Q4 2024 SmartRent Inc Earnings Call
Novi: Thank you for standing by. My name is Novi, and I will be your conference operator today.
Thank you for standing by my name is movie and I will be your conference operator today at this time I would like to welcome everyone to the Smart ranked fourth quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Novi: At this time, I would like to welcome everyone to the SmartRent Fourth Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. We also ask that you please limit your questions to one question, one follow-up. Thank you.
Speaker Change: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again, we also ask that you. Please limit your questions to one question one follow up. Thank you I would now like to turn the call over to Christian Lee Chief.
Kristen Lee: I would now like to turn the call over to Kristen Lee, Chief Legal Officer. Hello and thank you for joining us today. My name is Kristen Lee, Chief Legal Officer for SmartRent. I'm joined today by our newly appointed President and Chief Executive Officer, Shane Paladin, and Daryl Stemm, Chief Financial Officer.
Legal officer.
Speaker Change: Hello, and thank you for joining US today My name is Christina Lee Chief Legal officer for Smart rent I'm joined today by our newly appointed President and Chief Executive Officer, Shayne, Paladin, and Darryl stem Chief Financial Officer.
Kristen Lee: Before the market opened today, we issued an earnings release and filed our 10-K with the SEC, both of which are available on the Investor Relations section of our website, SmartRent.com.
Speaker Change: Before the market opened today, we issued an earnings release and filed our 10-K with the SEC both of which are available on the Investor Relations section of our website smart rent dotcom before.
Kristen Lee: Before I turn the call over to Shane, I would like to remind everyone that the discussion today may contain certain forward-looking statements that involve risks and uncertainty. Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q.
Speaker Change: Before I turn the call over to Shane I would like to remind everyone that the discussion today may contain certain forward looking statements that involve risks and uncertainties various factors could cause our actual results to be materially different from any future results expressed or implied by such statements.
Speaker Change: These factors are discussed in our SEC filings, including our annual report on Form 10-K, and quarterly reports on Form 10-Q.
Kristen Lee: We undertake no obligation to provide updates regarding forward-looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial position in SmartRent.
Speaker Change: We undertake no obligation to provide updates regarding forward looking statements made during this call and we recommend that all investors review. These reports thoroughly before taking a financial position in smart rent.
Kristen Lee: Also during today's call, we will refer to certain non-GAAP financial measures. A discussion of these non-GAAP financial measures, along with the reconciliation to the most directly comparable GAAP measure, is included in today's earnings. We would also like to highlight that a fourth-quarter and full-year earnings presentation is available on the Investor Relations section of our website.
Speaker Change: Also during today's call, we will refer to certain non-GAAP financial measures a discussion of these non-GAAP financial measures along with a reconciliation to the most directly comparable GAAP measure is included in today's earnings release, we would also like to highlight that our fourth quarter and full year earnings presentation is available on the investor.
Speaker Change: <unk> section of our website and with that I will turn the call over to Shane.
Shane Paladin: And with that, I will turn the call over to Shane. Thanks, Kristen, and good morning, everyone. I'm Shane Paladin, and I'm truly excited to be joining you today as SmartRent's new CEO.
Shane Palatin: Thanks, Christian and good morning, everyone, I'm ashamed palatin and I'm truly excited to be joining you today as smart wrench, new CEO, while ive only been on the company for about a week I wanted to take this opportunity to introduce myself and share some initial observations.
Shane Paladin: While I've only been on the company for about a week, I wanted to take this opportunity to introduce myself and share some initial observations. First, I'd like to thank our board of directors and the management team for their warm welcome and support during this transition. I'd also like to express my appreciation to our employees for their dedication to our mission and to our customers for their continued partnership.
Shane Palatin: First I'd like to thank our board of directors and the management team for their warm welcome and support during this transition I'd also like to express my appreciation to our employees for their dedication to our mission and to our customers for their continued partnership.
Shane Paladin: Throughout my career, I've been drawn to businesses with transformative potential and compelling marketing opportunities. while evaluating the strength of the product is fundamental to success. What attracted me to SmartRent is our exceptionally strong product foundation, SaaS growth potential, and the clear value proposition we deliver to our. Customers invest in software solutions to grow revenue, reduce costs, or mitigate and SmartRent delivers on all three of these values. We help property owners and operators increase revenue through premium pricing and enhanced resident loyalty, reduced operational costs through efficiency, and mitigate risk through improved property management capabilities. In my brief time here, one thing that has become crystal clear, the return on investment for our customers is compelling and quantifiable.
Shane Palatin: About my career I have been drawn to businesses with transformative potential and compelling marketing opportunities.
Shane Palatin: While evaluating the strength of the product is fundamental to success. What attracted me to smartphones is our exceptionally strong product foundation SaaS growth potential and our clear value proposition, we deliver to our customers.
Shane Palatin: Customers invest in software solutions to grow revenue reduce costs or mitigate risks and smart rent delivers in all three of these value drivers.
Shane Palatin: We help property owners and operators increase revenue through premium pricing and enhanced resident loyalty reduced operational costs through efficiency and mitigate risk through improved property management capabilities. In my brief time here one thing that has become crystal clear the return on investment for our customers is compelling and quantifiable.
Shane Paladin: When our customers implement SmartRent solutions effectively, they see measurable improvements in operational efficiency, resident satisfaction, and financial Our ability to deliver demonstrable financial benefits to our customers is a key differentiator in the market.
Shane Palatin: When our customers implement smart rent solutions effectively they see measurable improvements in operational efficiency resident satisfaction and financial performance, our ability to deliver demonstrable financial benefits to our customers is a key differentiator in the market.
Shane Paladin: Our vision is to provide property owners and operators with a comprehensive, unified platform that gives them everything they need to know about their property's performance, efficiency, and opportunities for optimization. When I look at SmartRent's position, I see tremendous opportunity to deepen market penetration and expand our reach. We have strong relationships with 15 of the top 20 multifamily operators, and our more than 600 customers collectively own and manage over 7 million rental units. Yet, with a total addressable market exceeding 50 million rental units, we've barely scratched the surface of the potential smart property technology. This substantial gap between our current footprint and the vast addressable market represents a significant growth runway for our solutions across customers of all sizes.
Shane Palatin: Our vision is to provide property owners and operators with a comprehensive unified platform that gives them everything they need to know about their properties performance efficiency and opportunities for optimization when.
Shane Palatin: When I look at smart <unk> position, I see tremendous opportunity to deepen market penetration and expand our reach we have strong relationships with 15 of the top 20 multifamily operators and our more than 600 customers collectively own and manage over 7 million rental units, yet with a total addressable market exceeding 50 million rental units.
Shane Palatin: We've barely scratched the surface of the potential smart property technology adoption.
Shane Palatin: This substantial gap between our current footprint and the vast addressable market represents a significant growth runway for our solutions across customers of all sizes. Additionally.
Shane Paladin: Additionally, mid-market owners and operators want the same operational efficiencies and revenue growth that our large multifamily operations experience today with SmartRent. And this is a core focus for our go-to-market organization.
Shane Palatin: Additionally, midmarket owners and operators want the same operational efficiencies and revenue growth that are large multifamily operations experienced today with smart rent and this is a core focus for our go to market organization looking at our business mix in Q4, 'twenty 'twenty four we generated 38% of our revenue from recurring SaaS subscriptions.
Shane Paladin: Looking at our business mix, in Q4 2024, we generated 38% of our revenue from recurring SAS subscriptions, which was up from 19% in the prior year. We see significant opportunity to expand this over time through disciplined execution and strategic focus on our software.
Shane Palatin: Which was up from 19% in the prior year, we see significant opportunity to expand this over time through disciplined execution and strategic focus on our software offerings.
Shane Paladin: It's important to note that this transformation won't happen overnight and requires two key elements to develop. Firstly, we need to ensure our operational foundation is solid. That means having repeatable, scalable processes for how we build our products and sell to and serve our customers. Secondly, it's expanding our SaaS platform to all areas that drive improvement on our customers' operating performance and efficiency. While it's still early in my tenure, I'm so encouraged by what I've seen so far.
Shane Palatin: It's important to note that this transformation won't happen overnight and requires two key elements to develop firstly, we need to ensure our operational foundation is solid that means having repeatable scalable processes for how we build our products and sell to and serve our customers. Secondly, it's expanding our SaaS platform to all areas that drive <unk>.
Shane Palatin: Improvement on our customers' operating performance inefficiency.
Shane Palatin: While it's still early in my tenure I'm. So encouraged by what I've seen so far I look forward to sharing more detailed thoughts about our strategy. During our next earnings call in May for now I'll turn it over to Daryl to walk through our fourth quarter and full year 'twenty 'twenty four results.
Shane Paladin: I look forward to sharing more detailed thoughts about our strategy during our next earnings call in May.
Daryl Stemm: For now, I'll turn it over to Daryl to walk through our fourth quarter and full year 2024 report. Thank you for your time today, and I look forward to meeting many of you in the coming months. Daryl? Thank you, Shane, and good morning, everyone. We appreciate you joining our call today to discuss our fourth quarter and full year 2024 results.
Speaker Change: Thank you for your time today and I look forward to meeting many of you in the coming months Daryl.
Daryl: Thank you Shane and good morning, everyone. We appreciate you joining our call today to discuss our fourth quarter and full year 'twenty 'twenty four results first I'd like to welcome Shane to our company as our new CEO. We're excited to have him on board as we continue our strategic transformation tore.
Daryl Stemm: First, I'd like to welcome Shane to our company as our new CEO. We're excited to have him on board as we continue our strategic transformation toward a SaaS focused business model. Before diving into the details, I want to emphasize that 2034 has been a challenging, but I believe pivotal year for our company as we execute on our strategic transformation. While we face some challenges, we've also made substantial progress in our strategic initiatives, which I'll elaborate on shortly. Let me start with our fourth quarter and full year financial performance. For the fourth quarter, our total revenue was $35.4 million, down 41% from the same quarter prior year.
Speaker Change: SaaS focused business model.
Speaker Change: Before diving into the details I want to emphasize that 'twenty before has been a challenging but I believe pivotal year for our company as we execute on our strategic transformation, while we faced some challenges. We've also made substantial progress in our strategic initiatives, which all will.
Speaker Change: Library on shortly.
Speaker Change: Let me start with our fourth quarter and full year financial performance for the fourth quarter. Our total revenue was $35.4 million down 41% from the same quarter prior year, while full year revenue was $174.9 million or 26.
Daryl Stemm: while full year revenue was $174.9 million, a 26% decrease from 2020. These declines primarily stem from reduced volumes in unit shift. largely resulting from the lack of success of our channel partner sales program, which was unwound last year shortly before the board initiated the leadership. Our SAS revenue grew 17% year over year in the fourth quarter, showing real progress in our strategic shift towards our core SAS platform. Annual Recurring Revenue, or ARR, increased to $54.4 million, up from $46.2 million in Q4 of 2023. SAS revenue now represents roughly one-third of our total revenue for 2024, up from 17% in 2023.
Speaker Change: [noise] cent decrease from 'twenty twenty-three these declines primarily stemmed from reduced volumes in units shipped.
Speaker Change: Largely resulting from the lack of success of our channel partner sales program, which was unwound last year shortly before the board initiated a leadership transition our SaaS revenue grew 17% year over year in the fourth quarter, showing real progress and our strategic shift towards our core SaaS.
Speaker Change: <unk> platform.
Speaker Change: Annual recurring revenue or a R. R increased to $54.4 million up from $46.2 million in Q4 of 2023.
Speaker Change: SaaS revenue now represents roughly one third of our total revenue for 2024 up from 17% in 2023. This percentage increase reflects both the growth in our recurring revenue streams and the decrease in our hardware and professional services revenue. Nevertheless.
Daryl Stemm: This percentage increase reflects both the growth in our recurring revenue streams and the decrease in our hardware and professional services revenue. Nevertheless, the absolute growth in ARR of $8.2 million demonstrates that we're making progress in building our SAS business. In the quarter, we made progress on a number of strategic initiatives driving our core pillar.
Speaker Change: The absolute growth in E. R. R of $8.2 million demonstrates that we're making progress in building our SaaS business in.
Speaker Change: In the quarter, we made progress on a number of strategic initiatives driving our core pillars.
Daryl Stemm: First, Sustainable and Predictable ARR. Our SAS revenue grew 17% year-over-year in the fourth quarter. And our ARR increased to $54.4 million, up from $46.2 million in Q4 2020. SAS ARPU increased 3% to $5.68 from $5.50 in Q4 2023, primarily driven by pricing improvements. Building on the smart operations upgrades announced in December, we're executing a robust product roadmap with additional smart operations capabilities planned for the first half of 2025. These upcoming enhancements target operational inefficiencies that our property managers face daily and are designed to drive both adoption and use. We believe these strategic investments in our SAS platform will accelerate smart operations revenue growth and contribute to expanding ARPU through the coming year.
Speaker Change: First sustainable and predictable growth.
Speaker Change: Our SaaS revenue grew 17% year over year in the fourth quarter.
Speaker Change: And our a R. R increased to $54.4 million up from $46 2 million in Q4, 2023, SaaS, our pool increased 3% to $5.68 from $5.50 in Q4, 2023, primarily driven by price.
Speaker Change: <unk> improvements.
Speaker Change: Building on the smart operations upgrades announced in December we're executing a robust product roadmap with additional smart operations capabilities planned for the first half of 2025. These upcoming enhancements target operational inefficiencies that our property managers face daily and.
Speaker Change: Are designed to drive both adoption and usage.
Speaker Change: We believe these strategic investments in our SaaS platform will accelerate smart operations revenue growth and contribute to expanding our pool through the coming year.
Daryl Stemm: Our units deployed reached 809,000, a 12% increase compared to December 2023. Continuing expansion of our installed base, albeit at reduced volume, in new units deployed. Hosted services revenue, which includes our SAS offerings, grew to $18.8 million for the quarter, a 9.7% increase year over year. For the full year, hosted services revenue was $73.2 million, up 14% from the prior year. SAS Gross Margin remains strong at 74.1%, providing a solid foundation for profitable growth as we scale this business.
Speaker Change: Our units deployed reached 809000 or 12% increase compared to December 2023.
Speaker Change: Continuing expansion of our installed base, albeit at reduced volume in new units deployed.
Speaker Change: Hosted services revenue, which includes our SaaS offerings grew to $18.8 million for the quarter, a 9.7% increase year over year.
Speaker Change: For the full year hosted services revenue was $73.2 million up 14% from the prior year.
SaaS gross margin remained strong at 74.1%, providing a solid foundation for profitable growth as we scale this business.
Daryl Stemm: Second, Platform Superiority. We've invested strategically in enhancing our core SAS platform with capabilities that our customers are specifically requesting. reinforcing our commitment to platform superiority. We believe these investments strengthen our value proposition.
Speaker Change: Second.
Speaker Change: That formed superiority we've.
Speaker Change: We've invested strategically in enhancing our core SaaS platform with capabilities that our customers are specifically requesting.
Speaker Change: Reinforcing our commitment to platform superiority.
Speaker Change: We believe these investments strengthen our value proposition.
Daryl Stemm: Third, operational excellence. We've made significant strides in improving our overall gross margin, which reached 28.7% in Q4, up from 28.2% in the same quarter last year. For the full year, total gross margin improved substantially to 34.5% from 20.9%, an improvement of over 1,000 basis points. These improvements stem from our disciplined approach to cost management and enhanced operational efficiency. While our full year adjusted EBITDA remains negative at $9.9 million, it improved by $9.3 million compared to the prior year. To preserve our financial position and minimize our use of cash, we plan to implement targeted cost reductions that we believe will begin to take effect in the second quarter of 2025, including streamlining operational processes, optimizing our organizational structure, and strategically prioritizing investments that directly support our SAS growth initiative.
Speaker Change: Third operational excellence, we've made significant strides in improving our overall gross margin, which reached 28, 7% in Q4 up from 28, 2% in the same quarter last year.
Speaker Change: For the full year total gross margin improved substantially to 34, 5% from 20.9% an improvement of over 1000 basis points.
Speaker Change: These improvements stem from our disciplined approach to cost management and enhanced operational efficiencies.
Speaker Change: While our full year adjusted EBITDA remains negative at $9.9 million it improved by $9 3 million compared to the prior year to.
Speaker Change: To preserve our financial position and minimize our use of cash we plan to implement targeted cost reductions that we believe will begin to take effect in the second quarter of 2025, including streamlining operational processes optimizing our organizational structure and.
Speaker Change: Strategically prioritizing investments that directly support our SaaS growth initiatives.
Daryl Stemm: We believe these disciplined cost controls will help minimize our expected net use of cash. We've transformed our customer support experience through a comprehensive overhaul of our service infrastructure, reducing our customer wait times to be in line with industry benchmarks. These improvements have contributed to stronger customer relationships and higher retention rates, which directly support our SAS-focused business model and recurring revenue growth. Units booked and new units deployed were down year over year, and we anticipate these metrics may remain at similar levels for much of this year before showing meaningful improvement. This period of flattened performance is primarily attributable to the lack of demand generation due to the poor performance of our Channel Partner Program and reflects the reality of our transformation as we work to make our customer engagement and customer success processes as frictionless as possible.
Speaker Change: We believe these disciplined cost controls will help minimize our expected net use of cash.
Speaker Change: We've transformed our customer support experience through a comprehensive overhaul of our service infrastructure, reducing our customer wait times to be in line with industry benchmarks.
Speaker Change: These improvements have contributed to stronger customer relationships and higher retention rates, which directly support our SaaS focused business model and recurring revenue growth.
Speaker Change: Units booked and new units deployed were down year over year, and we anticipate these metrics may remain at similar levels for much of this year before showing meaningful improvement. This period, a flattened performance is primarily attributable to the lack of demand generation due to the poor performance.
Speaker Change: Of our channel partner program and reflects the reality of our transformation as we work to make our customer engagement and customer success processes as frictionless as possible.
Daryl Stemm: Under our authorized $50 million share repurchase program, we repurchase approximately 3 million shares at an aggregate cost of $5.1 million in the quarter. and 15.2 million shares at an aggregate cost of $28.6 million for the full year, leaving approximately $21.6 million available for future repurchase. This underscores our commitment to disciplined capital allocation and our confidence in the company's long term value. We ended the quarter with a cash balance of approximately $143 million and no debt. We return $28.6 million to shareholders through our share repurchase program during 2024, which represents roughly 40% of the year-over-year change in our cash balance.
Speaker Change: Under our authorized $50 million share repurchase program, we repurchased approximately 3 million shares at an aggregate cost of $5.1 billion in the quarter.
Speaker Change: And 15.2 million shares at an aggregate cost of $28 6 million for the full year, leaving approximately 21.6 million available for future repurchases. This underscores our commitment to disciplined capital allocation and our confidence in the company's long term.
Speaker Change: <unk>.
Speaker Change: We ended the quarter with a cash balance of approximately $143 million and no debt.
Speaker Change: We returned $28 $6 million to shareholders through our share repurchase program during 'twenty 'twenty four.
Speaker Change: Which represents roughly 40% of the year over year change in our cash balance.
Daryl Stemm: This balanced approach to capital allocation allows us to simultaneously invest in our business transformation while demonstrating our commitment to returning value to shareholders. all while maintaining financial flexibility.
Speaker Change: This balanced approach to capital allocation allows us to simultaneously invest in our business transformation, while demonstrating our commitment to returning value to shareholders.
Speaker Change: All while maintaining financial flexibility.
Daryl Stemm: Additionally, we maintain an undrawn credit facility of $75 million, giving us ample liquidity to execute our strategy.
Speaker Change: Additionally, we maintain an undrawn credit facility of $75 million, giving us ample liquidity to execute our strategy.
Daryl Stemm: I want to address the challenges we faced head on. Our hardware revenue decreased to $10.4 million, down 72% from the same quarter last year, reflecting near-term demand generation issues resulting from our channel partner sales program, extended customer decision-making cycles for capital expenditures, and our decision to discontinue our previous strategy of sustaining revenue growth through our over-reliance on hardware sales. Professional services revenue also decreased to $6.2 million, down 7% year over year. These declines have contributed to a net loss of $11.4 million for the quarter and $33.6 million for the full year. As we look forward, we're taking a disciplined approach to align our cost structure with our growth trajectory as we In the fourth quarter, our cash utilization was primarily driven by three factors.
Speaker Change: Want to address the challenges we faced head on.
Speaker Change: Our hardware revenue decreased $10.4 million down 72% from the same quarter last year, reflecting near term demand generation issues, resulting from our channel partner sales program extended customer decision, making cycles for capital expenditures and.
Speaker Change: Our decision to discontinue our previous strategy of sustaining revenue growth through our over reliance on hardware sales.
Speaker Change: Professional services revenue also decreased to $6 $2 million down 7% year over year.
Speaker Change: These declines have contributed to a net loss of $11.4 million for the quarter and $33.6 million for the full year.
Speaker Change: As we look forward, we're taking a disciplined approach to align our cost structure with our growth trajectory as we scale in.
Speaker Change: In the fourth quarter, our cash utilization was primarily driven by three factors operating losses impact of deferred revenue.
Daryl Stemm: operating losses, impact of deferred revenue, and the share repurchase program. Currently, our focus is on investing in our sales organization and smart operations development and optimizing our internal systems and processes. We believe these investments in our foundation are essential for long-term success. and we expect to see cash use through the first quarter of 2025 at the same pace that it was used in the fourth quarter, primarily due to expected operating losses and the impact of earnings derived from deferred revenue. We don't believe this trend will extend past the first quarter of 2025. We believe these foundational improvements will position us to scale more efficiently as we accelerate our transition to higher quality, recurring revenue streams with positive cash flow.
Speaker Change: And the share repurchase program.
Speaker Change: Currently our focus is on investing in our sales organization and smart operations development and optimizing our internal systems and processes. We believe these investments in our foundation are essential for long term success, and we expect to see cash use through the first quarter of 2020.
Speaker Change: Five at the same pace that it was used in the fourth quarter.
Speaker Change: Primarily due to expected operating losses and the impact of earnings derived from deferred revenue. We don't believe this trend will extend past the first quarter of 2025. We believe these foundational improvements will position us to scale more efficiently as we accelerate our transition to higher.
Speaker Change: Quality recurring revenue streams with positive cash flow.
Daryl Stemm: One area we are monitoring closely is potential tariff policy changes affecting our hardware supply chain, including both our alloy products manufactured in Asia and third party components from key suppliers. These uncertainties, combined with our ongoing sales organization restructuring, have significantly reduced near-term visibility. We continue to closely monitor several key indicators that will inform our decision to reinstate guidance. including the stabilization of market conditions, clarity on economic trends that affect capital expenditure timing, and the successful execution of our strategic initiatives currently underway. As these factors align, we believe we will be better positioned to provide a financial outlook.
Speaker Change: One area, we are monitoring closely as potential tariff policy changes affecting our hardware supply chain, including both our alloy products manufactured in Asia and third party components from key suppliers.
Speaker Change: These uncertainties combined with our ongoing sales organization restructuring have significantly reduced near term visibility.
Speaker Change: We continue to closely monitor several key indicators that will inform our decision to reinstate guidance.
Speaker Change: Including the stabilization of market conditions clarity on economic trends that affect capital expenditure timing and the successful execution of our strategic initiatives currently underway as.
Speaker Change: As these factors aligned we believe we will be better positioned to provide our financial outlook in.
Daryl Stemm: In conclusion, our fourth quarter and full year results reflect the challenges of our transition. We believe we have the right strategy, the right leadership team, with Shane now at the helm, and the financial resources to successfully complete our transformation into a SaaS-focused company. Thank you for your continued support.
Speaker Change: In conclusion, our fourth quarter and full year results reflect the challenges of our transition.
Speaker Change: We believe we have the right strategy the right leadership team with Shane now at the helm and.
Speaker Change: And the financial resources to successfully complete our transformation into a SaaS focused company.
Shane Palatin: Thank you for your continued support I'd like to now hand, the call back over to Shane for a few closing comments. Thank.
Shane Paladin: I'd like to now hand the call back over to Shane for a few closing comments. Thank you, Daryl, for that comprehensive review of our financial results. As I wrap up before taking your questions, I want to reiterate that we're navigating a period of transition.
Shane Palatin: Thank you Darryl for that comprehensive review of our financial results as I wrap up before taking your questions I want to reiterate that we're navigating a period of transition I'm optimistic about smart <unk> future and our trajectory toward becoming a SaaS focused company with our financial position and disciplined approach to capital allocation. We believe we are well positioned.
Shane Paladin: I'm optimistic about SmartRent's future and our trajectory toward becoming a SaaS-focused With our financial position and disciplined approach to capital allocation, we believe we are well positioned to weather near-term challenges while making the strategic investments necessary to capture the significant market opportunity ahead.
Shane Palatin: <unk> to weather near term challenges, while making the strategic investments necessary to capture the significant market opportunity ahead of US now we will open the line and take your questions operator.
Novi: Now we'll open the line and take your questions. Operator? At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. We also ask that you. Please limit your questions to one question one follow up.
Novi: We also ask that you please limit your questions to one question, one follow-up. We will pause for just a moment to compile the Q&A roster.
Shane Palatin: We'll pause for just a moment to compile the Q&A roster.
Ryan Tomasello: Your first question comes from the line of Ryan Tomasello with KBW. Please go ahead. Hi, everyone. Thanks for taking the questions and congrats, Shane, on the new role. I guess it sounds like at this stage. with the company's focus on becoming a SaaS-first company, I think, as you put it. I'm trying to understand how that might impact the hardware, first-party hardware strategy. Clearly, based on your remarks, it sounds like you're trying to de-emphasize the reliance on hardware revenue. But just given how that's been such a key component of the company's strategy historically, any color on how you might approach, you know, changes to that strategy going forward would be helpful as we try to understand this transition period.
Shane Palatin: Your first question comes from the line of Ryan Tomasello with K B W.
Shane Palatin: Please go ahead.
Ryan Tomasello: Hi, everyone. Thanks for taking the questions and congrats Shane on the new role.
Shane Palatin: I guess.
Speaker Change: It sounds like at this stage.
Speaker Change: With the company's focus on becoming a SaaS first the company I think as you put it.
Speaker Change: I'm trying to understand how that might impact the hardware first party hardware strategy.
Speaker Change: Clearly based on your remarks, it sounds like you're trying to deemphasize the reliance on hardware revenue, but just given how that's been such a key component of the company's strategy historically any color on how you might approach.
Speaker Change: No changes to that strategy going forward would be helpful. As we try to understand this transition period.
Shane Paladin: Thanks.
Sure.
Shane Paladin: Ryan, great question, and thank you for the warm welcome. So what I want to kind of hit on, on the hardware side, this has been a key strategic investment for the company going forward, and it's actually, it's not a de-emphasis, it's also, it's actually monetizing it. So if you think about our business, the things that our hardware touches is the life of the resident every day. So everybody uses their smart lock to get in. Everybody needs to, you know, work on, is it too hot, is it too cold? These are key elements that are front and center within our customer base.
Ryan Tomasello: Ryan Great question and thank you for the warm welcome.
Ryan Tomasello: So what I want to kind of hit on on the hardware side. This has been a key strategic investment for the company going forward and it's actually it's not a deep emphasis. It's also it's actually monetizing. It. So if you think about our business the things that our hardware touches is alive at the rest of the life of the resident everyday.
Ryan Tomasello: So everybody uses their smart lock to get in everybody needs to work.
Ryan Tomasello: Work on is it too hard is it to cold. These are key elements that are front and center within our customer base. However, it's their ability to work with the smart op side of the house understanding how we actually take that data and make our operators smarter and what they do so it is actually taking all the insight that we garner from the hardware side of the business and be.
Shane Paladin: However, it's their ability to work with the smart ops side of the house, understanding how we actually take that data and make our operators smarter in what they do. So it's actually taking all the insight that we garner from the hardware side of the business and being able to monetize that through the software side of the business. So it is a symbiotic relationship and it takes time and the company has done a great job of building that foundation of excellent products on the hardware side that now enable us to go and take those insights and drive them through on more of the pure play SaaS side.
Ryan Tomasello: Being able to monetize that through the software side of the business. So it is a symbiotic relationship and it takes time and the company has done a great job of building that foundation of excellent products on the hardware side to now enable us to go in and take those insights and drive them through on more of a pure play SaaS side. So that's really the emphasis there.
Shane Paladin: So that's really the emphasis.
Shane Paladin: And just to add on top of that, Shane. We don't, in essence, sell locks and thermostats. We literally do. But what we sell are solutions to our customers' problems. Great. Thanks. Thanks for that color.
Ryan Tomasello: And just to add on top of that Shane.
Ryan Tomasello: We don't in essence sell locks and thermostats, we literally do but what we sell our solutions to our customers properly.
Speaker Change: Great. Thanks, Thanks for that color and then.
Ryan Tomasello: And then There's a follow-up question here as you think through your strategic pillars. How big of a focus is scaling the pace of unit deployments for the company? And if you could help us understand, you know, what initiatives. that you laid out might play into that strategy of scaling the pace of unit deployments. Are there any plans to perhaps stand up another channel partner program just to attack that mid-market category, which is so large? Any color you can provide there.
Speaker Change: As a follow up question here as you think through your strategic pillar.
Pillars.
Speaker Change: How big of a focus is scaling the pace of unit deployments for the company and if you could help us understand.
Speaker Change: What initiatives.
Speaker Change: You laid out might play into that strategy of scaling the pace of deployments.
Speaker Change: Are there any plans to perhaps stand up another channel partner program just to attack that mid market category, which is so large.
Speaker Change: Any color you can provide there thanks.
Shane Paladin: Sure. So I can start there. And Daryl, if you have any commentary, feel free to jump in. I've been on board about a week. I'm right now in the process of reviewing all of these items. You know, ultimately, what we need to understand is the customer journey of those that are in the bucket today, working with our strategic customers and partners. And then ultimately, once we've got that motion 100 percent well understood and working as it is, of course, the key there in time is to go down and see how we address other markets. But right now, more in the analysis mode coming back.
Speaker Change: Sure. So I can start there and Darryl if if any commentary feel free to jump in.
I've been on board about a week right now in the process of reviewing all of these items.
Speaker Change: Ultimately, what we need to understand is the customer journey of those that are in the bucket today working with our strategic customers and partners and then ultimately once we've got that motion, 100% well understood and working as it is of course the key there in time is to go down and see how we address other markets, but right now more in.
Speaker Change: The analysis mode coming back in as we get into the next earnings call. We'll have more insight into that in addition to that I would add that as we mentioned earlier, we've had a fairly significant not fairly we've had a very significant.
Daryl Stemm: And as we get into the next earnings call, we'll have more insight into that. In addition to that, I would add that, as we mentioned earlier, we've had a fairly significant, not fairly, we've had a very significant restructuring of our sales. beginning with adding Natalie as our new CRO in September, and then she's rebuilding her direct sales team. We did an announcement in January of four key hires in our sales and customer success organization. So I think, you know, fixing the sales organization is step one. As Shane mentioned, he's been here for about a week, and I'm sure that as he continues reviewing the processes and the development of ideal customer profiles, that we may have some more changes in the future.
Speaker Change: Restructuring of our sales team.
Speaker Change: Beginning with adding Natalie as our new C C. Aro in September and that she's rebuilding her direct sales team. We did an announcement in January of four key hires in our sales and customer success organization. So I think.
Speaker Change: Fixing the sales organization is step one as Shane.
Speaker Change: <unk> he has been here for about a week and I'm sure that as he continues.
Speaker Change: Reviewing the processes and.
The development of ideal customer profiles that we may have some more changes in the future.
Tom White: Your next question comes from the line of Tom White with D.A. David. Please go ahead. Great.
Speaker Change: Your next question comes from the line of Tom White with D. A Davidson.
Speaker Change: Please go ahead.
Tom White: Thanks for taking my questions, and yeah, congrats, Shane, on the new role. I guess, too, if I could, you know, last quarter you guys talked about the $10 million kind of incremental kind of growth investment. Maybe just give us an update there on kind of priorities or, you know, how you're deploying that or maybe you're kind of pausing to give Shane some time or wait to see how the macro shakes out. And then just secondarily on the macro, I realize, Shane, you've only been there a week, but I would just be curious to hear, you know, an update on what you're generally hearing from customers and prospects.
Tom White: Great. Thanks for taking my questions and congrats Shane on the new role I guess, two if I could.
Tom White: Last quarter, you guys talked about the 10 million dollar kind of incremental.
Tom White: Growth investment, maybe just give us an update there on kind of priorities are.
Tom White: How you're deploying that are or maybe youre kind of pausing to give shane some timer or wait to see how the macro shakes out and then.
Speaker Change: Just secondly on the macro realized shayne, you've only been there a week but.
Speaker Change: Would just be curious to hear an update on on what you're generally hearing from customers and prospects I know last quarter, you highlighted some angst from owner operators around the election.
Daryl Stemm: I know last quarter, you know, you highlighted some angst from owner-operators around the election. You know, there's any number of additional things now to be angsty about, I guess, but just maybe some general color there would be helpful. Thank you. Yeah, thank you, Tom.
Speaker Change: There's any number of additional things now to be angsty about I guess.
Speaker Change: Just maybe some general color there would be helpful. Thank you.
Speaker Change: Yes. Thank you Tom let me start with a couple of comments on the 10 million dollar investment and I would say that.
Daryl Stemm: Let me start with a couple of comments on the $10 million investment. And I would say that Our initial emphasis has been on development of the smart operation solutions. We did some announcements during Q4. The initial development work was really focused on. making data more readily available in a usable format that our customers didn't have to extract themselves. More development work is underway, including things that really address the concept of centralization of maintenance operations. So there'll be some additional announcements during Q2 of this year related to some of those new features. But again, the primary emphasis has been around development work of our SAS only.
Speaker Change: Our initial emphasis has been on development of the smart operation solutions we.
Speaker Change: Did some announcements during Q4 the initial <unk>.
Speaker Change: Development work was really focused on.
Speaker Change: Making data more readily available in a usable format.
Speaker Change: At our customers didn't have to extract themselves.
Speaker Change: More development work.
Speaker Change: Is underway, including things that really.
Speaker Change: Address the.
Speaker Change: <unk>.
Speaker Change: The concept of centralization.
Speaker Change: And its operations, so there'll be some additional announcements.
Speaker Change: During Q2 of this year related to some of those new features but again the primary emphasis has been around development work of our SaaS only.
Speaker Change: Smart operation solutions.
Shane Paladin: SmartOperationSolutions.
Shane Paladin: Shane, did you want to add anything on top of that? Yeah, I think you hit on the investment side.
Did you want to add anything on top of that yes, I think you hit on the investment side I think just to hit the macro question you had there.
Shane Paladin: I think just to hit the macro question you had there, you know, yesterday, in fact, I met with one of our largest customers, one of the largest multifamily operators in North America as well. And, you know, where they're at is they're being very pragmatic right now, right? And it's about ROI. And a lot of the discussion they had with us was about the ROI that we deliver, right? Which is, which is, you know, great hope in everything that we're doing with them. Also, they're seeing and their expectation is they're seeing tailwinds coming as we get into the next few years.
Speaker Change: Yesterday in fact, I met with one of our largest customers one of the largest multifamily operators in North America, as well and where they're out as they're being very pragmatic right now right and it's about ROI.
Speaker Change: A lot of the discussion they had with US was about the ROI that we deliver right, which is which gives me a grapes.
Speaker Change: Great hope in everything that we're doing with them also they they're seeing in their expectation is theyre seeing tailwind is coming as we get into the next few years, that's what they hope to see as well, but many conversations ongoing in this week and next week as well so as I get more and we get more into it we'll have a better view of what our customers are seeing.
Shane Paladin: That's what they hope to see as well. Many conversations ongoing in this week and next week as well. So as I get more and we get more into it, we'll have a better view of what our customers are seeing. And more importantly, that translates into our view as well.
Speaker Change: And more importantly that translates into our view as well.
Speaker Change: Thank you.
Novi: As there are no further questions at this time, I will now turn the call back over to Shane Paladin, CEO for Closing. Oh, hold on a moment, please.
Speaker Change: As there are no further questions at this time I will now turn the call back over to Shane Pelican CEO for closing Oh hold on them on in place.
Barry Oxford: Your next question comes from the line of Barry Oxford with Colliers International. Great. Thanks, guys.
Speaker Change: Your next question comes from the line of Barry Oxford.
Barry Oxford: With Colliers International.
Speaker Change: Great. Thanks, guys.
Shane Paladin: Shane, congrats on the new role. Barry Aksher with Colliers. Just full disclosure, I'm a REIT analyst, but want to get some color on the apartment landlords, especially some of the bigger ones. When there was a void at the top, did you guys see them sort of back off as far as converting new units into smart units, and therefore you feel that this space can re-engage with the bigger landlords? Yeah, Barry, thanks. Great question. You know, to be honest, I think if I was to reference this, I would go back to the operational investment we're making in the sales motion there, right?
Speaker Change: Shane Congrats on the new role Barry, Oxford with call your full disclosure of a REIT analyst, but wanted to get some color.
Speaker Change: On the.
Speaker Change: Our apartment landlords, especially some of the bigger ones.
Speaker Change: When there was a void at the top.
Speaker Change: Did you guys see them sort.
Speaker Change: Sort of back off as far as converting new units.
Speaker Change: Into this.
Speaker Change: Smart units.
Speaker Change: Or.
Speaker Change: And therefore, you feel that this pace can reengage with the bigger landlords.
Barry Oxford: Yes, Barry Thanks, Great question.
Speaker Change: To be honest I think if I was to references I would go back to the operational investment we're making in the sales motion there right. So as we get the sales motion stood up.
Shane Paladin: So as we get that sales motion stood up, you know, it's working with those customers and partners to get things going. I think it's more that, not necessarily their demand or desire in the market. And so we're, you know, we have Natalie, who's been on board now for a couple quarters, making the right investments, streamlining our own internal processes, making sure that we're meeting customers where they are, and also taking very customer centric view, right? Making sure not every customer is the same. Some are very complex. Some have simple needs. It's making sure we understand that we meet them where they are in that process.
Speaker Change: It's working with those customers and partners to get things going I think it's more of that not necessarily their demand or desire in the market and so we're we have Natalie who's been onboard now for couple of quarters, making the right investments streamlining our own internal processes, making sure that we're meeting customers, where they are and also taking very customer centric view right, making sure.
Speaker Change: Not every customer has the same some are very complex. Some have simple needs, it's making sure we understand that we meet them where they are in that process and I think that as that continues to evolve and advance will will see progression in the motion and the numbers.
Shane Paladin: And I think that's, as that continues to evolve in advance, we'll see progression in the motion and the numbers. Have you seen positive responses from those larger landlords as you've been enacting on them? Yeah, being here only a week in the handful I've met, all of them have been very positive. Right, right. No, no, no. I understand that. Full disclosure. I get that. I don't mean to be peppering you. So far, everyone has an appetite to do more, but ultimately, what it comes back down to is ROI. They want to make sure what they're doing, as they're doing their capital allocation, are they getting the best return on their investment?
Speaker Change: Have you seen positive responses from those larger landlords as you've been enacting on this.
Speaker Change: Yes, being here only a week in the Haynesville I've met all of them in very bright right no no I understand that full disclosure I get that I get that I don't mean to beat that Brian.
Go ahead.
Okay.
Speaker Change: So so far they've been very everyone has an appetite to do more right, but ultimately what it comes back down to his ROI right. They want to make sure what theyre doing as they're doing their capital allocation are they getting the best the best return on their investment and that those are the discussions that we're having and the great thing is they are all around.
Shane Paladin: And those are the discussions that we're having. And the great thing is they're all around, both the IoT side and the SaaS side, about how we help them achieve that, both in hard dollars and soft.
Speaker Change: Both the Iot side, and the SaaS side about how we help them help them achieve that both in hard terms and hard dollar and softer ores.
Speaker Change: Okay.
Novi: Great. Thanks for the color, Shane. Again, if you would like to ask a question, press star 1 on your telephone keypad.
Speaker Change: Thanks for the color.
Speaker Change: Okay.
Speaker Change: Again, if you would like to ask a question press star one on your telephone keypad.
Shane Paladin: As there are no further questions at this time, I will now turn the call back over to Shane Paladin, CEO, for closing remarks. All right, thank you for joining us today. As we conclude this call, I want to express my gratitude to our shareholders for your trust, our customers for your partnership, and our talented team for your dedication during this transition period. While I've only been with SmartRent for about a week, I'm energized by the opportunities ahead. Our solutions, customer relationships, and the market position we have today provide a remarkable springboard for our next phase of growth.
Speaker Change: As there are no further questions at this time.
Speaker Change: I will now turn the call back over to Sean Paladin CEO for closing remarks.
Sean Paladin: Alright, Thank you for joining us today as we conclude this call I want to express my gratitude to our shareholders for your trust our customers for your partnership and our talented team for your dedication during this transition period, while I've only been with smart rent for about a week I am energized by the opportunities ahead, our solutions customer relationships and.
Sean Paladin: The market position, we have today provide a remarkable springboard for our next phase of growth over the coming months I'll be conducting comprehensive reviews of our business getting to know our customers and working closely with our leadership team to refine our execution strategy I commit to bringing the focus discipline and operational rigor needed to accelerate our trains.
Shane Paladin: Over the coming months, I'll be conducting comprehensive reviews of our business, getting to know our customers, and working closely with our leadership team to refine our execution strategy. I commit to bringing the focus, discipline, and operational rigor needed to accelerate our transformation into a SaaS-centric business model and drive sustainable and profitable growth. Thank you again for joining us today. We appreciate your support and look forward to updating you on our progress.
Sean Paladin: <unk> into a SaaS centric business model and drive sustainable and profitable growth. Thank you again for joining US today. We appreciate your support and look forward to updating you on our progress.
Novi: Ladies and gentlemen, that concludes today's call. Thank you all for joining.
Sean Paladin: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Novi: You may now disconnect. Please wait, the conference will begin shortly.
Sean Paladin: Please wait the conference will begin shortly.
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