Overview
SmartRent, Inc. (NYSE:SMRT) is an enterprise real estate technology company that provides comprehensive management software and applications designed for property owners, managers and residents. The company's 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.
Financials
In the latest fiscal year, SmartRent reported annual revenue of $236,838,000 and a net loss of $34,587,000. The company generated annual operating cash flow of $5,981,000 and free cash flow of $2,208,000. These financial results demonstrate the company's ability to drive top-line growth while managing its costs and cash flow.
For the first quarter of 2024, SmartRent reported revenue of $50,489,000, a decrease of 22% compared to the same period in the prior year. This decline was primarily driven by a 22% decrease in hardware revenue to $29,077,000 and a 73% decrease in professional services revenue to $3,458,000, partially offset by a 20% increase in hosted services revenue to $17,954,000.
The decrease in hardware revenue was almost equally attributable to a 12% decrease in hardware ARPU, primarily driven by a change in product mix, and a 12% decrease in the number of units shipped. The decrease in professional services revenue was primarily attributable to a 46% decrease in new units deployed.
In contrast, the company's SaaS business continued to demonstrate strong growth, with SaaS ARR increasing 32% year-over-year to $47.6 million in Q1 2024. This growth was driven by a 24% increase in total units deployed and continued upselling and cross-selling of the company's comprehensive platform solutions. SaaS ARPU also increased 4% year-over-year to $5.41.
Gross margin improved significantly in the quarter, increasing to 38.5% from 14% in the same period of the prior year. This was primarily attributable to a favorable change in product mix, with a higher proportion of the company's higher-margin Alloy SmartHome hardware. Gross profit increased by over $10 million to $19.4 million.
Business Overview
SmartRent's Smart Operations solutions, which include work order management, leasing and resident call handling automation, and inspection process automation, are now servicing approximately 1.3 million units, demonstrating the company's ability to expand its platform and drive increased customer adoption.
The company also continued to make progress on its community WiFi initiative, which involves onboarding new talent and developing advanced technologies to capitalize on the growing demand for this solution. SmartRent reported that it is seeing robust demand for community WiFi across the multifamily rental housing segment, with more interest from new customers than for its IoT offerings.
Outlook
Looking ahead, SmartRent provided guidance for the second quarter of 2024, expecting revenue in the range of $49 million to $55 million and adjusted EBITDA in the range of negative $500,000 to positive $500,000. For the full year 2024, the company reiterated its previous guidance of revenue in the range of $260 million to $290 million and adjusted EBITDA in the range of $5 million to $8 million.
Risks and Challenges
The company's management noted that the current macroeconomic environment, characterized by higher interest rates, slowing rent growth, and increasing supply, is creating headwinds for many of its customers. However, SmartRent is well-positioned to navigate these challenges, as its solutions can provide significant cost savings and operational efficiencies for property owners and managers.
Recent Developments
One example is Centerspace, a customer that recently piloted SmartRent's smart apartment solutions, including smart locks, thermostats, leak sensors, and a resident mobile app, in 10 communities. The pilot yielded such positive results that Centerspace is now implementing SmartRent's solutions in 38 additional communities and expects to generate an additional $3 million or more in cash flow due to rent premiums and savings on water leaks.
SmartRent's unique position as the only provider to deliver purpose-built hardware, software, and end-to-end implementation and support gives the company a significant competitive advantage in the market. The company's deep integration with leading rental housing platforms, which reduces vendor fatigue and automates processes, further enhances its value proposition to customers.
As SmartRent looks to the second half of 2024 and beyond, the company's outlook is reinforced by the durable and scalable nature of its offerings, as well as its proven track record as a trusted provider to the top names in real estate. This positions the company exceptionally well to capture significant market share and sustain its growth trajectory.
Conclusion
In conclusion, while the current macroeconomic environment presents challenges, SmartRent's comprehensive solutions, innovative product roadmap, and strong customer relationships position the company for potential future success. The company's focus on driving SaaS revenue growth, improving gross margins, and achieving sustained profitability underscores its commitment to creating long-term value for shareholders.