Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SmartRent Inc (SMRT, Financial) achieved three consecutive quarters of positive adjusted EBITDA, reflecting improved profitability.
- The company reported a significant 32% year-over-year increase in SaaS revenue, driven by improvements in SaaS ARPU and the number of units deployed.
- Gross margin improved to 35.7% from 18.5% last year, driven by cost management and operational improvements.
- SmartRent Inc (SMRT) delivered record SaaS annual recurring revenue of $51.2 million, indicating strong customer trust and innovative solutions.
- The company has a strong balance sheet with substantial cash reserves and no debt, positioning it well for future growth opportunities.
Negative Points
- Total revenue for the quarter decreased by 9% year-over-year, primarily due to lower units deployed.
- Hardware revenue decreased by $3 million or 11%, and professional services revenue decreased by $4.2 million or 42% from the prior year.
- The company is experiencing delays in customer capital expenditures, pushing anticipated 2024 deployments to 2025.
- SmartRent Inc (SMRT) has suspended financial guidance due to ongoing CEO transition, market conditions, and customer spending delays.
- The channel partner sales program did not meet expectations, leading to a refocus on direct sales efforts.
Q & A Highlights
Q: How does the WiFi strategy fit into the recent management changes? Has the outlook or investment plans changed?
A: The WiFi component remains a bullish opportunity, and we continue to invest in it. While a new CEO might bring changes, we fundamentally believe in the WiFi opportunity as a compelling part of our offering. - Daryl Stemm, CFO
Q: Can you quantify the unit deployments or bookings being pushed out of 2024? What needs to happen for these projects to get back on track?
A: We have high confidence that these deployments will occur in 2025. Persistently high interest rates have impacted our forecast deployment. A reduction in interest rates would increase our confidence in the actual deployments being pushed out to 2025. - Daryl Stemm, CFO
Q: Why do you have high confidence that what gets pushed from 2024 will land in 2025?
A: We believe the likelihood of interest rate reductions is higher now. Our customers have expressed confidence in returning to more normalized CapEx investment in 2025. - Daryl Stemm, CFO
Q: Are you suggesting a change in the hardware approach to focus more on software and connecting the platform?
A: Our platform is comprehensive, and both hardware and software are equally important. We are renewing our focus on deployed units, which are primary drivers behind increasing SaaS revenue. - Daryl Stemm, CFO
Q: What characteristics are you looking for in the next CEO?
A: We are looking for someone with a history of successful scaling, as the skill set required to grow from $200 million to $1 billion is different from getting to $200 million. - Daryl Stemm, CFO
Q: What drove the big sequential improvement in SaaS ARPU?
A: The primary reason was the timing of new deployments in Q1, which were relatively late in the quarter. Additionally, bookings SaaS ARPU remains above our existing SaaS ARPU, indicating incremental growth. - Daryl Stemm, CFO
Q: Why did hosted services gross margin not go up despite changes in revenue mix?
A: Hosted services margin was relatively flat during the quarter. It is up year over year, and we expect it to approach 75% over time. - Daryl Stemm, CFO
Q: Can you provide insights on what to expect for the rest of the year in terms of revenue and profitability?
A: We are not prepared to give specific guidance at this point. As visibility improves and the macroeconomic climate changes, we will provide specific guidance later this year and around 2025. - Daryl Stemm, CFO
Q: What is the expected timeline for hiring a new CEO?
A: The Board is engaged with a leading executive search firm to identify and evaluate candidates. We are focused on making a smooth and orderly transition without setting a specific timeline. - Daryl Stemm, CFO
Q: What prompted the change in the channel partner strategy?
A: We are scaling back the program as it did not work as expected last year. We are refocusing our team to directly sell to existing customers to maintain deep customer relationships and enhance service. - Daryl Stemm, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
