
||||
Granted |
|
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|
$ |
|
|
|
|
|
|
|
||||
Exercised |
|
( |
) |
|
$ |
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|
|
|
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|
|||
Forfeited |
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
September 30, 2023 |
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable options as of September 30, 2023 |
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
23
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
During the three months ended September 30, 2023 and 2022, stock-based compensation expense of $
The table below summarizes the activity related to RSUs, pursuant to the 2018 Plan and 2021 Plan, for the nine months ended September 30, 2023.
|
Restricted Stock Units |
|||||||
|
Number of |
|
|
Weighted |
|
|
||
December 31, 2022 |
|
|
|
$ |
|
|
||
Granted |
|
|
|
$ |
|
|
||
Vested or distributed |
|
( |
) |
|
$ |
|
|
|
Forfeited |
|
( |
) |
|
$ |
|
|
|
March 31, 2023 |
|
|
|
$ |
|
|
||
Granted |
|
|
|
$ |
|
|
||
Vested or distributed |
|
( |
) |
|
$ |
|
|
|
Forfeited |
|
( |
) |
|
$ |
|
|
|
June 30, 2023 |
|
|
|
$ |
|
|
||
Granted |
|
|
|
$ |
|
|
||
Vested or distributed |
|
( |
) |
|
$ |
|
|
|
Forfeited |
|
( |
) |
|
$ |
|
|
|
September 30, 2023 |
|
|
|
$ |
|
|
||
No right to any Common Stock is earned or accrued until such time that vesting occurs, nor does the grant of the RSU award confer any right to continue vesting or employment. Compensation expense associated with the unvested RSUs is recognized on a straight-line basis over the vesting period.
During the three months ended September 30, 2023 and 2022 respectively, stock-based compensation expense of $
Employee Stock Purchase Plan
The Company has the ability to initially issue up to
During the three months ended September 30, 2023 and 2022, there were
24
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
During the three months ended September 30, 2023 and 2022, stock-based compensation expense of $
Stock-Based Compensation
The fair value of stock option grants is estimated by the Company on the date of grant using the Black Scholes-Merton option pricing model with the following weighted-average assumptions for the nine months ended September 30, 2023 and 2022. During the nine months ended September 30, 2023 and 2022, there were
|
For the nine months ended September 30, |
|
|||
|
2023 |
|
2022 |
|
|
Risk free interest |
|
|
|||
Dividend yield |
|
|
|||
Expected volatility |
|
|
|||
Expected life (years) |
|
|
|
||
The Company recorded stock-based compensation expense as follows.
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cost of revenue |
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
||
Research and development |
|
|
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|
||||
Sales and marketing |
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||||
General and administrative |
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|
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|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
During the three and nine months ended September 30, 2022, stock-based compensation expense of $
NOTE 9. INCOME TAXES
The Company’s effective tax rate (ETR) from continuing operations was
The income tax benefit on the Consolidated Statement of Operations and Comprehensive Loss is primarily related to the foreign and state taxes offset by a change in the valuation allowance. The Company established a full valuation allowance for net deferred U.S. federal and state tax assets, including net operating loss carryforwards. The Company expects to maintain this valuation allowance until it becomes more likely than not that the benefit of the federal and state deferred tax assets will be realized in future periods if it reports taxable income. The Company believes that it has established an adequate allowance for uncertain tax positions, although it can provide no assurance that the final outcome of these matters will not be materially different. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.
25
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
NOTE 10. NET LOSS PER SHARE
The following potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because inclusion of the shares on an as-converted basis would have been anti-dilutive.
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
2023 |
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2022 |
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2023 |
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2022 |
|
||||
Common stock options and restricted stock units |
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|
||||
Common stock warrants |
|
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|
||||
Shares subject to repurchase |
|
- |
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- |
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||
Total |
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|
|
|
|
|
|
||||
NOTE 11. RELATED-PARTY TRANSACTIONS
During the nine months ended September 30, 2022, the Company incurred marketing expenses of $
The Company incurred consulting expense of $
On March 22, 2022, the Company purchased all of the outstanding equity interests of SightPlan (see Note 13). One of the Company's directors, through a personal investment vehicle, held an unsecured convertible promissory note in SightPlan (the “SightPlan Convertible Note”). As consideration for the conversion and cancellation of the SightPlan Convertible Note, the director received $
Entities affiliated with RETV Management, LLC ("RET"), which at the time of the SightPlan acquisition held more than
26
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
NOTE 12. COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. Liabilities are accrued when it is believed that it is both probable that a liability has been incurred and that the Company can reasonably estimate the amount of the potential loss. The Company does not believe that the outcome of these proceedings or matters will have a material effect on the consolidated financial statements.
The Company entered into an agreement with a supplier in April 2020, as further amended in March 2021, to purchase minimum volumes of certain products through August 2022. Due to significant failure rates and other defects, the Company ceased ordering product from this supplier as of December 2020. Despite the Company’s requests, the supplier indicated they are not willing to refund the Company for the malfunctioning products previously purchased, and therefore, the Company filed a complaint against the supplier on March 22, 2022 in the Superior Court for the State of California, County of Santa Clara. On July 26, 2022, the supplier filed a cross-complaint against the Company for breach of contract and other allegations. Both parties filed demurrers, which were granted in part and overruled in part. On April 18, 2023, the supplier filed its operative Second Amended Complaint. The Company denies the allegations in the supplier’s complaint and does not believe it has any further commitment to the supplier. The parties are now engaging in discovery.
The Company regularly reviews outstanding legal claims, actions and enforcement matters, if any exist, to determine if accruals for expected negative outcomes of such matters are probable and can be reasonably estimated. The Company evaluates any such outstanding matters based on management’s best judgment after consultation with counsel. There is no assurance that the Company's accruals for loss contingencies will not need to be adjusted in the future. The amount of such adjustment could significantly exceed the accruals the Company has recorded. The Company had
NOTE 13. ACQUISITIONS
SightPlan Acquisition
On March 22, 2022, the Company purchased all of the outstanding equity interests of SightPlan for approximately $
The Company accounted for the SightPlan acquisition as a business combination. The preliminary purchase price consisted of $
27
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
As part of the business combination, the Company agreed to pay up to approximately $
The total purchase consideration and the fair values of the acquired assets and liabilities at the acquisition date were as follows.
Consideration |
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|
||
Cash paid at acquisition |
|
|
$ |
|
||
Cash consideration held in escrow |
|
|
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|
||
Net working capital adjustment |
|
|
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( |
) |
|
Fair value of total consideration transferred |
|
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||
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|
||
Recognized amounts of identifiable assets acquired and liabilities assumed |
|
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Cash |
$ |
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||
Accounts receivable, net |
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Intangible assets |
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Other assets |
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Total identifiable net assets acquired |
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Accounts payable |
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Deferred revenue |
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Accrued expenses and other liabilities |
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Deferred tax liability (Note 9) |
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Other long-term liabilities |
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Total liabilities assumed |
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Total identifiable assets |
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||
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Goodwill |
|
|
$ |
|
||
Changes resulting from facts and circumstances that existed as of the acquisition date resulted in measurement period adjustments to the estimated fair values of accounts receivable, net, intangible assets, other assets, deferred tax liability, and goodwill during the year ended December 31, 2022. Specifically, the refinement of inputs used to estimate the fair value of intangible assets resulted in an increase in customer relationships of $
Cash paid at acquisition |
$ |
|
|
Cash acquired |
|
( |
) |
Cash consideration released from escrow |
|
|
|
Net working capital adjustment |
|
( |
) |
Payment of acquisition consideration, net of cash acquired |
$ |
|
28
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
The Company recognized approximately $
The fair value of the assets acquired includes accounts receivable of $
The aggregate purchase price has been allocated to the assets acquired and liabilities assumed based on the fair market value of such assets and liabilities at the date of acquisition. Intangible assets associated with the acquisition totaled $
The Company recorded intangible assets at their fair value, which consisted of the following.
|
Estimated useful life (in years) |
March 31, 2022 |
|
|
Trade Name |
$ |
|
||
Customer relationships |
|
|
||
Developed technology |
|
|
||
Total intangible assets |
|
$ |
|
|
The valuation of intangible assets was determined using an income approach methodology. The fair value of the customer relationship intangible assets was determined using the multi-period excess earnings method based on discounted projected net cash flows associated with the net earnings attributable to the acquired customer relationships. The fair value of the trade name and the acquired developed technology was determined using the relief from royalty method, which measures the value by estimating the cost savings associated with owning the asset rather than licensing it. The income approach methodology involves estimating cash flows over the remaining economic life of the intangible assets, which are considered from a market participant perspective. Key assumptions used in estimating future cash flows included projected revenue growth rates and customer attrition rates. The projected future cash flows were discounted to present value using an appropriate discount rate. As such, all aforementioned intangible assets were valued using Level 3 inputs. During the three months ended September 30, 2023 and 2022, the Company recorded amortization expenses of $
Pro Forma Operating Results
The Company’s Consolidated Balance Sheet as of September 30, 2023 and December 2022, and other financial statements presented herein for the three and nine months ended September 30, 2023 and 2022 include the results of operations of SightPlan since the acquisition date. The following unaudited pro forma information presents consolidated financial information as if the SightPlan acquisition had occurred on January 1, 2022. Pro forma disclosures for net loss have not been provided as the acquisition did not have, and is not expected to have, a material impact on the consolidated results through the year of acquisition.
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Revenues |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
29
SMARTRENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
NOTE 14. SUBSEQUENT EVENTS
In connection with the preparation of the accompanying consolidated financial statements, the Company has evaluated events and transactions occurring after September 30, 2023 and through November 7, 2023, the date these financial statements were issued, for potential recognition or disclosure and has determined that there are no additional items to disclose except as disclosed below.
In October 2023,
30
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included herein and the consolidated financial statements and notes thereto for the year ended December 31, 2022 contained in our Annual Report on Form 10-K filed with the SEC on March 8, 2023, as amended.
This discussion may contain forward-looking statements based upon our current expectations that involve risks and uncertainties. Please refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
Overview
We are an enterprise real estate technology company that provides a comprehensive management platform designed for property owners, managers and residents. Our suite of products and services, which includes both smart building hardware and cloud-based SaaS solutions, provides seamless visibility and control over real estate assets. Our platform lowers operating costs, increases revenues, mitigates operational friction and protects assets for owners and operators, while providing a differentiated, elevated living experience for residents.
Through a Hub Device, we integrate our proprietary enterprise software with third-party smart devices and other technology interfaces. We use an open-architecture, brand-agnostic approach that allows owners, operators, and residents to manage their smart home systems through a single connected interface. Our solutions include smart apartments and homes, access control for buildings, common areas, and rental units, asset protection and monitoring, parking management, self-guided tours, and community and resident Wi-Fi. We also have a professional services team that provides customers with training, installation, and support services. Our SightPlan acquisition advanced our product roadmap and augmented our cloud-based SaaS solutions for current and prospective customers.
We believe SmartRent is the category leader in the enterprise smart home solutions industry. As of September 30, 2023, we had 682,632 Units Deployed and 588 customers, including many of the top multifamily residential owners in the U.S. As of that date, our customers owned an aggregate of approximately 6.9 million units. This represents approximately 16% of the United States market for institutionally owned multifamily rental units and single-family rental homes. In addition to multifamily residential owners, our customers include some of the leading homebuilders, single-family rental homeowners, and iBuyers in the United States.
Key Factors Affecting Our Performance
We believe that our success is dependent on many factors, including those further discussed below. Our operating results and cash flows are dependent upon a number of opportunities, challenges and other factors, including our ability to grow our customer base in a cost-effective manner, expand our hardware and hosted service offerings to generate increased revenue per Unit Deployed (as defined below), and provide high quality hardware products and hosted service applications to maximize revenue and improve the leverage of our business model. While these areas represent opportunities for us, they also represent challenges and risks that we must successfully address in order to operate our business.
Active Supply Chain Management
We continue to experience improvements in the challenges related to the global supply chain. In prior periods, the increased demand for electronics as a result of the COVID-19 pandemic, U.S. trade relations with China and certain other factors in recent periods led to a global shortage of semiconductors, including Z‑wave chips, which are a central component of our Hub Devices. Due to this shortage in prior periods, we experienced Hub Device production delays, which affected our ability to meet scheduled installations and facilitate customer upgrades to our higher-margin Hub Devices. We also experienced shortages and shipment delays related to components for Alloy Access and made-to-order specialty locks.
The incremental improvements in the global supply chain are evidenced by our reduction of backlogged Units Deployed for Alloy Access and made-to-order locks. We believe that this positive trend will continue into next year.
Investing in Research and Development
Our performance is significantly dependent on the investments we make in research and development, including our ability to attract and retain highly skilled research and development personnel. We must continually develop and introduce innovative new software services and hardware products, and integrate with third-party products and services, mobile applications and other new offerings.
31
New Products, Features and Functionality
We are evolving our business into a more diverse platform with new products, features and functionality that enhance the value of our smart home operating system. We have introduced a number of SaaS product enhancements and features, including Answer Automation and Work Management solutions, that streamline property management operations. We have also introduced Community WiFi, which provides communities with a private, device-dedicated WiFi network to power Hub Devices and other in-home smart devices, and Smart Package Room, which is a smart package management solution that transforms package visibility, reduces labor demands, optimizes storage space and enhances resident satisfaction. In the future, we intend to continue to release new products and solutions and enhance our existing products and solutions, and we expect that our operating results will be impacted by these releases.
The acquisition of SightPlan enhances our overall platform offering and customer value proposition by providing a comprehensive one-stop platform that broadens our support of property operations, enhancing the experience for residents, property owners and managers. Both SmartRent and SightPlan offer an open-API architecture that enables a myriad of third-party partner integrations, resulting in a multi-functional platform that enhances property management workflow efficiencies, empowers teams to get more done, elevates resident interactions, and improves resident living experiences.
Category Adoption and Market Growth
Our future growth depends in part on the continued consumer adoption of hardware and software products which improve the resident experience and the growth of this market. We need to deliver solutions that enhance the resident experience and deliver value to our customers, rental property owners and operators, as well as homebuilders and developers, by providing products and solutions designed to enhance visibility and control over assets while providing additional revenue opportunities. In addition, our long-term growth depends in part on our ability to expand into international markets in the future.
Basis of Presentation
The consolidated financial statements and accompanying notes included elsewhere in this Report are prepared in accordance with GAAP.
Key Operating Metrics
We regularly monitor a number of operating and financial metrics, which include certain non-GAAP financial measures in order to evaluate our operating performance, identify trends affecting our business, formulate business plans, measure our progress and make strategic decisions. Non-GAAP financial measures may not provide accurate predictions of future GAAP financial results.
The limitations our Key Operating Metrics have as an analytical tool are: (i) they might not accurately predict our future GAAP financial results, (ii) we might not realize all or any part of the anticipated value reflected in Units Booked, and (iii) other companies, including companies in our industry, may calculate our Key Operating Metrics or similarly titled measures differently, which reduces its usefulness as a comparative measure.
Units Deployed and New Units Deployed
We define Units Deployed as the aggregate number of Hub Devices that have been installed (including customer self-installations) as of a stated measurement date. We define New Units Deployed as the aggregate number of Hub Devices that were installed (including customer self-installations) during a stated measurement period. Although our revenue is primarily driven by New Units Deployed and the aggregate number of Units Deployed due to the expansion of our products and services, the correlation between New Units Deployed and revenue is not as strong as it was historically. We use these operating metrics to assess the general health and trajectory of our business and growth. As of September 30, 2023 and 2022, we had an aggregate of 682,632 and 504,409 Units Deployed, respectively.
We had 32,308, and 53,399 New Units Deployed during the three months ended September 30, 2023 and 2022, respectively. We had 135,436, and 164,924 New Units Deployed during the nine months ended September 30, 2023 and 2022, respectively.
Units Booked
We define Units Booked as the aggregate number of Hub Device units associated with binding orders executed during a stated measurement period. We utilize the concept of Units Booked to measure estimated near-term resource demand and the resulting approximate range of post-delivery revenue that we will earn and record. Units Booked represent binding orders only. We had 46,272 and 67,285 Units Booked during the three months ended September 30, 2023 and 2022, respectively. For the nine months ended September 30, 2023 and 2022, there were 131,347 and 218,073 Units Booked, respectively.
32
EBITDA and Adjusted EBITDA
We define EBITDA as net income or loss computed in accordance with GAAP before the following items: interest income/expense, income tax expense and depreciation and amortization. We define Adjusted EBITDA as EBITDA before the following items: stock-based compensation expense, non-employee warrant expense, warranty provisions for battery deficiencies, asset impairment, loss on extinguishment of debt, change in fair value of derivatives, unrealized gains and losses in currency exchange rates, non-recurring expenses in connection with acquisitions, severance charges, and other expenses caused by non-recurring or unusual events that are not indicative of our ongoing business. Management uses EBITDA and Adjusted EBITDA to identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance, while neutralizing the impact of expenses included in our operating results which could otherwise mask underlying trends in our business. See “Non-GAAP Financial Measures” for additional information and reconciliations of these measures.
Annual Recurring Revenue
We define Annual Recurring Revenue (“ARR”) as the annualized value of our recurring SaaS revenue earned in the current quarter. We monitor our ARR to assess the general health and trajectory of our Hosted Services business. Our ARR was approximately $43.3 million and $31.8 million as of September 30, 2023 and 2022, respectively.
Components of Results of Operations
Revenue
We generate revenue primarily from sales of systems that consist of hardware devices, professional installation services and Hosted Services enabling property owners and property managers to have visibility and control over assets, while providing all-in-one home control offerings for residents. We record revenue as earned when control of these products and services is transferred to the customer in an amount that reflects the consideration we expect to collect for those products and services.
Hardware Revenue
We generate revenue from the direct sale to our customers of hardware smart home devices, which devices generally consist of a Hub Device, door-locks, thermostats, sensors, and light switches. These hardware devices provide features that function independently without subscription to our proprietary software, and the performance obligation for hardware revenue is considered satisfied and revenue is recognized at a point in time when the hardware device is shipped to the customer. Certain Hub Devices do not function independently without the subscription, and therefore, the revenue is recognized in Hosted Services revenue. We generally provide a one-year warranty period on hardware devices that are delivered and installed. We record the cost of the warranty as a component of cost of hardware revenue.
Professional Services Revenue
We generate professional services revenue from installing smart home hardware devices, which does not result in significant customization of the installed products and is generally performed over a period ranging from two to four weeks. Installations can be performed by our employees, can be contracted out to a third party with our employees managing the engagement, or can be performed by the customer. Professional services contracts are generally performed on a fixed-price basis and revenue is recognized over the period in which installations are completed.
Hosted Services Revenue
Hosted Services primarily consist of monthly subscription revenue earned from the fees collected from customers to provide access to one or more of our software applications including access controls, asset monitoring and related services. These subscription arrangements have contractual terms ranging from one month to eight years and include recurring fixed plan subscription fees. Our arrangements do not provide the customer with the right to take possession of our software at any time. Customers are granted continuous access to the services over the contractual period. Accordingly, fees collected for subscription services are recognized on a straight-line basis over the contract term beginning on the date the subscription service is made available to the customer. Variable consideration is immaterial.
We sell certain Hub Devices, which only function with the subscription to our proprietary software applications and related hosting services. We consider those devices and hosting services subscription as a single performance obligation, and therefore we defer the recognition of revenue for those devices that are sold with application subscriptions. The estimated average in-service life of those devices is four years. When a Hub Device without independent functionality is included in a contract that does not require a long-term service commitment, the customer obtains a material right to renew the service because purchasing a new device is not required upon renewal. If a contract contains a material right, proceeds are allocated to the material right and recognized over the period of benefit, which is generally four years.
33
Cost of Revenue
Cost of revenue consists primarily of direct costs of products and services together with the indirect cost of estimated warranty expense and customer care and support over the life of the service arrangement. We expect cost of revenue to increase in absolute dollars in future periods. We record any change to cost of job performance and job conditions in the period during which the revision is identified.
Hardware
Cost of hardware revenue consists primarily of direct costs of proprietary products, Hub Devices, hardware devices and supplies purchased from third-party providers, shipping costs, warehouse facility (including depreciation and amortization of capitalized assets and right-of-use assets) and infrastructure costs, personnel-related costs associated with the procurement and distribution of our products and estimated warranty expenses together with the indirect cost of customer care and support. We expect an increase in cost of hardware revenue in absolute dollars in future periods.
In 2019, the U.S. administration imposed significant changes to U.S. trade policy with respect to China. Tariffs have subjected certain SmartRent products manufactured overseas to additional import duties. The amount of the import tariff has changed numerous times based on action by the U.S. administration. We continue to monitor the change in tariffs. If tariffs are increased, such actions may increase our cost of hardware revenue and reduce our hardware revenue margins in the future.
Professional Services
Cost of professional services revenue consists primarily of direct costs related to personnel-related expenses for installation and supervision of installation services, general contractor expenses and travel expenses associated with installation of our products, and indirect costs that are also primarily personnel-related expenses in connection with training of and ongoing support for customers and residents.
Hosted Services
Cost of Hosted Services revenue consists primarily of the amortization of the direct costs of certain Hub Devices consistent with the revenue recognition period noted above in “Hosted Services Revenue” and infrastructure costs associated with providing our software applications together with the indirect cost of customer care and support over the life of the service arrangement. We expect cost of Hosted Services revenue to increase in absolute dollars in future periods at a rate that is lower than the corresponding increase in Hosted Services revenue.
Operating Expenses
Research and Development
Research and development expenses consist primarily of personnel-related costs directly associated with our research and development activities. Our research and development efforts are focused on enhancing and developing additional functionality for our existing products and on new product development. We account for the cost of research and development by capitalizing qualifying costs, which are incurred during the product development stage, and amortizing those costs over the product’s estimated useful life, which generally ranges from three to five years depending on the type of application. Costs incurred and capitalized during the product development stage generally include the costs of software configuration, coding, and testing. Such costs primarily include payroll and payroll-related expenses for employees directly involved in the product development. We expense preliminary evaluation costs as they are incurred before technological feasibility is achieved, as well as post development implementation and operation costs, such as training, maintenance and minor upgrades. We begin amortizing capitalized costs when a project is ready for its intended use, and we periodically reassess the estimated useful life of a project considering the effects of obsolescence, technology, competition and other economic factors which may result in a shorter remaining life. Our research and development costs may increase in absolute dollars if we increase our investment in product development to broaden the capabilities of our solutions and introduce new products and features.
Sales and Marketing Expenses
Our sales and marketing expenses consist of costs directly associated with our sales and marketing activities, which primarily include personnel-related costs, sales commissions, marketing programs, trade shows, and promotional materials. Our sales and marketing expenses may increase over time as we hire additional sales and marketing personnel, increase our marketing activities, grow our operations, and continue to build brand awareness.
34
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs associated with our general and administrative organization, professional fees for legal, accounting and other consulting services, office facility, insurance, information technology costs, and expenses incurred as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and stock exchange listing requirements, additional insurance expense, investor relations activities and other administrative and professional services. We may also increase the size of our general and administrative staff in order to support the growth of our business but at a rate that is lower than the corresponding increase in total revenue.
Other Income/Expenses
Other income/expenses consist primarily of interest income net of interest expense, foreign currency transaction gains and losses, and other income related to the operations of foreign subsidiaries. Interest expense is recorded in connection with our various debt facilities. Foreign currency transaction gains and losses relate to the impact of transactions denominated in a foreign currency other than the U.S. dollar. As we have expanded our international operations, our exposure to fluctuations in foreign currencies has increased, which we expect to continue.
Provision for Income Taxes
The income tax benefit on the Consolidated Statement of Operations and Comprehensive Loss is primarily related to the foreign and state taxes offset by a change in the valuation allowance. We established a full valuation allowance for net deferred U.S. federal and state tax assets, including net operating loss carryforwards. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of the federal and state deferred tax assets will be realized in future periods if it reports taxable income. We believe we have established an adequate allowance for uncertain tax positions, although we can provide no assurance that the final outcome of these matters will not be materially different. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.
35
Results of Operations for the Three and Nine Months Ended September 30, 2023 and 2022
The results of operations presented below should be reviewed together with the consolidated financial statements and notes included elsewhere in this Report. The following table summarizes our historical consolidated results of operations data for the periods presented. The period-to-period comparison of operating results is not necessarily indicative of results for future periods. All dollars are in thousands unless otherwise stated.
|
|
|
Three months ended September 30, |
|
|
Change |
|
|
Change |
|
|
Nine months ended September 30, |
|
|
Change |
|
|
Change |
|
||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||||||
|
|
|
(dollars in thousands) |
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
||||||||||||||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hardware |
|
|
$ |
35,631 |
|
|
$ |
26,683 |
|
|
$ |
8,948 |
|
|
|
34 |
% |
|
$ |
100,744 |
|
|
$ |
69,692 |
|
|
$ |
31,052 |
|
|
|
45 |
% |
Professional services |
|
|
|
5,962 |
|
|
|
7,478 |
|
|
|
(1,516 |
) |
|
|
(20 |
)% |
|
|
28,781 |
|
|
|
23,510 |
|
|
|
5,271 |
|
|
|
22 |
% |
Hosted services |
|
|
|
16,511 |
|
|
|
13,341 |
|
|
|
3,170 |
|
|
|
24 |
% |
|
|
47,060 |
|
|
|
34,068 |
|
|
|
12,992 |
|
|
|
38 |
% |
Total revenue |
|
|
|
58,104 |
|
|
|
47,502 |
|
|
|
10,602 |
|
|
|
22 |
% |
|
|
176,585 |
|
|
|
127,270 |
|
|
|
49,315 |
|
|
|
39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hardware |
|
|
|
27,556 |
|
|
|
25,417 |
|
|
|
2,139 |
|
|
|
8 |
% |
|
|
82,118 |
|
|
|
68,226 |
|
|
|
13,892 |
|
|
|
20 |
% |
Professional services |
|
|
|
11,130 |
|
|
|
14,386 |
|
|
|
(3,256 |
) |
|
|
(23 |
)% |
|
|
44,573 |
|
|
|
43,668 |
|
|
|
905 |
|
|
|
2 |
% |
Hosted services |
|
|
|
5,887 |
|
|
|
6,516 |
|
|
|
(629 |
) |
|
|
(10 |
)% |
|
|
17,365 |
|
|
|
17,949 |
|
|
|
(584 |
) |
|
|
(3 |
)% |
Total cost of revenue |
|
|
|
44,573 |
|
|
|
46,319 |
|
|
|
(1,746 |
) |
|
|
(4 |
)% |
|
|
144,056 |
|
|
|
129,843 |
|
|
|
14,213 |
|
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Research and development |
|
|
|
7,573 |
|
|
|
7,610 |
|
|
|
(37 |
) |
|
|
(0 |
)% |
|
|
21,340 |
|
|
|
22,086 |
|
|
|
(746 |
) |
|
|
(3 |
)% |
Sales and marketing |
|
|
|
4,636 |
|
|
|
4,901 |
|
|
|
(265 |
) |
|
|
(5 |
)% |
|
|
14,626 |
|
|
|
16,202 |
|
|
|
(1,576 |
) |
|
|
(10 |
)% |
General and administrative |
|
|
|
11,269 |
|
|
|
15,337 |
|
|
|
(4,068 |
) |
|
|
(27 |
)% |
|
|
33,891 |
|
|
|
41,120 |
|
|
|
(7,229 |
) |
|
|
(18 |
)% |
Total operating expenses |
|
|
|
23,478 |
|
|
|
27,848 |
|
|
|
(4,370 |
) |
|
|
(16 |
)% |
|
|
69,857 |
|
|
|
79,408 |
|
|
|
(9,551 |
) |
|
|
(12 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Loss from operations |
|
|
|
(9,947 |
) |
|
|
(26,665 |
) |
|
|
16,718 |
|
|
|
(63 |
)% |
|
|
(37,328 |
) |
|
|
(81,981 |
) |
|
|
44,653 |
|
|
|
(54 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest income, net |
|
|
|
2,233 |
|
|
|
506 |
|
|
|
1,727 |
|
|
|
341 |
% |
|
|
6,064 |
|
|
|
747 |
|
|
|
5,317 |
|
|
|
712 |
% |
Other (expense) income, net |
|
|
|
(42 |
) |
|
|
290 |
|
|
|
(332 |
) |
|
|
(114 |
)% |
|
|
(45 |
) |
|
|
566 |
|
|
|
(611 |
) |
|
|
(108 |
)% |
Loss before income taxes |
|
|
|
(7,756 |
) |
|
|
(25,869 |
) |
|
|
18,113 |
|
|
|
(70 |
)% |
|
|
(31,309 |
) |
|
|
(80,668 |
) |
|
|
49,359 |
|
|
|
(61 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income tax benefit (expense) |
|
|
|
33 |
|
|
|
(81 |
) |
|
|
114 |
|
|
|
(141 |
)% |
|
|
22 |
|
|
|
5,735 |
|
|
|
(5,713 |
) |
|
|
(100 |
)% |
Net Loss |
|
|
$ |
(7,723 |
) |
|
$ |
(25,950 |
) |
|
$ |
18,227 |
|
|
|
(70 |
)% |
|
$ |
(31,287 |
) |
|
$ |
(74,933 |
) |
|
$ |
43,646 |
|
|
|
(58 |
)% |
Comparison of the Three and Nine months ended September 30, 2023 and 2022
Revenue
|
|
|
Three months ended September 30, |
|
|
Change |
|
|
Change |
|
|
Nine months ended September 30, |
|
|
Change |
|
|
Change |
|
||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||||||
|
|
|
(dollars in thousands) |
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
||||||||||||||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hardware |
|
|
$ |
35,631 |
|
|
$ |
26,683 |
|
|
$ |
8,948 |
|
|
|
34 |
% |
|
$ |
100,744 |
|
|
$ |
69,692 |
|
|
$ |
31,052 |
|
|
|
45 |
% |
Professional services |
|
|
|
5,962 |
|
|
|
7,478 |
|
|
|
(1,516 |
) |
|
|
(20 |
)% |
|
|
28,781 |
|
|
|
23,510 |
|
|
|
5,271 |
|
|
|
22 |
% |
Hosted services |
|
|
|
16,511 |
|
|
|
13,341 |
|
|
|
3,170 |
|
|
|
24 |
% |
|
|
47,060 |
|
|
|
34,068 |
|
|
|
12,992 |
|
|
|
38 |
% |
Total revenue |
|
|
$ |
58,104 |
|
|
$ |
47,502 |
|
|
$ |
10,602 |
|
|
|
22 |
% |
|
$ |
176,585 |
|
|
$ |
127,270 |
|
|
$ |
49,315 |
|
|
|
39 |
% |
Total revenue increased by $10.6 million, or 22%, to $58.1 million for the three months ended September 30, 2023, from $47.5 million for the three months ended September 30, 2022. The increase in revenue resulted primarily from an increase in average revenue per unit ("ARPU"), increased hardware revenue related to shipping distinct Hub Devices in the current period, and an increased number of cumulative active subscriptions for our Hosted Services during 2023 compared to 2022.
36
Total revenue increased by $49.3 million, or 39%, to $176.6 million for the nine months ended September 30, 2023, from $127.3 million for the nine months ended September 30, 2022. The increase in revenue resulted primarily from an increase in ARPU, increased hardware revenue related to shipping distinct Hub Devices in the current period, an increased number of cumulative active subscriptions for our Hosted Services during 2023 compared to 2022, and the realization of additional revenue from our acquisition of SightPlan in March 2022.
Hardware revenue increased by $8.9 million, or 34%, to $35.6 million for the three months ended September 30, 2023, from $26.7 million for the three months ended September 30, 2022 This increase in hardware revenue resulted from a 23% increase in units shipped and an ARPU increase of 8% to $569.32 for the 2023 period from $524.79 for the 2022 period. The increase in ARPU is primarily driven by hardware revenue recognized on the shipment of distinct Hub Devices during the three months ended September 30, 2023. During the three months ended September 30, 2022, only non-distinct Hub Devices were shipped, and thus, no hardware revenue was recognized for these devices. See Note 2 - Revenue Recognition for more information on revenue recognition related to Hub Devices. We define hardware ARPU as total hardware revenue for a given period divided by number of Hub Devices shipped in the same period.
Hardware revenue increased by $31.1 million, or 45%, to approximately $100.8 million for the nine months ended September 30, 2023, from $69.7 million for the nine months ended September 30, 2022. This increase in hardware revenue resulted from a 17% increase in units shipped and an ARPU increase of 24% to $569.95 for the 2023 period from $460.15 for the 2022 period. The increase in ARPU is primarily driven by hardware revenue recognized on the shipment of distinct Hub Devices during the nine months ended September 30, 2023. During the nine months ended September 30, 2022, only non-distinct Hub Devices were shipped, and thus, no hardware revenue was recognized for these devices. See Note 2 - Revenue Recognition for more information on revenue recognition related to Hub Devices.
Professional services revenue decreased by $1.5 million, or 20%, to $6.0 million for the three months ended September 30, 2023, from $7.5 million for the three months ended September 30, 2022. The decrease was primarily attributable to a 39% decrease in Units Deployed from the three months ended September 30, 2022, partially offset by an increase in ARPU of 32% from the three months ended September 30, 2022. The increase in ARPU was primarily driven by a favorable customer mix. We define professional services ARPU as total professional services revenue divided by Units Deployed in a period.
Professional services revenue increased by $5.3 million, or 22%, to $28.8 million for the nine months ended September 30, 2023, from $23.5 million for the nine months ended September 30, 2022. The increase was primarily attributable to an ARPU increase of 49% from the nine months ended September 30, 2022. The increase in ARPU was primarily driven by a favorable customer mix.
Hosted Services revenue increased by $3.2 million, or 24%, to $16.5 million for the three months ended September 30, 2023, from $13.3 million for the three months ended September 30, 2022. Of the $16.5 million revenue in 2023, $5.7 million is related to hub amortization and $10.8 million is related to SaaS revenue. Revenue increased from hub amortization and SaaS by $0.4 million and $2.8 million, respectively, from the three months ended September 30, 2022 to the three months ended September 30, 2023. The increase from both components of Hosted Services revenue resulted primarily from the increased aggregate number of Units Deployed from 504,409 units at September 30, 2022 to 682,632 units at September 30, 2023. We anticipate Hosted Services revenue from hub amortization will decrease in future periods as we continue to ship distinct Hub Devices. This revenue will be recognized as Hardware revenue at a point in time when the device is shipped to the customer. See Note 2 - Revenue Recognition for more information on revenue recognition related to Hub Devices.
Hosted Services revenue increased by $13.0 million, or 38%, to $47.1 million for the nine months ended September 30, 2023, from $34.1 million for the nine months ended September 30, 2022. Of the $47.1 million revenue in 2023, $17.6 million is related to hub amortization and $29.5 million is related to SaaS revenue. Revenue increased from hub amortization and SaaS by $3.2 million and $9.8 million, respectively, from the nine months ended September 30, 2022 to the nine months ended September 30, 2023. The increase from both components of Hosted Services revenue resulted primarily from the increased aggregate number of Units Deployed from 504,409 units at September 30, 2022 to 682,632 units at September 30, 2023 and an increase in SaaS ARPU of 1% to $5.33 for the nine months ended September 30, 2023 from $5.28 for the nine months ended September 30, 2022. Approximately $2.5 million of the 2023 increase in SaaS resulted from SightPlan contributions. We define SaaS ARPU as total SaaS revenue for a given period divided by the average aggregate Units Deployed in the same period.
We utilize the concept of Units Booked to measure estimated near-term resource demand and the resulting approximate range of post-delivery revenue that we will earn and record. Units Booked represent binding orders only and are a subset of Committed Units. We had 46,272 and 67,285 Units Booked during the three months ended September 30, 2023 and 2022, respectively. We had 131,347 and 218,073 Units Booked during the nine months ended September 30, 2023 and 2022, respectively.
We define Committed Units as the aggregate number of Hub Device (i) units that are subject to binding orders from customers together with (ii) units that existing customers, who are parties to a SmartRent master services agreement, have informed us (on a non-binding basis) that they intend to order in the future for deployment within two years of the measurement date. We measure and evaluate Committed Units to assess the general health and trajectory of our business operations and growth. As of September 30, 2023 and 2022, we had 907,860 and 811,312 Committed Units, respectively.
37
Cost of Revenue
|
|
|
Three months ended September 30, |
|
|
Change |
|
|
Change |
|
|
Nine months ended September 30, |
|
|
Change |
|
|
Change |
|
||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||||||
|
|
|
(dollars in thousands) |
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
||||||||||||||||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hardware |
|
|
$ |
27,556 |
|
|
$ |
25,417 |
|
|
$ |
2,139 |
|
|
|
8 |
% |
|
$ |
82,118 |
|
|
$ |
68,226 |
|
|
$ |
13,892 |
|
|
|
20 |
% |
Professional services |
|
|
|
11,130 |
|
|
|
14,386 |
|
|
|
(3,256 |
) |
|
|
(23 |
)% |
|
|
44,573 |
|
|
|
43,668 |
|
|
|
905 |
|
|
|
2 |
% |
Hosted services |
|
|
|
5,887 |
|
|
|
6,516 |
|
|
|
(629 |
) |
|
|
(10 |
)% |
|
|
17,365 |
|
|
|
17,949 |
|
|
|
(584 |
) |
|
|
(3 |
)% |
Total cost of revenue |
|
|
$ |
44,573 |
|
|
$ |
46,319 |
|
|
$ |
(1,746 |
) |
|
|
(4 |
)% |
|
$ |
144,056 |
|
|
$ |
129,843 |
|
|
$ |
14,213 |
|
|
|
11 |
% |
Total cost of revenue decreased by $1.7 million, or 4%, to $44.6 million for the three months ended September 30, 2023, from $46.3 million for the three months ended September 30, 2022. The decrease in cost of revenue resulted primarily from a decrease in New Units Deployed, and related third-party direct labor costs, from the three months ended September 30, 2022. This was partially offset by the shipment of distinct hub devices during the three months ended September 30, 2023.
Total cost of revenue increased by $14.2 million, or 11%, to approximately $144.0 million for the nine months ended September 30, 2023, from $129.8 million for the nine months ended September 30, 2022. The increase in cost of revenue resulted primarily from an increase in the volume of sales and units shipped of our smart home hardware devices, the shipment of distinct Hub Devices in the current period and increased third-party direct labor costs.
Hardware cost of revenue increased by approximately $2.2 million, or 8%, to $27.6 million for the three months ended September 30, 2023, from $25.4 million for the three months ended September 30, 2022. This increase in hardware cost of revenue was primarily attributable to the shipment of distinct hubs during the three months ended September 30, 2023.
Hardware cost of revenue increased by $13.9 million, or 20%, to $82.1 million for the nine months ended September 30, 2023, from $68.2 million for the nine months ended September 30, 2022. This increase in hardware cost of revenue was primarily attributable to approximately $16.1 million of additional cost resulting from greater sales volumes and the shipment of distinct hub devices during the nine months ended September 30, 2023, partially offset by reductions to other costs of revenue attributable to improved processes and efficiencies.
Professional services cost of revenue decreased by $3.3 million, or 23%, to $11.1 million for the three months ended September 30, 2023, from $14.4 million for the three months ended September 30, 2022. The decrease in professional services cost of revenue is primarily attributable to approximately $1.8 million resulting from a decrease in personnel-related costs and a decrease of $1.2 million in third-party direct labor costs due to decreased New Units Deployed.
Professional services cost of revenue increased by $0.9 million, or 2%, to $44.6 million for the nine months ended September 30, 2023, from $43.7 million for the nine months ended September 30, 2022. The increase in professional services cost of revenue is primarily attributable to approximately $5.4 million resulting from an increase in third-party direct labor costs. This was partially offset by a decrease in personnel-related costs, and related travel, of $4.1 million. This year we have invested in technology initiatives to allow our teams to be more efficient and furthered our collaboration with third-party partners to augment our professional services. As a result, we believe that we have transformed our professional services to a more variable cost model that will improve efficiency in future periods.
Hosted Services cost of revenue decreased by $0.6 million, or 10%, to $5.9 million for the three months ended September 30, 2023, from $6.5 million for the three months ended September 30, 2022. The decrease resulted from the decrease of approximately $0.5 million in personnel related expenses.
Hosted Services cost of revenue decreased by approximately $0.5 million to $17.4 million for the nine months ended September 30, 2023, from $17.9 million for the nine months ended September 30, 2022. The decrease resulted from the decrease in personnel related costs, partially offset by the increase in the aggregate number of Units Deployed and the resulting increase in hub amortization and the number of active subscriptions for our software service applications.
38
Operating Expenses
|
|
|
Three months ended September 30, |
|
|
Change |
|
|
Change |
|
|
Nine months ended September 30, |
|
|
Change |
|
|
Change |
|
||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||||||
|
|
|
(dollars in thousands) |
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
||||||||||||||||||||
Research and development |
|
|
$ |
7,573 |
|
|
$ |
7,610 |
|
|
$ |
(37 |
) |
|
|
(0 |
)% |
|
$ |
21,340 |
|
|
$ |
22,086 |
|
|
$ |
(746 |
) |
|
|
(3 |
)% |
Sales and marketing |
|
|
|
4,636 |
|
|
|
4,901 |
|
|
|
(265 |
) |
|
|
(5 |
)% |
|
|
14,626 |
|
|
|
16,202 |
|
|
|
(1,576 |
) |
|
|
(10 |
)% |
General and administrative |
|
|
|
11,269 |
|
|
|
15,337 |
|
|
|
(4,068 |
) |
|
|
(27 |
)% |
|
|
33,891 |
|
|
|
41,120 |
|
|
|
(7,229 |
) |
|
|
(18 |
)% |
Research and development expenses remained flat at $7.6 million for the three months ended September 30, 2023 from the three months ended September 30, 2022.
Research and development expenses decreased by $0.7 million, or 3%, to approximately $21.4 million for the nine months ended September 30, 2023, from $22.1 million for the nine months ended September 30, 2022, resulting primarily from a decrease of approximately $1.0 million of personnel-related expenses recorded during the nine months ended September 30, 2023.
Sales and marketing expenses decreased by $0.3 million, or 5%, to $4.6 million for the three months ended September 30, 2023 from $4.9 million for the three months ended September 30, 2022, resulting primarily from approximately $0.2 million of decreased conference and trade show expenses.
Sales and marketing expenses decreased by $1.6 million, or 10%, to $14.6 million for the nine months ended September 30, 2023 from $16.2 million for the nine months ended September 30, 2022, resulting primarily from a decrease of approximately $0.7 million in stock-based compensation, and $0.7 million in conference and trade show expenses.
For the three months ended September 30, 2023, general and administrative expenses decreased by approximately $4.0 million, or 27%, to $11.3 million, from $15.3 million for the three months ended September 30, 2022, resulting primarily from a $2.4 million asset impairment related to a prepaid license agreement during the three months ended September 30, 2022. Additionally, business insurance and personnel-related expenses decreased by $0.5 million and $0.4 million, respectively.
For the nine months ended September 30, 2023, general and administrative expenses decreased by $7.2 million, or 18%, to $33.9 million, from $41.1 million for the nine months ended September 30, 2023, resulting primarily from a $2.4 million asset impairment related to a prepaid license agreement during the nine months ended September 30, 2022. Additionally, business insurance and third-party consulting expenses decreased by $2.2 million and $1.5 million, respectively.
Other Income
|
|
|
Three months ended September 30, |
|
|
Change |
|
|
Change |
|
|
Nine months ended September 30, |
|
|
Change |
|
|
Change |
|
||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||||||
|
|
|
(dollars in thousands) |
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
||||||||||||||||||||
Interest income, net |
|
|
$ |
2,233 |
|
|
$ |
506 |
|
|
$ |
1,727 |
|
|
|
341 |
% |
|
$ |
6,064 |
|
|
$ |
747 |
|
|
$ |
5,317 |
|
|
|
712 |
% |
Other (expense) income, net |
|
|
|
(42 |
) |
|
|
290 |
|
|
|
(332 |
) |
|
|
(114 |
)% |
|
|
(45 |
) |
|
|
566 |
|
|
|
(611 |
) |
|
|
(108 |
)% |
Interest income, net increased by approximately $1.7 million, or 341%, to $2.2 million for the three months ended September 30, 2023, from $0.5 million for the three months ended September 30, 2022. Interest income, net increased by $5.3 million to $6.1 million for the nine months ended September 30, 2023, from $0.7 million for the nine months ended September 30, 2022. The increase in net interest income for both periods is primarily attributable to interest earned on interest-bearing cash balances.
Other (expense) income, net decreased by $0.3 million, or 114%, to $(42) thousand for the three months ended September 30, 2023, from $0.3 million for the three months ended September 30, 2022. Other (expense) income, net decreased by $0.6 million, or 101%, to $(45) thousand for the nine months ended September 30, 2023, from $0.6 million for the nine months ended September 30, 2022. The decrease in both periods is primarily due to foreign currency adjustments.
39
Income Taxes
|
|
|
Three months ended September 30, |
|
|
Change |
|
|
Change |
|
|
Nine months ended September 30, |
|
|
Change |
|
|
Change |
|
||||||||||||||
|
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||||||
|
|
|
(dollars in thousands) |
|
|
|
|
|
(dollars in thousands) |
|
|
|
|
||||||||||||||||||||
Loss before income taxes |
|
|
$ |
(7,756 |
) |
|
$ |
(25,869 |
) |
|
$ |
18,113 |
|
|
|
70 |
% |
|
$ |
(31,309 |
) |
|
$ |
(80,668 |
) |
|
$ |
49,359 |
|
|
|
(61 |
)% |
Income tax benefit (expense) |
|
|
|
33 |
|
|
|
(81 |
) |
|
|
114 |
|
|
|
(141 |
)% |
|
|
22 |
|
|
|
5,735 |
|
|
|
(5,713 |
) |
|
|
(100 |
)% |
We provided a full valuation allowance on our net U.S. federal and state deferred tax assets at September 30, 2023, and September 30, 2022. As of December 31, 2022, we had $205.8 million of U.S. federal and $188.3 million of state gross net operating loss carryforwards available to reduce future taxable income, which will be carried forward indefinitely for U.S. federal tax purposes and will expire between 2038 and 2042. The Company also has $0.1 million of R&D credits available that expire in 2039. The income tax expense is related to the foreign and state taxes offset by a change in the valuation allowance.
Non-GAAP Financial Measures
To supplement the consolidated financial statements, which are prepared and presented in accordance with GAAP, we present EBITDA and Adjusted EBITDA, described below, as non-GAAP measures. We believe the presentation of both GAAP and non-GAAP financial measures provides investors with increased transparency into financial measures used by our management team, and it also improves investors’ understanding of our underlying operating performance and their ability to analyze our ongoing operating trends. All historic non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures - these non-GAAP financial measures are not intended to supersede or replace our GAAP results.
We define EBITDA as net income or loss computed in accordance with GAAP before interest income/expense, income tax expense and depreciation and amortization.
We define Adjusted EBITDA as EBITDA before the following items: stock-based compensation expense, non-employee warrant expense, warranty provisions for battery deficiencies, asset impairment, loss on extinguishment of debt, change in fair value of derivatives, unrealized gains and losses in currency exchange rates, non-recurring expenses in connection with acquisitions, severance charges, and other expenses caused by non-recurring, or unusual, events that are not indicative of our ongoing business.
Our management uses EBITDA and Adjusted EBITDA to assess our financial and operating performance, and we believe these measures are helpful to management and external users in understanding our performance. EBITDA and Adjusted EBITDA help management identify controllable cash expenses and make decisions designed to help us meet our identified financial and operational goals and to optimize our financial performance, while neutralizing the impact of some expenses included in our operating results caused by external influences over which management has little or no control and by non-recurring, or unusual, events that might otherwise mask trends in our performance. Accordingly, we believe these metrics measure our financial performance based on operational factors that management can impact in the short-term, namely our cost structure and expenses.
We believe that the presentation of EBITDA and Adjusted EBITDA provides information useful to investors in assessing our results of operations. The GAAP measure most directly comparable to EBITDA and Adjusted EBITDA is net income or loss. EBITDA and Adjusted EBITDA are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP. Our EBITDA and Adjusted EBITDA may not be comparable to the EBITDA and Adjusted EBITDA of other companies due to the fact that not all companies use the same definitions of EBITDA and Adjusted EBITDA. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other companies.
40
The following table presents a reconciliation of net loss (as determined in accordance with GAAP) to EBITDA and Adjusted EBITDA for each of the periods indicated.
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
(dollars in thousands) |
|
|
(dollars in thousands) |
|
||||||||||
Net loss |
$ |
(7,723 |
) |
|
$ |
(25,950 |
) |
|
$ |
(31,287 |
) |
|
$ |
(74,933 |
) |
Interest income, net |
|
(2,233 |
) |
|
|
(506 |
) |
|
|
(6,064 |
) |
|
|
(747 |
) |
Provision for income taxes |
|
(33 |
) |
|
|
81 |
|
|
|
(22 |
) |
|
|
(5,735 |
) |
Depreciation and amortization |
|
1,395 |
|
|
|
1,240 |
|
|
|
3,991 |
|
|
|
2,876 |
|
EBITDA |
|
(8,594 |
) |
|
|
(25,135 |
) |
|
|
(33,382 |
) |
|
|
(78,539 |
) |
Stock-based compensation |
|
3,273 |
|
|
|
3,272 |
|
|
|
10,229 |
|
|
|
10,618 |
|
Non-employee warrant expense |
|
- |
|
|
|
51 |
|
|
|
- |
|
|
|
289 |
|
Compensation expense in connection with acquisitions |
|
15 |
|
|
|
1,341 |
|
|
|
2,010 |
|
|
|
3,450 |
|
Asset impairment |
|
- |
|
|
|
2,441 |
|
|
|
- |
|
|
|
2,441 |
|
Severance charges |
|
317 |
|
|
|
- |
|
|
|
805 |
|
|
|
- |
|
Other non-recurring acquisition expenses |
|
(23 |
) |
|
|
405 |
|
|
|
408 |
|
|
|
1,144 |
|
Adjusted EBITDA |
$ |
(5,012 |
) |
|
$ |
(17,625 |
) |
|
$ |
(19,930 |
) |
|
$ |
(60,597 |
) |
Liquidity and Capital Resources
Sources of Liquidity
As of September 30, 2023, we had cash and cash equivalents of $211.0 million, which were held for working capital and general corporate purposes. Our cash equivalents are comprised primarily of money market funds. To date, our principal sources of liquidity have been the net proceeds received as a result of the Business Combination, and payments collected from sales to our customers.
ADI Global Distribution Agreement
On August 3, 2023 we entered into a Product Sales Agreement (the "Agreement") with ADI Global Distribution ("ADI"), pursuant to which, ADI will serve as our non-exclusive hardware fulfillment partner throughout the United States, Canada, and Puerto Rico. In connection with the Agreement, the Company will transfer certain of its inventory to ADI, to fulfill our future sales in exchange for cash. No revenue is recognized when inventory is transferred to ADI and no such transfers had occurred as of September 30, 2023. We believe the Agreement will result in a net positive cash flow impact in future periods.
Debt Issuances
Following the maturity of our Revolving Facility (as defined below) in December 2021, we entered into a $75.0 million senior secured revolving credit facility with a five-year term (the "Senior Revolving Facility"). Interest rates for draws upon the Senior Revolving Facility are determined by whether the Company elects a secured overnight financing rate loan (“SOFR Loan”) or alternate base rate loan (”ABR Loan”). For SOFR Loans, the interest rate is based upon the forward-looking term rate based on SOFR as published by the CME Group Benchmark Administration Limited (CBA) plus 0.10%, subject to a floor of 0.00%, plus an applicable margin. For ABR Loans, the interest rate is based upon the highest of (i) the Prime Rate, (ii) the Federal Funds Effective Rate plus 0.50%, or (iii) 3.25%, plus an applicable margin. As of September 30, 2023, the applicable margins for SOFR Loans and ABR Loans under the Senior Revolving Facility were 1.75% and (0.50%), respectively. The Senior Revolving Facility is secured by substantially all of the Company’s assets and guaranteed by each of the Company’s material domestic subsidiaries.
We have incurred negative cash flows from operating activities and significant losses from operations in the past as reflected in our accumulated deficit of $282.2 million as of September 30, 2023. We may require additional capital to continue our operations in future periods. We expect to incur expenses related to non-cancellable contractual obligations such as from our operating leases.
We believe that our current cash, cash equivalents, available borrowing capacity under the Senior Revolving Facility, and cash raised in the Business Combination will be sufficient to fund our operations for at least the next 12 months beyond the issuance date of this Report. Our future capital requirements, however, will depend on many factors, including our sales volume, the expansion of sales and marketing activities, and market adoption of our new and enhanced products and features. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. From time to time, we may seek to raise additional funds through equity and debt. If we are unable to raise additional capital when desired and on reasonable terms, our business, results of operations, and financial condition may be adversely affected.
41
Cash Flow Summary - Nine Months Ended September 30, 2023 and 2022
The following table summarizes our cash flows for the periods presented:
|
|
Nine months ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(dollars in thousands) |
|
|||||
Net cash used in |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(1,366 |
) |
|
$ |
(79,380 |
) |
Investing activities |
|
|
(3,313 |
) |
|
|
(132,423 |
) |
Financing activities |
|
|
(1,500 |
) |
|
|
(2,525 |
) |
Operating Activities
For the nine months ended September 30, 2023, our operating activities used $1.4 million in cash resulting primarily from our net loss of $31.3 million partially offset by $10.9 million provided by changes in our operating assets and liabilities and $19.0 million provided by non-cash expenses. Changes in our operating assets and liabilities primarily resulted from a $26.4 million decrease in inventory, a $9.9 million decrease in deferred cost of revenue and a $0.5 million decrease in prepaid expenses and other assets, partially offset by an $12.3 million decrease in accrued expenses and other liabilities and a $9.3 million decrease in accounts payable. Non-cash expenses consisted primarily of stock-based compensation of $10.2 million, depreciation and amortization of $4.0 million, compensation expense related to acquisitions of $1.9 million, and provision for excess and obsolete inventory of $1.8 million. Of the total cash used for our operating activities, $6.0 million was attributable to payments related to the SightPlan acquisition. While the Agreement with ADI did not have a cash flow impact during the nine months ended September 30, 2023, we believe the Agreement will have a positive impact on cash flow in future periods.
For the nine months ended September 30, 2022, our operating activities used $79.4 million in cash resulting primarily from our net loss of $74.9 million and $20.0 million used in changes in our operating assets and liabilities, partially offset by $15.5 million provided by non-cash expenses. Changes in our operating assets and liabilities primarily resulted from a $28.4 million increase in inventory, $17.6 million increase in accounts receivable and $10.4 million increase in deferred cost of revenue, partially offset by a $32.0 million increase in deferred revenue. Non-cash expenses consisted primarily of stock-based compensation of $10.6 million, compensation expense related to acquisitions of $3.5 million, depreciation and amortization of $2.9 million, and $2.4 million of asset impairment, partially offset by a deferred tax benefit of $5.9 million resulting from the SightPlan acquisition.
Investing Activities
For the nine months ended September 30, 2023, we used $3.3 million of cash for investing activities, resulting primarily from cash paid for capitalized internal-use software development costs.
For the nine months ended September 30, 2022, we used $132.4 million of cash for investing activities, resulting primarily from $129.0 million used for the SightPlan acquisition, net of cash acquired.
Financing Activities
For the nine months ended September 30, 2023, our financing activities used $1.5 million of cash, resulting primarily from $1.7 million used for earnout payments related to the iQuue acquisition.
For the nine months ended September 30, 2022, our financing activities used $2.5 million of cash primarily for taxes paid related to net share settlements of stock-based compensation awards.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2023.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that can significantly impact the amounts we report as assets, liabilities, revenue, costs and expenses and the related disclosures. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Our actual results could differ significantly from these estimates under different assumptions and conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance as these policies involve a greater degree of judgment and complexity.
42
Revenue Recognition
We derive revenue primarily from sales of systems that consist of hardware devices, professional installation services and Hosted Services to assist property owners and property managers with visibility and control over assets, while providing all-in-one home control offerings for residents. Revenue is recognized when control of these products and services are transferred to the customer in an amount that reflects the consideration we expect to be entitled to receive in exchange for those products and services.
Payments we receive by credit card, check, or automated clearing house payments, and payment terms are determined by individual contracts and range from due upon receipt to net 30 days. Taxes collected from customers and remitted to governmental authorities are not included in reported revenue. Payments received from customers in advance of revenue recognition are reported as deferred revenue.
We apply the practical expedient that allows for inclusion of the future auto-renewals in the initial measurement of the transaction price. We only apply these steps when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services it transfers to a customer.
Accounting for contracts recognized over time involves the use of various estimates of total contract revenue and costs. Due to uncertainties inherent in the estimation process, it is possible that estimates of costs to complete a performance obligation may be revised in the future as we observe the economic performance of our contracts. Changes in job performance, job conditions and estimated profitability may result in revision to our estimates of revenue and costs and are recognized in the period in which the revision is identified.
We may enter into contracts that contain multiple distinct performance obligations including hardware and hosted services. The hardware performance obligation includes the delivery of hardware, and the Hosted Services performance obligation allows the customer use of our proprietary software during the contracted-use term. The subscription for the software and certain Hub Devices combine as one performance obligation, and there is no support or ongoing subscription for other device hardware. We partner with several manufacturers to offer a range of compatible hardware options for its customers. We maintain control of the hardware purchased from manufacturers prior to it being transferred to the customer, and accordingly, SmartRent is considered the principal in these arrangements.
For each performance obligation identified, we estimate the standalone selling price, which represents the price at which we would sell the good or service separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price, considering available information such as market conditions, historical pricing data, and internal pricing guidelines related to the performance obligations. We then allocate the transaction price among those obligations based on the estimation of the standalone selling price.
Inventory Valuation
Inventories are stated at the lower of cost or estimated net realizable value. Cost is computed under the first-in, first-out method. We adjust the inventory balance based on anticipated obsolescence, usage, and historical write-offs. Significant judgment is used in establishing our forecasts of future demand and obsolete material exposures. We consider marketability and product life cycle stage, product development plans, demand forecasts, historical revenue, and assumptions about future demand and market conditions in establishing our estimates. If the actual product demand is significantly lower than forecast, which may be caused by factors within and outside of our control, or if there were a higher incidence of inventory obsolescence because of rapidly changing technology and our customer requirements, we may be required to increase our inventory adjustment. A change in our estimates could have a significant impact on the value of our inventory and our results of operations.
Stock-Based Compensation
Our stock-based compensation relates to stock options and restricted stock units ("RSUs") granted to our employees and directors. Stock-based awards are measured based on the grant date fair value. We estimate the fair value of stock option awards on the grant date using the Black-Scholes option-pricing model. The fair value of RSUs is based on the grant date fair value of the stock price. The fair value of these awards is recognized as compensation expense on a straight-line basis over the requisite service period in which the awards are expected to vest. Forfeitures are recognized as they occur by reversing previously recognized compensation expense.
The Black-Scholes model considers several variables and assumptions in estimating the fair value of stock-based awards. These variables include the per share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected annual dividend yield, the expected stock price volatility over the expected term and forfeitures, which are recognized as they occur. For all stock options granted, we calculated the expected term using the simplified method for “plain vanilla” stock option awards.
43
Emerging Growth Company Status
Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") exempts “emerging growth companies” as defined in Section 2(A) of the Securities Act of 1933, as amended, from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We are an “emerging growth company” and have elected to take advantage of the benefits of this extended transition period.
We will use this extended transition period for complying with new or revised accounting standards that have different effective dates for public business entities and non-public business entities until the earlier of the date we (a) are no longer an emerging growth company or (b) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. The extended transition period exemptions afforded by our emerging growth company status may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of this exemption because of the potential differences in accounting standards used.
We will remain an “emerging growth company” under the JOBS Act until the earliest of (a) the last day of our first fiscal year following the fifth anniversary of our initial public offering, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (c) the last date of our fiscal year in which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non- convertible debt securities during the previous three years.
Recent Accounting Pronouncements
See Note 2, “Significant Accounting Policies” - Recent Accounting.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial condition due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.
We do not believe that inflation has had a material effect, to date, on our business, results of operations or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations or financial condition.
Interest Rate Fluctuation Risk
As of September 30, 2023, we had cash, cash equivalents, and restricted cash of approximately $211.5 million, which consisted primarily of institutional money market funds, which carries a degree of interest rate risk. A hypothetical 10% change in interest rates would increase our annual interest income by $21.2 million, or decrease our annual interest income by $6.3 million, based on our cash position as of September 30, 2023.
44
Foreign Currency Exchange Rate Risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. Substantially all of our revenue is generated in U.S. dollars. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the United States and to a lesser extent in Croatia and other international markets. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign currency exchange rates. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical consolidated financial statements. To date, we have not engaged in any hedging strategies. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.
Item 4 - Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) at the end of the period covered by this Report and, based on such evaluation, have concluded that our disclosure controls and procedures were effective as of September 30, 2023, at the reasonable assurance level to ensure that the information required to be disclosed by us in this Report was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
In addition, our management has determined we have remediated the deficient control first disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, as amended on May 9, 2023.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three or nine months ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. Other Information
Item 1 – Legal Proceedings
From time to time, we are subject to various claims, charges and litigation matters that arise in the ordinary course of business. We believe these actions are a normal incident of the nature and kind of business in which we are engaged. While it is not feasible to predict the outcome of these matters with certainty, we do not believe that any asserted or unasserted legal claims or proceedings, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations or prospects.
Item 1A – Risk Factors
We are subject to various risks and uncertainties in the course of our business. For a discussion of risks and uncertainties relating to our business, please see the section titled "Risk Factors" in our Annual Report on 10-K filed with the SEC on March 8, 2023. Other than the risk factor below, there have been no material changes from the risk factors described in our Annual Report on 10-K filed with the SEC on March 8, 2023, as amended. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future SEC filings.
Uncertain commercial banking conditions could materially adversely affect our results of operations and financial condition.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems, which may in turn effect our financial condition. For example, we have a banking relationship with SVB and also are a party with SVB to the Senior Revolving Facility. On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. On March 12, 2023, the U.S. Treasury, Federal Reserve, and the FDIC announced that SVB depositors would have access to all of their money starting March 13, 2023. SVB’s closure did not have a material impact on our operations and we did not experience any losses.
45
Although we assess our banking relationships as we believe necessary or appropriate, our access to cash in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect the financial institutions with which we have banking relationships, and in turn, us. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could also include factors involving financial markets or the financial services industry generally. The results of events or concerns that involve one or more of these factors could include a variety of material and adverse impacts on our current and projected business operations and our financial condition and results of operations.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3 – Defaults Upon Senior Securities
None.
Item 4 – Mine Safety Disclosures
Not Applicable.
Item 5 – Other Information
Rule 10b5-1 Trading Plans
A portion of the compensation of our executive officers is delivered in the form of deferred equity awards, including restricted stock unit awards. This compensation design is intended to align our executive compensation with the interests of our stockholders. Following the delivery of shares of our Common Stock under those equity awards, once any applicable service time vesting standards have been satisfied, our executive officers from time to time may engage in the open-market sale of some of those shares. Our executive officers may also engage from time to time in other transactions involving our securities.
Transactions in our securities by our executive officers are required to be made in accordance with our Insider Trading Policy, which, among other things, requires that the transactions be in accordance with applicable U.S. federal securities laws that prohibit trading while in possession of material nonpublic information. Rule 10b5-1 under the Exchange Act provides an affirmative defense that enables prearranged transactions in securities in a manner that avoids concerns about initiating transactions at a future date while possibly in possession of material nonpublic information. Our Insider Trading Policy permits our executive officers to enter into trading plans designed to comply with Rule 10b5-1. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company.
During the three months ended September 30, 2023, none of our directors or executive officers
46
PART IV
Item 6 - Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
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Incorporated by Reference |
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Exhibit |
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Exhibit Description |
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Form |
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Exhibit |
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Filing Date |
2.1** |
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8-K |
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2.1 |
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April 22, 2021 |
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2.2 |
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8-K |
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2.1 |
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July 26, 2021 |
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3.1 |
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8-K |
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3.1 |
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August 30, 2021 |
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3.2 |
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8-K |
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3.2 |
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August 30, 2021 |
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10.1 |
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8-K |
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10.1 |
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August 8, 2023 |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101.INS |
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Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE* |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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** Certain exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally to the SEC a copy of any omitted exhibits or schedules upon request.
47
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 7th day of November 2023.
SmartRent, Inc. |
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By: |
/s/ Lucas Haldeman |
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Lucas Haldeman |
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Chief Executive Officer |
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(Principal Executive Officer) |
By: |
/s/ Hiroshi Okamoto |
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Hiroshi Okamoto |
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Chief Financial Officer |
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(Principal Financial Officer) |
48
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lucas Haldeman, certify that:
Date: November 7, 2023
/s/ LUCAS HALDEMAN
Lucas Haldeman
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Hiroshi Okamoto, certify that:
Date: November 7, 2023
/s/ HIROSHI OKAMOTO
Hiroshi Okamoto
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SmartRent, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lucas Haldeman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
Date: November 7, 2023
/s/ LUCAS HALDEMAN
Lucas Haldeman
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SmartRent, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Hiroshi Okamoto, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
Date: November 7, 2023
/s/ HIROSHI OKAMOTO
Hiroshi Okamoto
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Convertible preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Convertible preferred stock, authorized | 50,000,000 | 50,000,000 |
| Convertible preferred stock, issued | 0 | 0 |
| Convertible preferred stock, outstanding | 0 | 0 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, authorized | 500,000,000 | 500,000,000 |
| Common stock, issued | 203,076,000 | 198,525,000 |
| Common stock, shares outstanding | 203,076,000 | 198,525,000 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
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| Revenue | ||||
| Total revenue | $ 58,104 | $ 47,502 | $ 176,585 | $ 127,270 |
| Cost of revenue | ||||
| Total cost of revenue | 44,573 | 46,319 | 144,056 | 129,843 |
| Operating expense | ||||
| Research and development | 7,573 | 7,610 | 21,340 | 22,086 |
| Sales and marketing | 4,636 | 4,901 | 14,626 | 16,202 |
| General and administrative | 11,269 | 15,337 | 33,891 | 41,120 |
| Total operating expense | 23,478 | 27,848 | 69,857 | 79,408 |
| Loss from operations | (9,947) | (26,665) | (37,328) | (81,981) |
| Interest income, net | 2,233 | 506 | 6,064 | 747 |
| Other (expense) income, net | 42 | 290 | (45) | 566 |
| Loss before income taxes | (7,756) | (25,869) | (31,309) | (80,668) |
| Income tax benefit (expense) | 33 | (81) | 22 | 5,735 |
| Net loss | (7,723) | (25,950) | (31,287) | (74,933) |
| Other comprehensive loss | ||||
| Foreign currency translation adjustment | (188) | (493) | (93) | (1,083) |
| Comprehensive loss | $ (7,911) | $ (26,443) | $ (31,380) | $ (76,016) |
| Net loss per common share | ||||
| Net loss per common share basic | $ (0.04) | $ (0.13) | $ (0.16) | $ (0.38) |
| Net loss per common share diluted | $ (0.04) | $ (0.13) | $ (0.16) | $ (0.38) |
| Weighted-average number of shares used in computing net loss per share basic | 201,584 | 196,486 | 199,858 | 195,090 |
| Weighted-average number of shares used in computing net loss per share diluted | 201,584 | 196,486 | 199,858 | 195,090 |
| Hardware | ||||
| Revenue | ||||
| Total revenue | $ 35,631 | $ 26,683 | $ 100,744 | $ 69,692 |
| Cost of revenue | ||||
| Total cost of revenue | 27,556 | 25,417 | 82,118 | 68,226 |
| Professional Services | ||||
| Revenue | ||||
| Total revenue | 5,962 | 7,478 | 28,781 | 23,510 |
| Cost of revenue | ||||
| Total cost of revenue | 11,130 | 14,386 | 44,573 | 43,668 |
| Hosted Services | ||||
| Revenue | ||||
| Total revenue | 16,511 | 13,341 | 47,060 | 34,068 |
| Cost of revenue | ||||
| Total cost of revenue | $ 5,887 | $ 6,516 | $ 17,365 | $ 17,949 |
Pay vs Performance Disclosure - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
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| Pay vs Performance Disclosure | ||||||||
| Net Income (Loss) | $ (7,723) | $ (10,349) | $ (13,215) | $ (25,950) | $ (25,589) | $ (23,394) | $ (31,287) | $ (74,933) |
Insider Trading Arrangements |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Trading Arrangements, by Individual | |
| Rule 10b5-1 Arrangement Adopted | false |
| Non-Rule 10b5-1 Arrangement Adopted | false |
| Rule 10b5-1 Arrangement Terminated | false |
| Non-Rule 10b5-1 Arrangement Terminated | false |
Description of Business |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Description of Business | NOTE 1. DESCRIPTION OF BUSINESS SmartRent, Inc., and its wholly owned subsidiaries (collectively, the "Company"), is an enterprise real estate technology company that provides comprehensive management software and applications designed for property owners, managers and residents. Its suite of products and services, which includes both smart building hardware and cloud-based software-as-a-service ("SaaS") solutions, provides seamless visibility and control over real estate assets. The Company’s platform lowers operating costs, increases revenues, mitigates operational friction and protects assets for owners and operators, while providing a differentiated, elevated living experience for residents. The Company is headquartered in Scottsdale, Arizona. The Company, formerly known as Fifth Wall Acquisition Corp. I (“FWAA”), was originally incorporated in Delaware on November 23, 2020, as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses. On February 9, 2021, the Company consummated its initial public offering, following which its shares began trading on the Nasdaq National Market. On April 21, 2021, FWAA entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with SmartRent.com, Inc. (“Legacy SmartRent”) and Einstein Merger Corp. I, a wholly owned subsidiary of FWAA. On August 24, 2021, the transactions contemplated by the Merger Agreement (the “Business Combination”) were consummated. In connection with the closing of the Business Combination, FWAA changed its name to SmartRent, Inc. and its shares began trading on the New York Stock Exchange under the symbol “SMRT.” As a result of the Business Combination, SmartRent, Inc. became the owner, directly or indirectly, of all of the equity interests of Legacy SmartRent and its subsidiaries. |
Significant Accounting Policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Significant Accounting Policies | NOTE 2. SIGNIFICANT ACCOUNTING POLICIES Unaudited Interim Financial Information The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and include the consolidated accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation. The Consolidated Balance Sheet at December 31, 2022 has been derived from the audited consolidated financial statements as of December 31, 2022, as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 8, 2023, as amended. Certain notes and other information have been condensed or omitted from the interim financial statements presented herein. The financial data and other information disclosed in these Notes to Consolidated Financial Statements related to the three and nine months ended September 30, 2023 and 2022 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which are of a normal recurring nature, necessary for a fair statement of the Company’s financial condition and results of operations and cash flows for the interim period presented. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023 or any future period. Immaterial Restatement of Prior Period Financial Statements Subsequent to the issuance of the Company’s financial statements for the year ended December 31, 2022, the Company’s management identified an error in the classification of cash paid for capitalized software costs that had previously been included in operating activities but should have been included in investing activities within the statement of cash flows. As a result, the accompanying condensed consolidated statement of cash flows for the nine months ended September 30, 2022 has been restated from amounts previously reported. Management determined that the error was not material to previously issued financial statements. The following table presents the effects of the restatement to the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2022.
Foreign Currency SmartRent, Inc.'s functional and reporting currency is United States Dollars (“USD”) and its foreign subsidiaries have a functional currency other than USD. Financial position and results of operations of the Company's international subsidiaries are measured using local currencies as the functional currency. Assets and liabilities of these operations are translated at the exchange rates in effect at the end of each reporting period. The Company's international subsidiaries' statements of operations accounts are translated at the weighted-average rates of exchange prevailing during each reporting period. Translation adjustments arising from the use of differing currency exchange rates from period to period are included in accumulated other comprehensive loss in stockholders’ equity. Gains and losses on foreign currency exchange transactions, as well as translation gains or losses on transactions denominated in currencies other than an entity’s functional currency, are reflected in the Consolidated Statements of Operations and Comprehensive Loss. Liquidity The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. Management believes that currently available resources will provide sufficient funds to enable the Company to meet its obligations for at least one year past the issuance date of these financial statements. The Company may need to raise additional capital through equity or debt financing to fund future operations until it generates positive operating cash flows. There can be no assurance that such additional equity or debt financing will be available on terms acceptable to the Company, or at all. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expense during the reporting period. These estimates made by management include valuing the Company’s inventories on hand, allowance for doubtful accounts, intangible assets, earnout liabilities, warranty liabilities, stand-alone selling price of items sold, and certain assumptions used in the valuation of equity awards, including the estimated fair value of common stock warrants, and assumptions used to estimate the fair value of stock-based compensation expense. Actual results could differ materially from those estimates. Acquisitions In March 2022, the Company purchased all of the outstanding equity interests of SightPlan Holdings, Inc. ("SightPlan") in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used (see Note 13). The acquisition was recorded on the date that the Company obtained control over the acquired business. The consideration paid was determined on the acquisition date. The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and were recorded as expense in the period incurred. Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed. In December 2021, the Company purchased all of the outstanding equity interests of iQuue, LLC (“iQuue”) in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used. The acquisition was recorded on the date that the Company obtained control over the acquired business. The consideration paid was determined on the acquisition date. The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and recorded as expense in the period incurred. Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed. In February 2020, Legacy SmartRent purchased all of the outstanding equity interests of Zenith Highpoint, Inc. in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used. The acquisition was recorded on the date that the Company obtained control over the acquired business. The consideration paid was determined on the acquisition date. The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and recorded as expense in the period incurred. Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed. Net Loss Per Share Attributable to Common Stockholders The Company follows the two-class method to include the dilutive effect of securities that participated in dividends, if and when declared, when computing net income per common share. The two-class method determines net income per common share for each class of common stock and participating securities according to dividends, if and when declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The anti-dilutive effect of potentially dilutive securities is excluded from the computation of net loss per share because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive. The Company considers any unvested common shares subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of unvested common shares subject to repurchase do not have a contractual obligation to share in losses. Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase and any shares issuable by the exercise of warrants for nominal consideration. Diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. For periods in which the Company reports a net loss, the diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive. Cash and Cash Equivalents The Company considers financial instruments with an original maturity of three months or less to be cash and cash equivalents. The Company maintains cash and cash equivalents at multiple financial institutions, and, at times, these balances exceed federally insurable limits. As a result, there is a concentration of credit risk related to amounts on deposit. The Company believes any risks are mitigated through the size and security of the financial institution at which its cash balances are held. Restricted Cash The Company considers cash to be restricted when withdrawal or general use is legally restricted. The Company reports the current portion of restricted cash as a separate item in the Consolidated Balance Sheets and the non-current portion is a component of other long-term assets in the Consolidated Balance Sheets. The Company determines current or non-current classification based on the expected duration of the restriction. Accounts Receivable, net Accounts receivable consist of balances due from customers resulting from the sale of hardware, professional services and hosted services. Accounts receivable are recorded at invoiced amounts, are non-interest bearing and are presented net of the associated allowance for doubtful accounts on the Consolidated Balance Sheets. The allowance for doubtful accounts totaled $582 and $606 as of September 30, 2023, and December 31, 2022, respectively. The provision for doubtful accounts is recorded in general and administrative expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss; the provision for doubtful accounts totaled $39 for both the three and nine months ended September 30, 2023. The provision for doubtful accounts totaled $196 for both the three and nine months ended September 30, 2022. No material accounts receivable were deemed uncollectable and there were no material write-offs of accounts receivable for the three and nine months ended September 30, 2023 and 2022. The Company evaluates the collectability of the accounts receivable balances and has determined the allowance for doubtful accounts based on a combination of factors, which include the nature of the relationship and the prior collection experience the Company has with the account and an evaluation for current and projected economic conditions as of the Consolidated Balance Sheets date. Accounts receivable determined to be uncollectible are charged against the allowance for doubtful accounts. Actual collections of accounts receivable could differ from management’s estimates. Significant Customers A significant customer represents 10% or more of the Company’s total revenue or net accounts receivable balance at each respective Consolidated Balance Sheet date. Revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable for each significant customer follows.
* Total less than 10% for the respective period
Inventory Inventories, which are comprised of smart home equipment and components, are stated at the lower of cost or net realizable value with cost determined under the first-in, first-out method. The Company adjusts the inventory balance based on anticipated obsolescence, usage and historical write-offs. Goodwill Goodwill represents the excess of cost over net assets of the Company's completed business combinations. The Company tests for potential impairment of goodwill on an annual basis in November to determine if the carrying value is less than the fair value. The Company will conduct additional tests between annual tests if there are indications of potential goodwill impairment. No goodwill impairment has been recorded as of September 30, 2023 and December 31, 2022. Intangible Assets The Company recorded intangible assets with finite lives, including customer relationships and developed technology, as a result of acquisitions made in prior years. Intangible assets are amortized on a straight-line basis based on their estimated useful lives. The estimated useful life of these intangible assets are as follows.
Warranty Allowance The Company provides its customers with limited-service warranties associated with product replacement and related services. The warranty typically lasts one year following the installation of the product. The estimated warranty costs, which are expensed at the time of sale and included in hardware cost of revenue, are based on the results of product testing, industry and historical trends and warranty claim rates incurred and are adjusted for identified current or anticipated future trends as appropriate. Actual warranty claim costs could differ from these estimates. For the three months ended September 30, 2023 and 2022, warranty expense included in cost of hardware revenue was $850 and $488, respectively. For the nine months ended September 30, 2023 and 2022, warranty expense included in cost of hardware revenue was $1,390 and $1,145, respectively. As of September 30, 2023, and December 31, 2022, the Company’s warranty allowance was $1,696 and $2,277, respectively. During the year ended December 31, 2020, the Company identified a deficiency with batteries contained in certain hardware sold and has included an estimate of the expected cost to remove these batteries, which were acquired from one supplier, in its warranty allowance. During the year ended December 31, 2021, the Company identified additional deficient batteries, and while the number of deficient batteries is less than one percent of the total number of all batteries deployed, the Company has elected to replace all such batteries from previously deployed hardware devices. As of September 30, 2023, and December 31, 2022, $869 and $1,687, respectively, is included in the Company’s warranty allowance related to the remaining cost of replacement for this identified battery deficiency. Fair Value of Financial Instruments Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities subject to on-going fair value measurement are categorized and disclosed into one of three categories depending on observable or unobservable inputs employed in the measurement. These two types of inputs have created the following fair value hierarchy. Level 1: Quoted prices in active markets that are accessible at the measurement date for assets and liabilities. Level 2: Observable prices that are based on inputs not quoted in active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. The Company recognizes transfers between levels of the hierarchy based on the fair values of the respective financial measurements at the end of the reporting period in which the transfer occurred. There were no transfers between levels of the fair value hierarchy during the three or nine months ended September 30, 2023 or 2022. The carrying amounts of the Company’s accounts receivable, accounts payable and accrued and other liabilities approximate their fair values due to their short maturities. Revenue Recognition The Company derives its revenue primarily from sales of systems that consist of hardware devices, professional services and hosted services to assist property owners and property managers with visibility and control over assets, while providing all-in-one home control offerings for residents. Revenue is recorded when control of these products and services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those products and services. The Company may enter into contracts that contain multiple distinct performance obligations. The transaction price for a typical arrangement includes the price for: smart home hardware devices, professional services, and a subscription for use of the Company's proprietary software (“Hosted Services”). Included in these contracts are centrally connected devices ("Hub Devices"), which integrate the Company’s proprietary enterprise software with third party smart devices. Historically, the Company sold Hub Devices which only functioned with a subscription to its proprietary software (“non-distinct Hub Devices"). During the year ended December 31, 2022, the Company began shipping Hub Devices with features that function independently from its proprietary software subscription (“distinct Hub Devices"). Non-distinct Hub Devices are recognized as a single performance obligation with the Company’s proprietary software in Hosted Services revenue, while distinct Hub Devices are recognized as a separate performance obligation in hardware revenue. When distinct Hub Devices are included in a contract, the Hosted Services performance obligation is comprised of only the Company’s proprietary software. The Company considers delivery for each of the hardware, professional services and Hosted Services to be separate performance obligations. The hardware performance obligation includes the delivery of smart home hardware and distinct Hub Devices. The professional services performance obligation includes the services to install the hardware. The Hosted Services performance obligation provides a subscription that allows the customer access to software during the contracted-use term when the promised service is provided to the customer. Also included in the hosted service performance obligation are non-distinct Hub Devices that only function with a subscription to the Company’s proprietary software. Payments are received by the Company by credit card, check or automated clearing house payments and payment terms are determined by individual contracts and generally range from due upon receipt to net 30 days. Taxes collected from customers and remitted to governmental authorities are not included in reported revenue. Payments received from customers in advance of revenue recognition are reported as deferred revenue. The Company has elected the following practical expedients following the adoption of ASC 606: • Shipping and handling costs: the Company elected to account for shipping and handling activities that occur after the customer has obtained control of a good as fulfillment activities (i.e., an expense) rather than as a promised service and are recorded as hardware cost of revenue. Amounts billed for shipping and handling fees are recorded as revenue. • Sales tax collected from customers: the Company elected to exclude from the measurement of transaction price all taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer. • Measurement of the transaction price: the Company applies the practical expedient that allows for inclusion of the future auto-renewals in the initial measurement of the transaction price. The Company only applies these steps when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services it transfers to a customer. • Significant financing component: the Company elected not to adjust the promised amount of consideration for the effects of a significant financing component when the period between the transfer of promised goods or services and when the customer pays for the goods or services will be one year or less. Timing of Revenue Recognition is as follows. • Hardware Revenue Hardware revenue results from the direct sale to customers of hardware smart home devices, which devices generally consist of a distinct Hub Device, door-locks, thermostats, sensors, and light switches. These hardware devices provide features that function independently without subscription to the Company's proprietary software, and the performance obligation for hardware revenue is considered satisfied and revenue is recognized at a point in time when the hardware device is shipped to the customer. The Company generally provides a one-year warranty period on hardware devices that are delivered and installed. The cost of the warranty is recorded as a component of cost of hardware revenue. • Professional Services Revenue Professional services revenue results from installing smart home hardware devices, which does not result in significant customization of the product and is generally performed over a period from two to four weeks. Installations can be performed by the Company's employees, contracted out to a third-party with the Company's employees managing the engagement, or the customer can perform the installation themselves. The Company’s professional services contracts are generally arranged on a fixed price basis and revenue is recognized over the period in which the installations are completed. • Hosted Services Revenue Hosted Services revenue primarily consists of monthly subscription revenue generated from fees that provide customers access to one or more of the Company’s proprietary software applications including access controls, asset monitoring and related services. These subscription arrangements have contractual terms ranging from one-month to eight-years and include recurring fixed plan subscription fees. Arrangements with customers do not provide the customer with the right to take possession of the Company’s software at any time. Customers are granted continuous access to the services over the contractual period. Accordingly, fees collected for subscription services are recognized on a straight-line basis over the contract term beginning on the date the subscription service is made available to the customer. Variable consideration is immaterial. Also included in Hosted Services revenue are non-distinct Hub Devices. The Company considers those devices and hosting services subscription a single performance obligation and therefore defers the recognition of revenue for those devices upon shipment to the customer. The revenue is then amortized over its average service life. When a non-distinct Hub Device is included in a contract that does not require a long-term service commitment, the customer obtains a material right to renew the service because purchasing a new device is not required upon renewal. If a contract contains a material right, proceeds are allocated to the material right and recognized over the period of benefit, which is generally four years. Cost of Revenue Cost of revenue consists primarily of direct costs of products and services together with the indirect cost of estimated warranty expense and customer care and support over the life of the service arrangement. • Hardware Cost of hardware revenue consists primarily of direct costs of proprietary products, such as the distinct Hub Device, hardware devices, supplies purchased from third-party providers, and shipping costs, together with indirect costs related to warehouse facilities (including depreciation and amortization of capitalized assets and right-of-use assets), infrastructure costs, personnel-related costs associated with the procurement and distribution of products and warranty expenses together with the indirect cost of customer care and support. • Professional Services Cost of professional services revenue consists primarily of direct costs related to personnel-related expenses for installation and supervision of installation services, general contractor expenses and travel expenses associated with the installation of products and indirect costs that are also primarily personnel-related expenses in connection with training of and ongoing support for customers and residents. • Hosted Services Cost of Hosted Services revenue consists primarily of the amortization of the direct costs of non-distinct Hub Devices, consistent with the revenue recognition period noted above in "Hosted Services Revenue", and infrastructure costs associated with providing software applications together with the indirect cost of customer care and support over the life of the service arrangement. Deferred Cost of Revenue Deferred cost of revenue includes all direct costs included in cost of revenue for Hosted Services and non-distinct Hub Devices that have been deferred to future periods. Research and Development These expenses relate to the research and development of new products and services and enhancements to the Company’s existing product offerings. The Company accounts for the cost of research and development by capitalizing qualifying costs, which are incurred during the product development stage, and amortizing those costs over the product’s estimated useful life. The Company expenses preliminary evaluation costs as they are incurred before the product development stage, as well as post development implementation and operation costs, such as training, maintenance and minor upgrades. As of September 30, 2023, the Company had capitalized $6,182 of research and development costs in other long-term assets on the Consolidated Balance Sheets, of which $5,620 remains to be amortized. As of December 31, 2022, the Company had capitalized $3,145 of research and development costs in other long-term assets on the Consolidated Balance Sheets, of which $3,066 remains to be amortized. During the three and nine months ended September 30, 2023, $228 and $483, respectively, of amortization expense related to capitalized software was recorded in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss. There was no such amortization expense recorded during the three and nine months ended September 30, 2022. Advertising Advertising costs are expensed as incurred and recorded as a component of sales and marketing expense. The Company incurred $97 of advertising expenses for the three months ended September 30, 2022. There were no such advertising expenses recorded for the three months ended September 30, 2023. The Company incurred $268 and $237 of advertising expenses for the nine months ended September 30, 2023 and 2022, respectively. Segments The Company has one operating segment and one reportable segment as its chief operating decision maker, who is its Chief Executive Officer, reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company’s principal operations are in the United States and the Company’s long-lived assets are located primarily within the United States. The Company held $7,656 and $8,096 of assets outside the United States at September 30, 2023, and December 31, 2022, respectively. Recent Accounting Guidance Recently Adopted Accounting Guidance In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-12, “Income Taxes (Topic 740)”, which simplifies the accounting for income taxes, primarily by eliminating certain exceptions found in the Accounting Standards Codification, section 740. This standard is effective for fiscal periods beginning after December 15, 2021. The Company adopted ASU No. 2019-12 effective January 1, 2022, which did not have a material impact on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” which modifies the measurement of expected credit losses of certain financial instruments. This update is effective for fiscal years beginning after December 15, 2022 and must be applied using a modified-retrospective approach, with early adoption permitted. The requirement to disclose credit quality indicators by year or origination is not applicable to trade receivables due in one year or less that result from revenue transactions within the scope of ASC 606. The Company adopted ASU 2016-13 effective January 1, 2023 using the modified-retrospective approach. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. |
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Fair Value Measurements and Fair Value of Instruments |
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements and Fair Value of Instruments | NOTE 3. FAIR VALUE MEASUREMENTS AND FAIR VALUE OF INSTRUMENTS The following tables display the carrying values and fair values of financial instruments.
The Company reports the current portion of restricted cash as a separate item in the Consolidated Balance Sheets and the non-current portion is a component of other long-term assets in the Consolidated Balance Sheets.
The Company reports the current portion of the acquisition earnout payment as a component of other current liabilities in the Consolidated Balance Sheets and the non-current portion is a component of other long-term liabilities on the Consolidated Balance Sheets. Earnout payments related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The changes in the fair value of the Company's Level 3 liabilities for the nine months ended September 30, 2023 and the year ended December 31, 2022 are as follows.
The fair value of the earnout payment is measured on a recurring basis at each reporting date. The following inputs and assumptions were used in the Monte Carlo simulation model to estimate the fair value of the earnout payment as of September 30, 2023 and December 31, 2022. During the three months ended September 30, 2023, the Company determined there was an $81 decrease in the fair value of the earnout, primarily due to a portion of the expected payout being delayed to a future date. During the nine months ended September 30, 2023 the Company determined there was a $225 increase of in the fair value of the earnout, primarily due to a decreased payment term as we are nine months closer to the payout date. During the three and nine months ended September 30, 2022, there was a $344 increase in the fair value of the earnout, primarily due to a decreased payment term as we get closer to the payout date. The Company recorded these adjustments in general and administrative expense on the Consolidated Statement of Operations and Comprehensive Loss. See Note 13 for more information regarding the earnout payment. The following table sets forth the weighted-average assumptions used to estimate the fair value of the earnout payment as of September 30, 2023 and December 31, 2022.
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Revenue and Deferred Revenue |
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| Revenue and Deferred Revenue | NOTE 4. REVENUE AND DEFERRED REVENUE Disaggregation of Revenue In the following tables, revenue is disaggregated by primary geographical market and type of revenue.
Remaining Performance Obligations Advance payments received from customers are recorded as deferred revenue and are recognized upon the completion of related performance obligations over the period of service. Advance payments for non-distinct Hub Devices are recorded as deferred revenue and recognized over their average in-service life. Advance payments received from customers for subscription services are recorded as deferred revenue and recognized over the term of the subscription. A summary of the change in deferred revenue is as follows.
As of September 30, 2023, the Company expects to recognize 61% of its total deferred revenue within the next 12 months, 19% of its total deferred revenue between , 17% between , and the remainder is expected to be recognized . Contracts may contain termination for convenience provisions that allow the Company, customer, or both parties the ability to terminate for convenience, either at any time or upon providing a specified notice period, without a substantive termination penalty. Included in deferred revenue as of September 30, 2023 and 2022 are $39,816 and $31,137, respectively, of prepaid fees related to contracts with termination for convenience provisions which are refundable at the request of the customer. Based on the Company's historical experience, customers do not typically exercise their termination for convenience rights. Deferred cost of revenue includes all direct costs included in cost of revenue that have been deferred to future periods. |
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Other Balance Sheet Information |
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| Balance Sheet Related Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Balance Sheet Information | NOTE 5. OTHER BALANCE SHEET INFORMATION
Inventory consisted of the following.
The Company writes-down inventory for any excess or obsolete inventories or when the Company believes the net realizable value of inventories is less than the carrying value. During the three and nine months ended September 30, 2023, the Company recorded write-downs of $1,857 and $2,130, respectively. There were no write-downs recorded for the three or nine months ended September 30, 2022.
Prepaid expenses and other current assets consisted of the following.
Property and equipment, net consisted of the following.
Depreciation and amortization expense on all property, plant and equipment was $182 and $175 during the three months ended September 30, 2023 and 2022, respectively. Depreciation and amortization expense on all property, plant and equipment was $582 and $535 during the nine months ended September 30, 2023 and 2022, respectively.
Intangible assets, net consisted of the following.
Amortization expense on all intangible assets was $968 and $1,047 for the three months ended September 30, 2023 and 2022, respectively. Amortization expense on all intangible assets was $2,906 and $2,322 for the nine months ended September 30, 2023 and 2022, respectively. Total future amortization for finite-lived assets is estimated as follows.
Other long-term assets consisted of the following.
Amortization expense on all other long-term assets was $248 and $503 for the three and nine months ended September 30, 2023, respectively, which is primarily related to capitalized software costs and was recorded in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss. There was no such amortization expense recorded during the three or nine months ended September 30, 2022.
Accrued expenses and other current liabilities consisted of the following.
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Debt |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Debt Disclosure [Abstract] | |
| Debt | NOTE 6. DEBT
Term Loan and Revolving Line of Credit Facility In December 2021, the Company entered into a $75,000 Senior Revolving Facility with a five-year term (the "Senior Revolving Facility"). The Senior Revolving Facility includes a letter of credit sub-facility in the aggregate availability of $10,000 as a sublimit of the Senior Revolving Facility, and a swingline sub-facility in the aggregate availability of $10,000 as a sublimit of the Senior Revolving Facility. Proceeds from the Senior Revolving Facility are to be used for general corporate purposes. Amounts borrowed under the Senior Revolving Facility may be repaid and, prior to the Senior Revolving Facility maturity date, reborrowed. The Senior Revolving Facility terminates on the Senior Revolving Facility maturity date in December 2026, when the principal amount of all advances, the unpaid interest thereon, and all other obligations relating to the Senior Revolving Facility shall be immediately due and payable. The Company has yet to draw on the Senior Revolving Facility as of September 30, 2023. The Company accounted for the cancellation of its previous revolving facility and the issuance of the Senior Revolving Facility as an exchange with the same creditor. As a result, all costs related to entering into the Senior Revolving Facility that are allowed to be deferred are recorded as a deferred asset and included in other assets on the Consolidated Balance Sheets. These costs totaled $688 and will be amortized ratably over the five-year term of the Senior Revolving Facility. For the three months ended September 30, 2023 and 2022, the Company recorded $34 and $34, respectively, of amortization expense in connection with these costs, as a component of interest expense on the Consolidated Statements of Operations and Comprehensive Loss. For the nine months ended September 30, 2023 and 2022, the Company recorded $103 and $112, respectively, of amortization expense in connection with these costs, as a component of interest expense on the Consolidated Statements of Operations and Comprehensive Loss. Interest rates for draws upon the Senior Revolving Facility are determined by whether the Company elects a secured overnight financing rate loan (“SOFR Loan”) or alternate base rate loan (”ABR Loan”). For SOFR Loans, the interest rate is based upon the forward-looking term rate based on SOFR as published by the CME Group Benchmark Administration Limited (CBA) plus 0.10%, subject to a floor of 0.00%, plus an applicable margin. For ABR Loans, the interest rate is based upon the highest of (i) the Prime Rate, (ii) the Federal Funds Effective Rate plus 0.50%, or (iii) 3.25%, plus an applicable margin. As of September 30, 2023, the applicable margins for SOFR Loans and ABR Loans under the Senior Revolving Facility were 1.75% and (0.50%), respectively. In addition to paying interest on the outstanding principal balance under the Senior Revolving Facility, the Company is required to pay a facility fee to the lender in respect of the unused commitments thereunder. The facility fee rate is based on the daily unused amount of the Senior Revolving Facility and is one fourth of one percent (0.25%) per annum based on the unused facility amount. During the three months ended September 30, 2023 and 2022, the facility fee totaled $47 and $45, respectively. During the nine months ended September 30, 2023 and 2022, the facility fee totaled $141 and $146, respectively. The Senior Revolving Facility contains certain customary affirmative and negative covenants and events of default. Such covenants will, among other things, restrict, subject to certain exceptions, the Company’s ability to (i) engage in certain mergers or consolidations, (ii) sell, lease or transfer all or substantially all of the Company’s assets, (iii) engage in certain transactions with affiliates, (iv) make changes in the nature of the Company’s business and its subsidiaries, and (v) incur additional indebtedness that is secured on a pari passu basis with the Senior Revolving Facility. The Senior Revolving Facility also requires the Company, on a consolidated basis with its subsidiaries, to maintain a minimum cash balance. If the minimum cash balance is not maintained, the Company is required to maintain a minimum liquidity ratio. If an event of default occurs, the lender is entitled to take various actions, including the acceleration of amounts due under the Senior Revolving Facility and all actions permitted to be taken by a secured creditor. As of September 30, 2023, and through the date these consolidated financial statements were issued, the Company believes it was in compliance with all financial covenants. The Senior Revolving Facility is collateralized by first priority or equivalent security interests in substantially all the property, rights, and assets of the Company. As of September 30, 2023 and December 31, 2022, there was no outstanding principal amount under the Senior Revolving Facility. |
Convertible Preferred Stock and Equity |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Equity [Abstract] | |
| Convertible Preferred Stock and Equity | NOTE 7. CONVERTIBLE PREFERRED STOCK AND EQUITY
Preferred Stock The Company is authorized to issue 50,000 shares of $0.0001 par value preferred stock. As of September 30, 2023, there are no preferred stock issued or outstanding. Warrants As of September 30, 2023, warrants issued as consideration to certain customers to purchase 3,663 shares of Common Stock at $0.01 per share remain outstanding. The warrants vest dependent on the number of installed units, as defined by the warrant agreements, purchased by the customer. The fair value of the vested warrants has been recorded as additional paid-in capital and contra-revenue on the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss, respectively. During the three months ended September 30, 2022, the Company recorded $51 as contra-revenue in the Consolidated Statement of Operations and Comprehensive Loss related to these warrants. There was no contra-revenue recorded related to these warrants during the three months ended September 30, 2023. During the nine months ended September 30, 2022, the Company recorded $72 as contra-revenue in the Consolidated Statement of Operations and Comprehensive Loss related to these warrants. There was no contra-revenue recorded related to these warrants during the nine months ended September 30, 2023. As of September 30, 2023, warrants issued to a former investor to purchase 1,874 shares of Common Stock were fully vested and exercised. The warrants represented compensation paid for marketing services provided by the investor and was accounted for using stock-based compensation guidance. The warrants vested based on the number of installed units attained over a measurement period. The warrants fully vested during the three months ended March 31, 2022 and the warrants were exercised during the three months ended June 30, 2022. The Company recorded the associated marketing expense over the service period as the units were installed with an offset to additional paid-in-capital. During the three months ended September 30, 2023 and 2022, the Company did not recognize sales and marketing expense related to these warrants. During the nine months ended September 30, 2022, the Company recognized $217 of sales and marketing expense related to these warrants. No such marketing expense was recorded during the nine months ended September 30, 2023. |
Stock-Based Compensation |
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| Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation | NOTE 8. STOCK-BASED COMPENSATION
2018 Stock Plan Legacy SmartRent’s board of directors adopted, and its stockholders approved, the SmartRent.com, Inc. 2018 Stock Plan (the “2018 Stock Plan”), effective March 2018. The purpose of the 2018 Stock Plan was to advance the interests of Legacy SmartRent and its stockholders by providing an incentive to attract, retain and reward persons performing services for Legacy SmartRent and by motivating such persons to contribute to the growth and profitability of Legacy SmartRent. The 2018 Stock Plan seeks to achieve this purpose by providing awards in the form of options, restricted stock purchase rights or restricted stock bonuses. Awards granted under the 2018 Stock Plan generally expire ten years from the date of grant and become vested and exercisable over a four-year period. All options are subject to certain provisions that may impact these vesting schedules. Amendment to the 2018 Stock Plan In April 2021, the board of directors of Legacy SmartRent executed a unanimous written consent to provide an additional incentive to certain employees of Legacy SmartRent by amending the 2018 Stock Plan to allow for the issuance of RSUs and granted a total of 1,533 RSUs to certain employees which vest over four years. The estimated fair value for each RSU issued was approximately $21.55 per share and the total stock-based compensation expense to be amortized over the vesting period is $33,033. 2021 Equity Incentive Plan In connection with the Business Combination, the Company's board of directors (the "Board") approved and implemented the SmartRent, Inc. 2021 Equity Incentive Plan (the "2021 Plan"). The purpose of the 2021 Plan is to enhance the Company's ability to attract, retain and motivate persons who make, or are expected to make, important contributions to the Company by providing these individuals with equity ownership opportunities and equity-linked compensation opportunities. The 2021 Plan authorizes the compensation committee to provide incentive compensation in the form of stock options, restricted stock and stock units, performance shares and units, other stock-based awards and cash-based awards. Under the 2021 Plan, the Company is authorized to issue up to 15,500 shares of common stock. Non-employee board member RSUs will vest either over one year or three years. The RSUs granted to employees are generally subject to a four-year vesting schedule and all vesting shall be subject to the recipient’s continued employment with the Company or its subsidiaries through the applicable vesting dates. The table below summarizes the activity related to stock options, pursuant to the 2018 Plan and 2021 Plan, for the nine months ended September 30, 2023.
During the three months ended September 30, 2023 and 2022, stock-based compensation expense of $431 and $159, respectively, was recognized in connection with the outstanding options. During the nine months ended September 30, 2023 and 2022, stock-based compensation expense of $1,231 and $387, respectively, was recognized in connection with the outstanding options. As of September 30, 2023, there is $5,082 of unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 7.3 years. The table below summarizes the activity related to RSUs, pursuant to the 2018 Plan and 2021 Plan, for the nine months ended September 30, 2023.
No right to any Common Stock is earned or accrued until such time that vesting occurs, nor does the grant of the RSU award confer any right to continue vesting or employment. Compensation expense associated with the unvested RSUs is recognized on a straight-line basis over the vesting period. During the three months ended September 30, 2023 and 2022 respectively, stock-based compensation expense of $2,698 and $2,855 was recognized in connection with the vesting of all RSUs. During the nine months ended September 30, 2023 and 2022 respectively, stock-based compensation expense of $8,690 and $9,380 was recognized in connection with the vesting of all RSUs. As of September 30, 2023, there is $20,052 of unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted-average period of 1.3 years. Employee Stock Purchase Plan The Company has the ability to initially issue up to 2,000 shares of Common Stock under the Employee Stock Purchase Plan ("ESPP"), subject to annual increases effective as of January 1, 2022 and each subsequent January 1 through and including January 1, 2030 in an amount equal to the smallest of (i) 1% of the number of shares of the Common Stock outstanding as of the immediately preceding December 31, (ii) 2,000 shares or (iii) such amount, if any, as the Board may determine. During the three months ended September 30, 2023 and 2022, there were no additional shares of Common Stock authorized pursuant to the ESPP and employees enrolled in the Company’s ESPP purchased 138 and 133 shares, respectively, of the Company's Common Stock. During the nine months ended September 30, 2023 and 2022, employees enrolled in the Company’s ESPP purchased 314 and 208 shares, respectively, of the Company’s Common Stock and there were 1,985 and 1,939 shares of Common Stock authorized pursuant to the ESPP, respectively. As of September 30, 2023 and 2022, the number of shares available for sale under the ESPP were 5,402 and 3,731, respectively. During the three months ended September 30, 2023 and 2022, stock-based compensation expense of $144 and $53, respectively, was recognized in connection with the ESPP. During the nine months ended September 30, 2023 and 2022, stock-based compensation expense of $199 and $244, respectively, was recognized in connection with the ESPP. Stock-Based Compensation The fair value of stock option grants is estimated by the Company on the date of grant using the Black Scholes-Merton option pricing model with the following weighted-average assumptions for the nine months ended September 30, 2023 and 2022. During the nine months ended September 30, 2023 and 2022, there were 3,299 and 175 options granted, respectively. During the three months ended September 30, 2023, there were 229 options granted. There were no options granted during the three months ended September 30, 2022.
The Company recorded stock-based compensation expense as follows.
During the three and nine months ended September 30, 2022, stock-based compensation expense of $205 and $607, respectively, was recognized for 844 shares granted in connection with the Company's February 2020 acquisition of a foreign supplier and are recorded as a component of general and administrative expense. There was no such expense recorded during the three months ended September 30, 2023 as these shares fully vested during the three months ended March 31, 2023. During the nine months ended September 30, 2023 $109 of such expense was recorded. |
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Income Taxes |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | NOTE 9. INCOME TAXES
The Company’s effective tax rate (ETR) from continuing operations was 0.43% and (0.31%) for the three months ended September 30, 2023 and 2022, respectively. The Company’s ETR from continuing operations was 0.07% and 7.11% for the nine months ended September 30, 2023 and 2022, respectively. The Company’s ETR during the three and nine months ended September 30, 2023 differed from the federal statutory rate of 21% primarily due to changes in valuation allowance and foreign taxes. The income tax benefit on the Consolidated Statement of Operations and Comprehensive Loss is primarily related to the foreign and state taxes offset by a change in the valuation allowance. The Company established a full valuation allowance for net deferred U.S. federal and state tax assets, including net operating loss carryforwards. The Company expects to maintain this valuation allowance until it becomes more likely than not that the benefit of the federal and state deferred tax assets will be realized in future periods if it reports taxable income. The Company believes that it has established an adequate allowance for uncertain tax positions, although it can provide no assurance that the final outcome of these matters will not be materially different. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. |
Net Loss Per Share |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Loss Per Share | NOTE 10. NET LOSS PER SHARE
The following potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because inclusion of the shares on an as-converted basis would have been anti-dilutive.
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Related-Party Transactions |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Related Party Transactions [Abstract] | |
| Related-Party Transactions | NOTE 11. RELATED-PARTY TRANSACTIONS
During the nine months ended September 30, 2022, the Company incurred marketing expenses of $217 in connection with the vesting of warrants held by a former investor (see Note 7). No such marketing expense was recorded during the nine months ended September 30, 2023 or the three months ended September 30, 2023 and 2022. The Company incurred consulting expense of $20 included in research and development expenses for the nine months ended September 30, 2022, related to services provided by companies in which one of the Company's former executives had control or significant influence. There were no such expenses incurred during the nine months ended September 30, 2023 or the three months ended September 30, 2023 and 2022. On March 22, 2022, the Company purchased all of the outstanding equity interests of SightPlan (see Note 13). One of the Company's directors, through a personal investment vehicle, held an unsecured convertible promissory note in SightPlan (the “SightPlan Convertible Note”). As consideration for the conversion and cancellation of the SightPlan Convertible Note, the director received $458 at the closing of the SightPlan acquisition. The director did not participate in any negotiations, recused himself from all board discussions related to the SightPlan acquisition, and did not vote on the matter. Entities affiliated with RETV Management, LLC ("RET"), which at the time of the SightPlan acquisition held more than 5% of the outstanding shares of the Company's Common Stock, held more than 17% of the fully diluted shares outstanding of SightPlan (the “RET SightPlan Holdings”). As consideration for the RET SightPlan Holdings, entities affiliated with RET received $22,271 at the closing of the SightPlan acquisition. None of the Company's executive officers or directors hold any economic interest in RET and RET does not have a designee on the Board. Further, RET did not assist the Company with any negotiations or participate in the Board discussions related to the SightPlan acquisition. As of September 30, 2023, RET does not hold any outstanding shares of the Company's Common Stock. |
Commitments and Contingencies |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | NOTE 12. COMMITMENTS AND CONTINGENCIES
Legal Matters The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. Liabilities are accrued when it is believed that it is both probable that a liability has been incurred and that the Company can reasonably estimate the amount of the potential loss. The Company does not believe that the outcome of these proceedings or matters will have a material effect on the consolidated financial statements. The Company entered into an agreement with a supplier in April 2020, as further amended in March 2021, to purchase minimum volumes of certain products through August 2022. Due to significant failure rates and other defects, the Company ceased ordering product from this supplier as of December 2020. Despite the Company’s requests, the supplier indicated they are not willing to refund the Company for the malfunctioning products previously purchased, and therefore, the Company filed a complaint against the supplier on March 22, 2022 in the Superior Court for the State of California, County of Santa Clara. On July 26, 2022, the supplier filed a cross-complaint against the Company for breach of contract and other allegations. Both parties filed demurrers, which were granted in part and overruled in part. On April 18, 2023, the supplier filed its operative Second Amended Complaint. The Company denies the allegations in the supplier’s complaint and does not believe it has any further commitment to the supplier. The parties are now engaging in discovery. The Company regularly reviews outstanding legal claims, actions and enforcement matters, if any exist, to determine if accruals for expected negative outcomes of such matters are probable and can be reasonably estimated. The Company evaluates any such outstanding matters based on management’s best judgment after consultation with counsel. There is no assurance that the Company's accruals for loss contingencies will not need to be adjusted in the future. The amount of such adjustment could significantly exceed the accruals the Company has recorded. The Company had no such accruals as of September 30, 2023 or December 31, 2022. |
Acquisitions |
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| Acquisitions | NOTE 13. ACQUISITIONS
SightPlan Acquisition On March 22, 2022, the Company purchased all of the outstanding equity interests of SightPlan for approximately $135,000. SightPlan was founded in 2013 and is headquartered in Orlando, Florida. SightPlan is a SaaS company that provides a real estate operating platform offering automated answering, resident engagement, field service and maintenance management, inspections management, and due diligence and audit management services to real estate owners and managers. The Company accounted for the SightPlan acquisition as a business combination. The preliminary purchase price consisted of $131,781 of cash and restricted cash and a post-closing downward adjustment of $127 reflecting the difference between estimated and actual net working capital of SightPlan on the acquisition date. On the acquisition date, the Company paid cash consideration of $130,931 and placed $850 in escrow accounts legally owned by the Company. During the year ended December 31, 2022, consideration held in escrow of $850 was distributed. As part of the distribution, the net working capital adjustment of $127 was returned to the Company. As part of the business combination, the Company agreed to pay up to approximately $5,760 to the former employees of SightPlan on the one-year anniversary of the acquisition date, subject to continued employment at the Company. As this payment was contingent upon the continuous service of the employees, it was accounted for as post-combination expense and was recognized ratably over the service period of one year. During the nine months ended September 30, 2023, the Company distributed $5,976 in connection with this contingent consideration, including $216 for payroll taxes and retirement benefits. There were no such distributions during the three months ended September 30, 2023. The total purchase consideration and the fair values of the acquired assets and liabilities at the acquisition date were as follows.
Changes resulting from facts and circumstances that existed as of the acquisition date resulted in measurement period adjustments to the estimated fair values of accounts receivable, net, intangible assets, other assets, deferred tax liability, and goodwill during the year ended December 31, 2022. Specifically, the refinement of inputs used to estimate the fair value of intangible assets resulted in an increase in customer relationships of $4,400, a decrease in goodwill of $3,839, and an increase in the deferred tax liability of $557. The increase to the deferred tax liability caused an increase to the release of the valuation allowance, generating a $1,227 income tax benefit on the Consolidated Statement of Operations, of which $1,044 was related to the nine months ended September 30, 2022. Changes to accounts receivable, net and other assets were immaterial.
The Company recognized approximately $1,655 of compensation expense related to contingent consideration in connection with the SightPlan acquisition during the three months ended September 30, 2022. There was no such compensation expense recorded during the three months ended September 30, 2023. The Company recognized $49 and $53 of other non-recurring acquisition related costs that were expensed during the three months ended September 30, 2023 and 2022, respectively. The Company recognized approximately $1,480 and $3,453 of compensation expense related to contingent consideration in connection with the SightPlan acquisition during the nine months ended September 30, 2023 and 2022, respectively. The Company recognized $147 and $695 of other non-recurring acquisition related costs that were expensed during the nine months ended September 30, 2023 and 2022, respectively. Compensation and other non-recurring acquisition related costs are included in general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Loss. The fair value of the assets acquired includes accounts receivable of $1,255. The gross amount due under contracts for accounts receivable was $1,284 as of March 22, 2022. The Company did not acquire any other class of receivable as a result of the acquisition of SightPlan. The aggregate purchase price has been allocated to the assets acquired and liabilities assumed based on the fair market value of such assets and liabilities at the date of acquisition. Intangible assets associated with the acquisition totaled $30,900 and were primarily related to customer relationships and developed technology. The excess purchase price over the fair value of net assets acquired was recognized as goodwill and totaled $104,601. The goodwill is attributable primarily to the workforce of the acquired business and expected synergies with the Company’s existing operations and is not deductible for income tax purposes. The Company recorded intangible assets at their fair value, which consisted of the following.
The valuation of intangible assets was determined using an income approach methodology. The fair value of the customer relationship intangible assets was determined using the multi-period excess earnings method based on discounted projected net cash flows associated with the net earnings attributable to the acquired customer relationships. The fair value of the trade name and the acquired developed technology was determined using the relief from royalty method, which measures the value by estimating the cost savings associated with owning the asset rather than licensing it. The income approach methodology involves estimating cash flows over the remaining economic life of the intangible assets, which are considered from a market participant perspective. Key assumptions used in estimating future cash flows included projected revenue growth rates and customer attrition rates. The projected future cash flows were discounted to present value using an appropriate discount rate. As such, all aforementioned intangible assets were valued using Level 3 inputs. During the three months ended September 30, 2023 and 2022, the Company recorded amortization expenses of $905 and $905, respectively, related to intangible assets. During the nine months ended September 30, 2023 and 2022, the Company recorded amortization expense of $2,716 and $1,900, respectively, related to intangible assets. These intangible assets are deductible over 15 years for income tax purposes. Pro Forma Operating Results The Company’s Consolidated Balance Sheet as of September 30, 2023 and December 2022, and other financial statements presented herein for the three and nine months ended September 30, 2023 and 2022 include the results of operations of SightPlan since the acquisition date. The following unaudited pro forma information presents consolidated financial information as if the SightPlan acquisition had occurred on January 1, 2022. Pro forma disclosures for net loss have not been provided as the acquisition did not have, and is not expected to have, a material impact on the consolidated results through the year of acquisition. Pro forma operating results were prepared for comparative purposes only and are not indicative of what would have occurred had the acquisition been made as of January 1, 2022 or of the results that may occur in the future.
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Subsequent Events |
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| Subsequent Events [Abstract] | |
| Subsequent Events | NOTE 14. SUBSEQUENT EVENTS
In connection with the preparation of the accompanying consolidated financial statements, the Company has evaluated events and transactions occurring after September 30, 2023 and through November 7, 2023, the date these financial statements were issued, for potential recognition or disclosure and has determined that there are no additional items to disclose except as disclosed below. In October 2023, 127 shares of the Company's Class A Common Stock were issued to certain employees related to vested RSUs and exercised options. |
Significant Accounting Policies (Policies) |
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| Immaterial Restatement of Prior Period Financial Statements | Immaterial Restatement of Prior Period Financial Statements Subsequent to the issuance of the Company’s financial statements for the year ended December 31, 2022, the Company’s management identified an error in the classification of cash paid for capitalized software costs that had previously been included in operating activities but should have been included in investing activities within the statement of cash flows. As a result, the accompanying condensed consolidated statement of cash flows for the nine months ended September 30, 2022 has been restated from amounts previously reported. Management determined that the error was not material to previously issued financial statements. The following table presents the effects of the restatement to the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2022.
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| Foreign Currency | Foreign Currency SmartRent, Inc.'s functional and reporting currency is United States Dollars (“USD”) and its foreign subsidiaries have a functional currency other than USD. Financial position and results of operations of the Company's international subsidiaries are measured using local currencies as the functional currency. Assets and liabilities of these operations are translated at the exchange rates in effect at the end of each reporting period. The Company's international subsidiaries' statements of operations accounts are translated at the weighted-average rates of exchange prevailing during each reporting period. Translation adjustments arising from the use of differing currency exchange rates from period to period are included in accumulated other comprehensive loss in stockholders’ equity. Gains and losses on foreign currency exchange transactions, as well as translation gains or losses on transactions denominated in currencies other than an entity’s functional currency, are reflected in the Consolidated Statements of Operations and Comprehensive Loss. |
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| Liquidity | Liquidity The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. Management believes that currently available resources will provide sufficient funds to enable the Company to meet its obligations for at least one year past the issuance date of these financial statements. The Company may need to raise additional capital through equity or debt financing to fund future operations until it generates positive operating cash flows. There can be no assurance that such additional equity or debt financing will be available on terms acceptable to the Company, or at all. |
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| Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expense during the reporting period. These estimates made by management include valuing the Company’s inventories on hand, allowance for doubtful accounts, intangible assets, earnout liabilities, warranty liabilities, stand-alone selling price of items sold, and certain assumptions used in the valuation of equity awards, including the estimated fair value of common stock warrants, and assumptions used to estimate the fair value of stock-based compensation expense. Actual results could differ materially from those estimates. |
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| Acquisitions | Acquisitions In March 2022, the Company purchased all of the outstanding equity interests of SightPlan Holdings, Inc. ("SightPlan") in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used (see Note 13). The acquisition was recorded on the date that the Company obtained control over the acquired business. The consideration paid was determined on the acquisition date. The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and were recorded as expense in the period incurred. Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed. In December 2021, the Company purchased all of the outstanding equity interests of iQuue, LLC (“iQuue”) in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used. The acquisition was recorded on the date that the Company obtained control over the acquired business. The consideration paid was determined on the acquisition date. The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and recorded as expense in the period incurred. Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed. In February 2020, Legacy SmartRent purchased all of the outstanding equity interests of Zenith Highpoint, Inc. in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used. The acquisition was recorded on the date that the Company obtained control over the acquired business. The consideration paid was determined on the acquisition date. The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and recorded as expense in the period incurred. Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed. |
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| Net Loss Per Share Attributable to Common Stockholders | Net Loss Per Share Attributable to Common Stockholders The Company follows the two-class method to include the dilutive effect of securities that participated in dividends, if and when declared, when computing net income per common share. The two-class method determines net income per common share for each class of common stock and participating securities according to dividends, if and when declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The anti-dilutive effect of potentially dilutive securities is excluded from the computation of net loss per share because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive. The Company considers any unvested common shares subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of unvested common shares subject to repurchase do not have a contractual obligation to share in losses. Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase and any shares issuable by the exercise of warrants for nominal consideration. Diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. For periods in which the Company reports a net loss, the diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive. |
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| Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers financial instruments with an original maturity of three months or less to be cash and cash equivalents. The Company maintains cash and cash equivalents at multiple financial institutions, and, at times, these balances exceed federally insurable limits. As a result, there is a concentration of credit risk related to amounts on deposit. The Company believes any risks are mitigated through the size and security of the financial institution at which its cash balances are held. |
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| Restricted Cash | Restricted Cash The Company considers cash to be restricted when withdrawal or general use is legally restricted. The Company reports the current portion of restricted cash as a separate item in the Consolidated Balance Sheets and the non-current portion is a component of other long-term assets in the Consolidated Balance Sheets. The Company determines current or non-current classification based on the expected duration of the restriction. |
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| Accounts Receivable, net | Accounts Receivable, net Accounts receivable consist of balances due from customers resulting from the sale of hardware, professional services and hosted services. Accounts receivable are recorded at invoiced amounts, are non-interest bearing and are presented net of the associated allowance for doubtful accounts on the Consolidated Balance Sheets. The allowance for doubtful accounts totaled $582 and $606 as of September 30, 2023, and December 31, 2022, respectively. The provision for doubtful accounts is recorded in general and administrative expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss; the provision for doubtful accounts totaled $39 for both the three and nine months ended September 30, 2023. The provision for doubtful accounts totaled $196 for both the three and nine months ended September 30, 2022. No material accounts receivable were deemed uncollectable and there were no material write-offs of accounts receivable for the three and nine months ended September 30, 2023 and 2022. The Company evaluates the collectability of the accounts receivable balances and has determined the allowance for doubtful accounts based on a combination of factors, which include the nature of the relationship and the prior collection experience the Company has with the account and an evaluation for current and projected economic conditions as of the Consolidated Balance Sheets date. Accounts receivable determined to be uncollectible are charged against the allowance for doubtful accounts. Actual collections of accounts receivable could differ from management’s estimates. |
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| Significant Customers | Significant Customers A significant customer represents 10% or more of the Company’s total revenue or net accounts receivable balance at each respective Consolidated Balance Sheet date. Revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable for each significant customer follows.
* Total less than 10% for the respective period |
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| Inventory | Inventory Inventories, which are comprised of smart home equipment and components, are stated at the lower of cost or net realizable value with cost determined under the first-in, first-out method. The Company adjusts the inventory balance based on anticipated obsolescence, usage and historical write-offs. |
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| Goodwill | Goodwill Goodwill represents the excess of cost over net assets of the Company's completed business combinations. The Company tests for potential impairment of goodwill on an annual basis in November to determine if the carrying value is less than the fair value. The Company will conduct additional tests between annual tests if there are indications of potential goodwill impairment. No goodwill impairment has been recorded as of September 30, 2023 and December 31, 2022. |
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| Intangible Assets | Intangible Assets The Company recorded intangible assets with finite lives, including customer relationships and developed technology, as a result of acquisitions made in prior years. Intangible assets are amortized on a straight-line basis based on their estimated useful lives. The estimated useful life of these intangible assets are as follows.
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| Warranty Allowance | Warranty Allowance The Company provides its customers with limited-service warranties associated with product replacement and related services. The warranty typically lasts one year following the installation of the product. The estimated warranty costs, which are expensed at the time of sale and included in hardware cost of revenue, are based on the results of product testing, industry and historical trends and warranty claim rates incurred and are adjusted for identified current or anticipated future trends as appropriate. Actual warranty claim costs could differ from these estimates. For the three months ended September 30, 2023 and 2022, warranty expense included in cost of hardware revenue was $850 and $488, respectively. For the nine months ended September 30, 2023 and 2022, warranty expense included in cost of hardware revenue was $1,390 and $1,145, respectively. As of September 30, 2023, and December 31, 2022, the Company’s warranty allowance was $1,696 and $2,277, respectively. During the year ended December 31, 2020, the Company identified a deficiency with batteries contained in certain hardware sold and has included an estimate of the expected cost to remove these batteries, which were acquired from one supplier, in its warranty allowance. During the year ended December 31, 2021, the Company identified additional deficient batteries, and while the number of deficient batteries is less than one percent of the total number of all batteries deployed, the Company has elected to replace all such batteries from previously deployed hardware devices. As of September 30, 2023, and December 31, 2022, $869 and $1,687, respectively, is included in the Company’s warranty allowance related to the remaining cost of replacement for this identified battery deficiency. |
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities subject to on-going fair value measurement are categorized and disclosed into one of three categories depending on observable or unobservable inputs employed in the measurement. These two types of inputs have created the following fair value hierarchy. Level 1: Quoted prices in active markets that are accessible at the measurement date for assets and liabilities. Level 2: Observable prices that are based on inputs not quoted in active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. The Company recognizes transfers between levels of the hierarchy based on the fair values of the respective financial measurements at the end of the reporting period in which the transfer occurred. There were no transfers between levels of the fair value hierarchy during the three or nine months ended September 30, 2023 or 2022. The carrying amounts of the Company’s accounts receivable, accounts payable and accrued and other liabilities approximate their fair values due to their short maturities. |
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| Revenue Recognition | Revenue Recognition The Company derives its revenue primarily from sales of systems that consist of hardware devices, professional services and hosted services to assist property owners and property managers with visibility and control over assets, while providing all-in-one home control offerings for residents. Revenue is recorded when control of these products and services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those products and services. The Company may enter into contracts that contain multiple distinct performance obligations. The transaction price for a typical arrangement includes the price for: smart home hardware devices, professional services, and a subscription for use of the Company's proprietary software (“Hosted Services”). Included in these contracts are centrally connected devices ("Hub Devices"), which integrate the Company’s proprietary enterprise software with third party smart devices. Historically, the Company sold Hub Devices which only functioned with a subscription to its proprietary software (“non-distinct Hub Devices"). During the year ended December 31, 2022, the Company began shipping Hub Devices with features that function independently from its proprietary software subscription (“distinct Hub Devices"). Non-distinct Hub Devices are recognized as a single performance obligation with the Company’s proprietary software in Hosted Services revenue, while distinct Hub Devices are recognized as a separate performance obligation in hardware revenue. When distinct Hub Devices are included in a contract, the Hosted Services performance obligation is comprised of only the Company’s proprietary software. The Company considers delivery for each of the hardware, professional services and Hosted Services to be separate performance obligations. The hardware performance obligation includes the delivery of smart home hardware and distinct Hub Devices. The professional services performance obligation includes the services to install the hardware. The Hosted Services performance obligation provides a subscription that allows the customer access to software during the contracted-use term when the promised service is provided to the customer. Also included in the hosted service performance obligation are non-distinct Hub Devices that only function with a subscription to the Company’s proprietary software. Payments are received by the Company by credit card, check or automated clearing house payments and payment terms are determined by individual contracts and generally range from due upon receipt to net 30 days. Taxes collected from customers and remitted to governmental authorities are not included in reported revenue. Payments received from customers in advance of revenue recognition are reported as deferred revenue. The Company has elected the following practical expedients following the adoption of ASC 606: • Shipping and handling costs: the Company elected to account for shipping and handling activities that occur after the customer has obtained control of a good as fulfillment activities (i.e., an expense) rather than as a promised service and are recorded as hardware cost of revenue. Amounts billed for shipping and handling fees are recorded as revenue. • Sales tax collected from customers: the Company elected to exclude from the measurement of transaction price all taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer. • Measurement of the transaction price: the Company applies the practical expedient that allows for inclusion of the future auto-renewals in the initial measurement of the transaction price. The Company only applies these steps when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services it transfers to a customer. • Significant financing component: the Company elected not to adjust the promised amount of consideration for the effects of a significant financing component when the period between the transfer of promised goods or services and when the customer pays for the goods or services will be one year or less. Timing of Revenue Recognition is as follows. • Hardware Revenue Hardware revenue results from the direct sale to customers of hardware smart home devices, which devices generally consist of a distinct Hub Device, door-locks, thermostats, sensors, and light switches. These hardware devices provide features that function independently without subscription to the Company's proprietary software, and the performance obligation for hardware revenue is considered satisfied and revenue is recognized at a point in time when the hardware device is shipped to the customer. The Company generally provides a one-year warranty period on hardware devices that are delivered and installed. The cost of the warranty is recorded as a component of cost of hardware revenue. • Professional Services Revenue Professional services revenue results from installing smart home hardware devices, which does not result in significant customization of the product and is generally performed over a period from two to four weeks. Installations can be performed by the Company's employees, contracted out to a third-party with the Company's employees managing the engagement, or the customer can perform the installation themselves. The Company’s professional services contracts are generally arranged on a fixed price basis and revenue is recognized over the period in which the installations are completed. • Hosted Services Revenue Hosted Services revenue primarily consists of monthly subscription revenue generated from fees that provide customers access to one or more of the Company’s proprietary software applications including access controls, asset monitoring and related services. These subscription arrangements have contractual terms ranging from one-month to eight-years and include recurring fixed plan subscription fees. Arrangements with customers do not provide the customer with the right to take possession of the Company’s software at any time. Customers are granted continuous access to the services over the contractual period. Accordingly, fees collected for subscription services are recognized on a straight-line basis over the contract term beginning on the date the subscription service is made available to the customer. Variable consideration is immaterial. Also included in Hosted Services revenue are non-distinct Hub Devices. The Company considers those devices and hosting services subscription a single performance obligation and therefore defers the recognition of revenue for those devices upon shipment to the customer. The revenue is then amortized over its average service life. When a non-distinct Hub Device is included in a contract that does not require a long-term service commitment, the customer obtains a material right to renew the service because purchasing a new device is not required upon renewal. If a contract contains a material right, proceeds are allocated to the material right and recognized over the period of benefit, which is generally four years. |
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| Cost of Revenue | Cost of Revenue Cost of revenue consists primarily of direct costs of products and services together with the indirect cost of estimated warranty expense and customer care and support over the life of the service arrangement. • Hardware Cost of hardware revenue consists primarily of direct costs of proprietary products, such as the distinct Hub Device, hardware devices, supplies purchased from third-party providers, and shipping costs, together with indirect costs related to warehouse facilities (including depreciation and amortization of capitalized assets and right-of-use assets), infrastructure costs, personnel-related costs associated with the procurement and distribution of products and warranty expenses together with the indirect cost of customer care and support. • Professional Services Cost of professional services revenue consists primarily of direct costs related to personnel-related expenses for installation and supervision of installation services, general contractor expenses and travel expenses associated with the installation of products and indirect costs that are also primarily personnel-related expenses in connection with training of and ongoing support for customers and residents. • Hosted Services Cost of Hosted Services revenue consists primarily of the amortization of the direct costs of non-distinct Hub Devices, consistent with the revenue recognition period noted above in "Hosted Services Revenue", and infrastructure costs associated with providing software applications together with the indirect cost of customer care and support over the life of the service arrangement. |
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| Deferred Cost of Revenue | Deferred Cost of Revenue Deferred cost of revenue includes all direct costs included in cost of revenue for Hosted Services and non-distinct Hub Devices that have been deferred to future periods. |
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| Research and Development | Research and Development These expenses relate to the research and development of new products and services and enhancements to the Company’s existing product offerings. The Company accounts for the cost of research and development by capitalizing qualifying costs, which are incurred during the product development stage, and amortizing those costs over the product’s estimated useful life. The Company expenses preliminary evaluation costs as they are incurred before the product development stage, as well as post development implementation and operation costs, such as training, maintenance and minor upgrades. As of September 30, 2023, the Company had capitalized $6,182 of research and development costs in other long-term assets on the Consolidated Balance Sheets, of which $5,620 remains to be amortized. As of December 31, 2022, the Company had capitalized $3,145 of research and development costs in other long-term assets on the Consolidated Balance Sheets, of which $3,066 remains to be amortized. During the three and nine months ended September 30, 2023, $228 and $483, respectively, of amortization expense related to capitalized software was recorded in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss. There was no such amortization expense recorded during the three and nine months ended September 30, 2022. |
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| Advertising | Advertising Advertising costs are expensed as incurred and recorded as a component of sales and marketing expense. The Company incurred $97 of advertising expenses for the three months ended September 30, 2022. There were no such advertising expenses recorded for the three months ended September 30, 2023. The Company incurred $268 and $237 of advertising expenses for the nine months ended September 30, 2023 and 2022, respectively. |
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| Segments | Segments The Company has one operating segment and one reportable segment as its chief operating decision maker, who is its Chief Executive Officer, reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company’s principal operations are in the United States and the Company’s long-lived assets are located primarily within the United States. The Company held $7,656 and $8,096 of assets outside the United States at September 30, 2023, and December 31, 2022, respectively. |
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| Recent Accounting Guidance | Recent Accounting Guidance Recently Adopted Accounting Guidance In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-12, “Income Taxes (Topic 740)”, which simplifies the accounting for income taxes, primarily by eliminating certain exceptions found in the Accounting Standards Codification, section 740. This standard is effective for fiscal periods beginning after December 15, 2021. The Company adopted ASU No. 2019-12 effective January 1, 2022, which did not have a material impact on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” which modifies the measurement of expected credit losses of certain financial instruments. This update is effective for fiscal years beginning after December 15, 2022 and must be applied using a modified-retrospective approach, with early adoption permitted. The requirement to disclose credit quality indicators by year or origination is not applicable to trade receivables due in one year or less that result from revenue transactions within the scope of ASC 606. The Company adopted ASU 2016-13 effective January 1, 2023 using the modified-retrospective approach. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. |
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Significant Accounting Policies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Revenue as a Percentage of Total Revenue and Accounts Receivable as a Percentage of Total Accounts Receivable for Each Significant Customer | Revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable for each significant customer follows.
* Total less than 10% for the respective period |
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| Schedule of Intangible Assets Estimated Useful Life | Intangible assets are amortized on a straight-line basis based on their estimated useful lives. The estimated useful life of these intangible assets are as follow
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| Schedule of Error Corrections and Prior Period Adjustments | The following table presents the effects of the restatement to the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2022.
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Fair Value Measurements and Fair Value of Instruments (Tables) |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Carrying Values and Fair Values of Financial Instruments | The following tables display the carrying values and fair values of financial instruments.
The Company reports the current portion of restricted cash as a separate item in the Consolidated Balance Sheets and the non-current portion is a component of other long-term assets in the Consolidated Balance Sheets.
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| Schedule of Changes In Fair Value of Liabilities | The changes in the fair value of the Company's Level 3 liabilities for the nine months ended September 30, 2023 and the year ended December 31, 2022 are as follows.
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| Schedule of Earnout of Measurement | The following table sets forth the weighted-average assumptions used to estimate the fair value of the earnout payment as of September 30, 2023 and December 31, 2022.
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Revenue and Deferred Revenue (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Disaggregation of Revenue | In the following tables, revenue is disaggregated by primary geographical market and type of revenue.
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| Summary of Deferred Revenue, by Arrangement, Disclosure | A summary of the change in deferred revenue is as follows.
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Other Balance Sheet Information (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance Sheet Related Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Inventory | Inventory consisted of the following.
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| Summary of Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consisted of the following.
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| Summary of Property and Equipment, Net | Property and equipment, net consisted of the following.
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| Summary of Intangible Assets And Goodwill | Intangible assets, net consisted of the following.
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| Summary of Finite Lived Intangible Assets Amortization Expense | Total future amortization for finite-lived assets is estimated as follows.
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| Summary of Other Long-term Assets | Other long-term assets consisted of the following.
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| Summary of Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities consisted of the following.
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Stock-Based Compensation (Tables) |
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| Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Stock Options Activity | The table below summarizes the activity related to stock options, pursuant to the 2018 Plan and 2021 Plan, for the nine months ended September 30, 2023.
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| Summary of Restricted Stock Units Activity | The table below summarizes the activity related to RSUs, pursuant to the 2018 Plan and 2021 Plan, for the nine months ended September 30, 2023.
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| Summary of Fair value of Stock Option Grants | The fair value of stock option grants is estimated by the Company on the date of grant using the Black Scholes-Merton option pricing model with the following weighted-average assumptions for the nine months ended September 30, 2023 and 2022. During the nine months ended September 30, 2023 and 2022, there were 3,299 and 175 options granted, respectively. During the three months ended September 30, 2023, there were 229 options granted. There were no options granted during the three months ended September 30, 2022.
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| Summary of Stock-based Compensation Expense | The Company recorded stock-based compensation expense as follows.
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Net Loss Per Share (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Computation of Diluted Net Loss per Share Attributable to Common Stockholders | The following potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because inclusion of the shares on an as-converted basis would have been anti-dilutive.
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Acquisitions (Tables) |
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| Business Acquisition [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Pro Forma Operating Results | Pro forma operating results were prepared for comparative purposes only and are not indicative of what would have occurred had the acquisition been made as of January 1, 2022 or of the results that may occur in the future.
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| SightPlan | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Acquisition [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Total Purchase Consideration and Fair Values of Acquired Assets and Liabilities at Acquisition Date and Statement of Cash Flows | The total purchase consideration and the fair values of the acquired assets and liabilities at the acquisition date were as follows.
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| Schedule of Recorded Intangible Assets at Fair Value | The Company recorded intangible assets at their fair value, which consisted of the following.
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Description of Business - Additional Information (Details) |
Nov. 23, 2020
Business
|
|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Condition for future business combination number of businesses minimum | 1 |
Significant Accounting Policies - Schedule of Error Corrections and Prior Period Adjustments (Details) - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Change in Prepaid expenses and other Assets | $ 537 | $ 5,677 |
| Net cash used in operating activities | (1,366) | (79,380) |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||
| Capitalized software costs | (3,197) | (2,668) |
| Net cash used in investing activities | $ (3,313) | (132,423) |
| As Previously Reported | ||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Change in Prepaid expenses and other Assets | 3,009 | |
| Net cash used in operating activities | (82,048) | |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||
| Net cash used in investing activities | (129,755) | |
| Adjustment | ||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Change in Prepaid expenses and other Assets | 2,668 | |
| Net cash used in operating activities | 2,668 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||
| Capitalized software costs | (2,668) | |
| Net cash used in investing activities | $ (2,668) | |
Significant Accounting Policies - Revenue as a Percentage of Total Revenue and Accounts Receivable as a Percentage of Total Accounts Receivable for Each Significant Customer (Details) - Customer Concentration Risk |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Customer A | Accounts Receivable | |||||
| Concentration Risk [Line Items] | |||||
| Concentration risk, percentage | 30.00% | ||||
| Customer A | Revenue | |||||
| Concentration Risk [Line Items] | |||||
| Concentration risk, percentage | 13.00% | ||||
| Customer B | Revenue | |||||
| Concentration Risk [Line Items] | |||||
| Concentration risk, percentage | 12.00% | ||||
| Customer C | Accounts Receivable | |||||
| Concentration Risk [Line Items] | |||||
| Concentration risk, percentage | 20.00% | ||||
| Customer C | Revenue | |||||
| Concentration Risk [Line Items] | |||||
| Concentration risk, percentage | 20.00% | 13.00% | 15.00% | ||
Significant Accounting Policies - Schedule Of Intangible Assets Estimated Useful Life (Details) |
Sep. 30, 2023 |
|---|---|
| Trade Name | |
| Finite-Lived Intangible Assets [Line Items] | |
| Intangible assets estimated useful life | 5 years |
| Customer Relationships | Minimum | |
| Finite-Lived Intangible Assets [Line Items] | |
| Intangible assets estimated useful life | 10 years |
| Customer Relationships | Maximum | |
| Finite-Lived Intangible Assets [Line Items] | |
| Intangible assets estimated useful life | 13 years |
| Developed Technology | Minimum | |
| Finite-Lived Intangible Assets [Line Items] | |
| Intangible assets estimated useful life | 1 year |
| Developed Technology | Maximum | |
| Finite-Lived Intangible Assets [Line Items] | |
| Intangible assets estimated useful life | 7 years |
Fair Value Measurements and Fair Value of Instruments - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| General and Administrative Expense | ||||
| Fair Value Disclosures [Line Items] | ||||
| Increase (decrease) in fair value of earnout | $ (81) | $ 344 | $ 225 | $ 344 |
Fair Value Measurements and Fair Value of Instruments - Schedule of Changes in Fair Value (Details) - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Fair Value Disclosures [Line Items] | ||
| Payment of earnout in connection with the iQuue acquisition | $ 1,702 | |
| Level 3 | ||
| Fair Value Disclosures [Line Items] | ||
| Balance at beginning of period | 5,540 | $ 5,230 |
| Payment of earnout in connection with the iQuue acquisition | (1,702) | |
| Increase in fair value of earnout | 225 | 310 |
| Balance at end of period | $ 4,063 | $ 5,540 |
Fair Value Measurements and Fair Value of Instruments - Schedule of Earnout Payment of Measurement (Details) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Discount Rate | ||
| Fair Value Disclosures [Line Items] | ||
| Earnout payment | 0.115 | 0.098 |
| Volatility | ||
| Fair Value Disclosures [Line Items] | ||
| Earnout payment | 0.42 | 0.42 |
Revenue and Deferred Revenue - Summary of Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Disaggregation of Revenue [Line Items] | ||||
| Total revenue | $ 58,104 | $ 47,502 | $ 176,585 | $ 127,270 |
| United States | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total revenue | 58,056 | 47,098 | 175,616 | 125,478 |
| International | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total revenue | 48 | 404 | 969 | 1,792 |
| Hardware | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total revenue | 35,631 | 26,683 | 100,744 | 69,692 |
| Professional Services | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total revenue | 5,962 | 7,478 | 28,781 | 23,510 |
| Hosted Services | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total revenue | $ 16,511 | $ 13,341 | $ 47,060 | $ 34,068 |
Revenue and Deferred Revenue - Summary of Deferred Revenue, by Arrangement, Disclosure (Details) - USD ($) $ in Thousands |
3 Months Ended | |||||
|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
|
| Revenue from Contract with Customer [Abstract] | ||||||
| Deferred revenue, beginning balance | $ 142,836 | $ 142,969 | $ 139,948 | $ 125,445 | $ 116,772 | $ 95,597 |
| Revenue recognized from balance of deferred revenue at the beginning of the period | (12,096) | (11,896) | (14,505) | (9,823) | (11,051) | (6,864) |
| Revenue deferred during the period | 12,286 | 16,954 | 19,593 | 15,998 | 23,879 | 30,247 |
| Revenue recognized from revenue originated and deferred during the period | (5,447) | (5,191) | (2,067) | (3,451) | (4,155) | (2,208) |
| Deferred revenue, ending balance | $ 137,579 | $ 142,836 | $ 142,969 | $ 128,169 | $ 125,445 | $ 116,772 |
Revenue and Deferred Revenue - Additional Information (Details) - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Revenue from Contract with Customer [Abstract] | ||
| Deferred revenue, payments recognized | $ 39,816 | $ 31,137 |
Other Balance Sheet Information - Summary of Inventory (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Finished Goods | $ 47,161 | $ 74,276 |
| Raw Materials | 360 | 1,449 |
| Total inventory | $ 47,521 | $ 75,725 |
Other Balance Sheet Information - Inventory (Additional Information) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Inventory Disclosure [Abstract] | ||||
| Inventory write-down | $ 1,857 | $ 0 | $ 2,130 | $ 0 |
Other Balance Sheet Information - Summary of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Prepaid Expense and Other Assets, Current [Abstract] | ||
| Prepaid expenses | $ 8,765 | $ 5,042 |
| Other current assets | 808 | 4,140 |
| Total prepaid expenses and other current assets | $ 9,573 | $ 9,182 |
Other Balance Sheet Information - Summary of Property and Equipment, Net (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Property and equipment | $ 3,787 | $ 3,685 |
| Less: Accumulated depreciation | (2,198) | (1,616) |
| Total property and equipment, net | 1,589 | 2,069 |
| Computer Hardware | ||
| Property and equipment | 2,212 | 2,192 |
| Leasehold Improvements | ||
| Property and equipment | 716 | 698 |
| Warehouse and Other Equipment | ||
| Property and equipment | 713 | 632 |
| Furniture and Fixtures | ||
| Property and equipment | $ 146 | $ 163 |
Other Balance Sheet Information - Property and equipment, net (Additional Information) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Depreciation and amortization expense and plant and equipment | $ 182 | $ 175 | $ 582 | $ 535 |
Other Balance Sheet Information - Summary of Intangible Assets And Goodwill (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets, Gross | $ 34,490 | $ 34,490 |
| Accumulated amortization | (6,273) | (3,367) |
| Total intangible assets, net | 28,217 | 31,123 |
| Customer Relationships | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets, Gross | 22,990 | 22,990 |
| Accumulated amortization | (3,445) | (1,778) |
| Total intangible assets, net | 19,545 | 21,212 |
| Developed technology | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets, Gross | 10,600 | 10,600 |
| Accumulated amortization | (2,543) | (1,440) |
| Total intangible assets, net | 8,057 | 9,160 |
| Trade Name | ||
| Finite-Lived Intangible Assets [Line Items] | ||
| Intangible assets, Gross | 900 | 900 |
| Accumulated amortization | (285) | (149) |
| Total intangible assets, net | $ 615 | $ 751 |
Other Balance Sheet Information - Intangible assets (Additional Information) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Amortization of intangible assets | $ 968 | $ 1,047 | $ 2,906 | $ 2,322 |
Other Balance Sheet Information - Summary of Finite Lived Intangible Assets Amortization Expense (Details) $ in Thousands |
Sep. 30, 2023
USD ($)
|
|---|---|
| Finite-Lived Intangible Assets, Net, Amortization Expense, Rolling Maturity [Abstract] | |
| 2023 - Remaining | $ 968 |
| 2024 | 3,873 |
| 2025 | 3,873 |
| 2026 | 3,873 |
| 2027 | 3,734 |
| Thereafter | 11,896 |
| Total | $ 28,217 |
Other Balance Sheet Information - Summary of Other long-term Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
Sep. 30, 2022 |
|---|---|---|---|
| Assets, Noncurrent [Abstract] | |||
| Capitalized software costs | $ 5,620 | $ 3,066 | |
| Operating lease - ROU asset, net | $ 2,921 | $ 3,968 | |
| Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Total other long-term assets | Total other long-term assets | |
| Restricted cash, long-term portion | $ 247 | $ 247 | $ 495 |
| Other long-term assets | 1,728 | 2,240 | |
| Total other long-term assets | $ 10,516 | $ 9,521 |
Other Balance Sheet Information - Other long-term assets - (Additional Information) (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| General and Administrative Expenses | ||||
| Amortization expense of all other long-term intangible assets | $ 248,000 | $ 0 | $ 503,000 | $ 0 |
Other Balance Sheet Information - Summary of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Accrued Liabilities and Other Liabilities [Abstract] | ||
| Accrued compensation costs | $ 8,769 | $ 14,157 |
| Accrued expenses | 6,128 | 8,571 |
| Warranty allowance | 1,696 | 2,277 |
| Other | 4,551 | 9,391 |
| Total accrued expenses and other current liabilities | $ 21,144 | $ 34,396 |
Stock-Based Compensation - Summary of Fair value of Stock Option Grants (Details) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
| Risk free interest | 1.47% | |
| Risk free interest minimum | 3.55% | |
| Risk free interest maximum | 4.32% | |
| Dividend yield | 0.00% | 0.00% |
| Expected volatility | 75.00% | 58.80% |
| Expected life (years) | 6 years 29 days | |
| Maximum | ||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
| Expected life (years) | 6 years 3 months | |
| Minimum | ||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
| Expected life (years) | 6 years 29 days | |
Stock-Based Compensation - Summary of Stock-based Compensation Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items] | ||||
| Compensation expense | $ 3,273 | $ 3,272 | $ 10,229 | $ 10,618 |
| Cost of revenue | ||||
| Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items] | ||||
| Compensation expense | 252 | 756 | ||
| Research and Development | ||||
| Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items] | ||||
| Compensation expense | 902 | 912 | 2,792 | 2,726 |
| Sales and Marketing | ||||
| Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items] | ||||
| Compensation expense | 155 | 188 | 573 | 1,317 |
| General and Administrative Expense | ||||
| Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items] | ||||
| Compensation expense | $ 1,964 | $ 2,172 | $ 6,108 | $ 6,575 |
Income Taxes - Additional Information (Details) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Valuation Allowance [Line Items] | ||||
| Effective tax rate, percent | 0.43% | (0.31%) | 0.07% | 7.11% |
| U.S. statutory rate | 21.00% | |||
Commitments and Contingencies - Additional Information (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Loss Contingencies [Line Items] | ||
| Loss contingency, accruals | $ 0 | $ 0 |
Acquisitions - Schedule of Reconciles the Elements Of Acquisition to Consolidated Statement of Cash Flows (Details) - SightPlan - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 22, 2022 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Business Acquisition [Line Items] | |||
| Cash paid at acquisition | $ 130,931 | ||
| Cash acquired | (1,978) | ||
| Cash consideration released from escrow | 850 | $ 850 | |
| Net working capital adjustment | (127) | $ (127) | |
| Payment of acquisition consideration, net of cash acquired | $ 129,676 | $ 128,953 |
Acquisitions - Schedule of Recorded Intangible Assets at Fair Value (Details) - SightPlan - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2022 |
Sep. 30, 2023 |
Mar. 22, 2022 |
|
| Acquired Finite-Lived Intangible Assets [Line Items] | |||
| Total intangible assets | $ 30,900 | $ 30,900 | $ 30,900 |
| Trade Name | |||
| Acquired Finite-Lived Intangible Assets [Line Items] | |||
| Estimated useful life (in years) | 5 years | ||
| Total intangible assets | $ 900 | ||
| Customer Relationships | |||
| Acquired Finite-Lived Intangible Assets [Line Items] | |||
| Estimated useful life (in years) | 10 years | ||
| Total intangible assets | $ 19,700 | ||
| Developed Technology | |||
| Acquired Finite-Lived Intangible Assets [Line Items] | |||
| Estimated useful life (in years) | 7 years | ||
| Total intangible assets | $ 10,300 |
Acquisition - Schedule of Pro Forma Operating Results (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Business Combinations [Abstract] | ||||
| Revenues | $ 58,104 | $ 47,502 | $ 176,585 | $ 129,622 |
Subsequent Events - Additional Information (Details) shares in Thousands |
1 Months Ended |
|---|---|
|
Oct. 31, 2023
shares
| |
| Subsequent Events | Employee Stock Purchase Plan | Class A Common Stock | |
| Subsequent Event [Line Items] | |
| Shares purchased under ESPP | 127 |