What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-05 compared with 2024-03-05 · 181 added, 178 removed, 301 unchanged (54% of the section changed)

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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 suite of products and services, which includes cloud-based SaaS solutions many of which are enabled by smart building hardware, provide seamless visibility and control over real estate assets.

Our platform can lower operating costs, increase revenues, mitigate operational friction and protect assets for owners and operators, while providing a differentiated, elevated living experience for residents.

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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 WiFi.

Our Smart Community solutions include software and devices that power (i) smart apartments and homes, (ii) access control for buildings, common areas, and rental units, (iii) community and resident WiFi, and other solutions such as asset protection and monitoring, parking management and self-guided tours.

Our Smart Operations solutions include work order management, the automation of leasing and resident call handling, audit management, and the automation of the inspection process.

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.

SmartRent is positioned to be a category leader in the enterprise smart home solutions industry.

As of December 31, 2023, we had 719,691 Units Deployed and 593 customers, including many of the largest multifamily residential owners in the United States.

As of that date, our customers owned an aggregate of approximately 7.0 million units.

SmartRent is a category leader in the enterprise smart home solutions industry.

As of December 31, 2024, we had 809,497 Units Deployed (as defined below) and over 650 customers, including many of the largest multifamily residential owners in the United States.

As of that date, we believe our customers owned an aggregate of approximately 7.4 million rental units.

This represents approximately 15% 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.

In addition to multifamily residential owners, our customers include some of the leading single-family rental homeowners, homebuilders, and iBuyers in the United States.

Our Business Model

We generate revenue primarily from sales of smart home systems which enable property owners and property managers to have visibility and control over assets, while providing all-in-one home control offerings for residents.

Currently, the majority of our revenue is generated 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.

We also generate professional services revenue from installing smart home hardware devices and from monthly subscription revenue earned from the fees collected from customers to provide access to one or more of our software applications ("Hosted Services") including access controls, asset monitoring, WiFi, and related services.

Subscription arrangements have contractual terms ranging from one month to eight years;

the majority of our recurring revenue contracts range from one month to one year and our average recurring revenue contract term is 1.6 years.

We generate revenue primarily from sales of smart home systems that enable property owners and property managers to have visibility and control over assets, while providing all-in-one home control offerings for residents.

Our revenue is generated from:

(1) the direct sale to our customers of hosted services from monthly subscription fees collected from customers to provide access Hosted Services including access controls, asset monitoring, WiFi, and related services;

(2) the sale and delivery of smart home devices, which generally consist of a Hub Device, door-locks, thermostats, sensors, and light switches ;

and (3) installation and implementation of smart home devices that enable our Hosted Services.

Subscription arrangements have contractual terms ranging from one month to ten years and the weighted average length of our recurring revenue contracts is 4.4 years.

Key Factors Affecting Our Performance

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The incremental improvements in the global supply chain are evidenced by our reduction of backlogged Units Deployed for Access Control and made-to-order locks.

We believe that this positive trend will continue into next year.

Investing in Research and Development

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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.

Our future growth depends in part on the continued consumer adoption of software and hardware 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.

The Business Combination

On August 24, 2021, we consummated the Business Combination contemplated by the Merger Agreement.

Upon the closing of the Business Combination, Merger Sub merged with and into Legacy SmartRent, with Legacy SmartRent continuing as the surviving company and changing its name to “SmartRent Technologies, Inc.” In connection with the consummation of the Business Combination, we changed our name from “Fifth Wall Acquisition Corp.

I” to “SmartRent, Inc.” and changed our trading symbol and exchange listing from “FWAA” on Nasdaq to “SMRT” on the NYSE.

The Business Combination is accounted for as a reverse capitalization in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Under the guidance in the Financial Accounting Standards Board Accounting Standards Update (FASB ASC) 805, “Business Combinations,” FWAA is treated as the “acquired” company for financial reporting purposes.

SmartRent Technologies, Inc.

is deemed the accounting predecessor of the combined business and the successor SEC registrant, meaning that our financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC.

The Business Combination had a significant impact on our reported financial condition and results of operations as a consequence of the reverse capitalization.

The most significant change in our reported financial condition and results of operations was a net increase in cash (as compared to our Consolidated Balance Sheet immediately prior to the Business Combination) of approximately $444.6 million, which includes approximately $155.0 million in proceeds from a concurrent private placement to certain investors who subscribed for an aggregate of 15,500,000 shares of Class A Common Stock, offset by additional transaction costs for the Business Combination.

Transaction costs incurred in connection with the Business Combination were approximately $56.0 million, including $12.1 million which represents deferred underwriter fees from the FWAA IPO.

Comparability of Financial Information

Our results of operations and financial position may not be comparable to historical results as a result of the Business Combination.

Key Operating and Financial 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, New Units Deployed and Units Shipped

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.

During the year ended December 31, 2024, we experienced headwinds to adoption as certain customers deferred capital expenditures, driven by broader macroeconomic conditions, which resulted in a decrease in Units Shipped and New Units Deployed.

In addition, changes in our executive leadership and the structure of our sales organization have impacted sales and overall volumes.

Recent Developments

On July 30, 2024, we announced the departure of Lucas Haldeman, the Company’s Chief Executive Officer and Chairman of the Board, effective July 29, 2024.

As part of the transition, Mr.

Haldeman resigned as a member of the Board, effective July 29, 2024.

We appointed Daryl Stemm, the Company’s Chief Financial Officer, as the Interim Principal Executive Officer, effective as of July 29, 2024.

John Dorman, the Board’s lead independent director, was appointed Chairman of the Board, and the Board formed an Operating Committee of independent directors and a Management Committee of current executives to guide us through the transition period.

On January 27, 2025, we announced the appointment of Michael Shane Paladin as President and Chief Executive Officer and member of the Board.

Paladin’s employment commenced on February 24, 2025 (the "Start Date").

Paladin replaces Daryl Stemm who had been serving as Interim Principal Executive Officer since July 29, 2024.

Stemm will continue to serve as our Chief Financial Officer.

The Management Committee of SmartRent and the Operating Committee of the Board dissolved effective as of the Start Date.

Basis of Presentation

The consolidated financial statements and accompanying notes included elsewhere in this Report are prepared in accordance with GAAP.

We regularly monitor a number of operating metrics in order to evaluate our operating performance, identify trends affecting our business, formulate business plans, measure our progress and make strategic decisions.

Our key metrics are not based on any standardized industry methodology and are not necessarily calculated in the same manner or comparable to similarly titled measures presented by other companies.

Similarly, our key metrics may differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology.

The numbers that we use to calculate our key metrics are based on internal data.

While these numbers are based on what we believe to be reasonable judgments and estimates for the applicable period of measurement, there are inherent challenges in measuring such information.

We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy.

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) and have an active subscription as of a stated measurement date.

We utilize the Units Deployed metric to assess the health of our business and measure the trajectory of our growth.

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 that don't require a Hub Device, the correlation between New Units Deployed and revenue is not as strong as it was historically.

We define New Units Deployed as the aggregate number of Hub Devices that were installed (including customer self-installations) and resulted in a new active subscription during a stated measurement period.

Although our revenue is primarily driven by New Units Deployed and the number of Units Deployed, due to the expansion of our products and services that don't require a Hub Device, and Hub Device upgrades that do not result in net new active subscriptions, the correlation between New Units Deployed and revenue is not as strong as it was historically.

Although the correlation has decreased, New Units Deployed is still an indicator of our ability to acquire new customers and expand our relationships with our current customers.

As of December 31, 2024, 2023 and 2022, we had an aggregate of 809,497, 719,691 and 547,196 Units Deployed, respectively.

We had 172,495, 207,711, and 167,743 New Units Deployed during the years ended December 31, 2023, 2022 and 2021, respectively.

We define Units Shipped as the aggregate number of Hub Devices that have been shipped from warehouse locations during a stated measurement period.

We had 226,722, 200,169, and 192,867 Units shipped during the years ended December 31, 2023, 2022 and 2021, respectively.

We define Units Booked as the aggregate number of Hub Device units associated with binding orders executed during a stated measurement period.

For the years ended December 31, 2024, 2023 and 2022, we had 89,806, 172,495 and 207,711 New Units Deployed, respectively.

Units Shipped

We define Units Shipped as the aggregate number of Hub Devices that have been shipped to customers during a stated measurement period.

Units Shipped is used to assess the trajectory of our growth and is an indicator of our ability to acquire new customers and expand our relationships with our current customers.

However, we caution that Units Shipped also includes Hub Devices for upgrades and out of warranty replacements and may not be an indicator of New Units Deployed in future periods.

For the years ended December 31, 2024, 2023 and 2022, we had 169,476, 226,722 and 200,169 Units Shipped, respectively.

We define Units Booked as the aggregate number of Hub Device units subject to binding orders executed during a stated measurement period that will result in a New Unit Deployed.

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.

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For the years ended December 31, 2024, 2023 and 2022 there were 121,670, 173,195 and 282,512 Units Booked, respectively.

For the year ended December 31, 2024, ARR (as defined below) related to Units Booked was $8,410.

We define Bookings as the contract value of hardware, professional services, and the first year of ARR for binding orders executed during a stated measurement period, including renewals and upgrades.

We utilize Bookings to measure revenue expected to be earned in future periods from orders contracted during the current period.

For the years ended December 31, 2024, 2023 and 2022, Bookings were $133,836, $158,453 and $242,957, respectively.

We define SaaS Revenue as monthly subscription revenue from fees paid by customers for access to one or more of SmartRent's software applications, including access controls, asset monitoring and related services, and our Community WiFi solution.

We believe that SaaS Revenue growth demonstrates our ability to acquire new customers and to maintain and expand our relationships with existing customers.

More specifically, we monitor our SaaS Revenue to assess the general health and trajectory of our Hosted Services business.

Arrangements with customers do not provide the customer with the right to take possession of SmartRent's software at any time.

Customers are granted continuous access to the services over the contractual period.

As of December 31, 2024, approximately 35% of our ARR had prepaid payment terms.

We believe that our customer base is inherently sticky given the barriers to entry associated with rolling out an integrated enterprise solution across a portfolio of rental units.

For the years ended December 31, 2024, 2023 and 2022, we generated SaaS Revenue of $51.6 million, $41.1 million and $27.8 million, respectively.

Annual Recurring Revenue

We believe that ARR is a key metric to measure our business performance as it is driven by our ability to acquire new customers and to maintain and expand our relationships with existing customers.

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 $46.2 million, $32.3 million, and $10.6 million as of December 31, 2023, 2022 and 2021 respectively.

Average Revenue per Unit

We use Average Revenue per Unit ("ARPU") to assess the growth and health of the overall business and believe that ARPU reflects our ability to acquire, retain, engage and monetize our customers, and thereby drive revenue.

We define ARR as the annualized value of our SaaS Revenue earned in the current quarter, which we calculate by taking the total amount of SaaS Revenue in the current quarter and multiplying that amount by four.

We believe that ARR growth demonstrates our ability to acquire new customers and to maintain and expand our relationships with existing customers.

More specifically, we monitor our ARR to assess the general health and trajectory of our Hosted Services business.

As of December 31, 2024, 2023 and 2022, ARR was approximately $54.4 million, $46.2 million and $32.3 million, respectively.

Hardware Average Revenue per Unit ("ARPU"), Professional Services ARPU, SaaS ARPU, and Units Booked SaaS ARPU

We define Hardware ARPU as total hardware revenue during a given period divided by the total Units Shipped during the same period.

Hardware ARPU is used to evaluate the effectiveness of our hardware pricing and assess our ability to market and sell our hardware offerings.

For the years ended December 31, 2024, 2023 and 2022, Hardware ARPU was $489, $605 and $436 , respectively.

We define Professional Services ARPU as total professional services revenue during a given period divided by the total New Units Deployed during the same period.

For the years ended December 31, 2023, 2022 and 2021, Professional Services ARPU was $205.65, $155.51 and $135.52, respectively.

We define SaaS ARPU as total SaaS revenue during a given period divided by the average aggregate Units Deployed in the same period.

We define Professional Services ARPU as total professional services revenue during a given period divided by the total New Units Deployed, excluding customer self-installations, during the same period.

Professional Services ARPU is used to assess our ability to effectively price our installation services.

During the year ended December 31, 2024, we updated the denominator of the calculation to exclude self-installations as self-installations don't materially contribute to professional services revenue.

For the years ended December 31, 2024, 2023 and 2022, Professional Services ARPU was $344, $255 and $182, respectively, per the new definition of Professional Services ARPU.

Under the previous definition, Professional Services ARPU was $209, $206 and $156 for the years ended December 31, 2024, 2023 and 2022, respectively.

We define SaaS ARPU as total SaaS Revenue during a given period divided by the average aggregate Units Deployed in the same period divided by the number of months in the period.

Average aggregate Units Deployed is calculated as the Units Deployed as of the current period plus the Units Deployed as of the previous period divided by two.

SaaS ARPU is used to evaluate the effectiveness of our SaaS pricing and assess our ability to market and sell our various software solutions.

For the years ended December 31, 2024, 2023 and 2022, SaaS ARPU was $5.63, $5.40 and $5.32 , respectively.

Non-GAAP Financial Measures

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, non-recurring warranty provisions, asset impairment, loss on extinguishment of debt, 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.

We define Units Booked SaaS ARPU as the first year ARR for binding orders with Units Booked executed during the stated measurement period divided by the total Units Booked in the same period divided by the number of months in the period.

Units Booked SaaS ARPU is used to evaluate the effectiveness of our SaaS pricing and assess our ability to market and sell our various software solutions for orders executed during the period.

For the years ended December 31, 2024, 2023 and 2022, Units Booked SaaS ARPU wa s $6.44, $8.32 and $4.60 , respectively.

Customer Churn

We define Customer Churn as cancelled deployed units during the measurement period divided by Units Deployed as of the beginning of the measurement period.

Cancelled deployed units are the previously deployed units that have been cancelled during the same measurement period in which a customer cancels all product subscriptions.

Our Hosted Services growth is driven by our ability to retain our customers and minimize Customer Churn.

Our Customer Churn for our Smart Communities Solutions is 0.07% for the year ended December 31, 2024 compared to 0.02% and 0.01% for the years ended December 31, 2023 and 2022, respectively.

Property Net Revenue Retention

We define Property Net Revenue Retention as SaaS Revenue at the end of the current period related to properties which had SaaS Revenue at the end of the same period in the prior year, divided by SaaS Revenue at the end of the same period in the prior year for those same properties.

Property Net Revenue Retention includes additions to revenue from price increases on existing products, additions of new products at existing properties and transfers of ownership, offset by any reductions in revenue caused by cancellations or downgrades.

Property Net Revenue Retention was 101% as of December 31, 2024 compared to 105% as of December 31, 2023.

Customer Net Revenue Retention

We define Customer Net Revenue Retention as SaaS Revenue at the end of the current period related to customers which had SaaS Revenue at the end of the same period in the prior year, divided by SaaS Revenue at the end of the same period in the prior year for those same customers.

A customer with SaaS Revenue is defined as an entity that has an active subscription during the stated period.

Customer Net Revenue Retention includes additions to revenue from transfers of ownership, price increases on existing products and additions of new products at existing properties, offset by any reductions in revenue caused by cancellations or downgrades.

Customer Net Revenue Retention was 111% as of December 31, 2024.

Components of Results of Operations

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Hosted Services (1)

Professional Services

Hosted Services (1)

Smart Communities Solutions

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Total Revenue

(1) For the years ended December 31, 2024, 2023, and 2022, Hosted services revenue for our Smart Apartments solution included hub amortization revenue of $21,600, $23,097, and $20,360, respectively.

Hardware Revenue

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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.

The majority of our recurring revenue contracts range from one month to one year and our average recurring revenue contract term is 1.6 years.

These subscription arrangements have contractual terms ranging from one month to ten years and include recurring fixed plan subscription fees.

The weighted average length of our recurring revenue contracts is 4.4 years.

Our arrangements do not provide the customer with the right to take possession of our software at any time.

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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 software applications and related hosting services.

We sold certain Hub Devices, which only function with the subscription to our software applications and related hosting services ("non-distinct Hub Devices").

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.

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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.

We do not expect to deploy any more non-distinct Hub Devices.

Cost of Revenue

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The amount of the import tariff has changed numerous times based on action by the U.S.

administration.

administration and new presidential administration recently announced additional tariffs on imports from Canada, Mexico and China.

Such actions may increase our cost of hardware revenue and reduce our hardware revenue margins in the future.

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

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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.

We believe our research and development costs will increase in absolute dollars as we increase our investment in product development to broaden the capabilities of our solutions and introduce new products and features - in particular as we enhance our WiFi offering.

Sales and Marketing Expenses

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Provision for Income Taxes

The income tax benefit on the Consolidated Statement of Operations and Comprehensive Loss is primarily related to the federal, state, and international taxes offset by a change in the valuation allowance.

The income tax expense on the Consolidated Statement of Operations and Comprehensive Loss is primarily related to state minimum and franchise taxes.

We have 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 our federal and state deferred tax assets will be realized in future periods if we report taxable income.

We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized.

We believe that we have established an adequate allowance for our uncertain tax positions, although we can provide no assurance that the final outcome of these matters will not be materially different.

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Other income (expense)

Interest income (expense), net

Other (expense) income, net

Interest income, net

Other income (expense), net

Loss before income taxes

Income tax (benefit) expense

Income tax expense (benefit)

Comparison of the years ended December 31, 2024 and 2023

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Total revenue

Total revenue increased by $69.0 million, or 41%, to $236.8 million for the year ended December 31, 2023, from $167.8 million for the year ended December 31, 2022.

Of the $69.0 million increase, $60.3 million was driven by our Smart Apartments solution.

The increase in revenue resulted primarily from a 39% increase in Hardware ARPU, increased hardware revenue related to shipping distinct Hub Devices in the current year, a 13% increase in units shipped, a 32% increase in the number of cumulative active subscriptions for our Hosted Services during 2023 compared to 2022, and the realization of additional revenue from our Smart Operations solutions.

Below is a table of our revenue drivers.

Total revenue decreased by approximately $61.9 million, or 26%, to $174.9 million for the year ended December 31, 2024, from $236.8 million for the year ended December 31, 2023.

The decrease was primarily driven by a $66.0 million decrease in revenue related to our Smart Apartments solution and resulted primarily from a decrease in New Units Deployed to 89,806 units for the year ended December 31, 2024 from 172,495 units for the year ended December 31, 2023 and a 25% decrease in Units Shipped to 169,476 for the year ended December 31, 2024 from 226,722 for the year ended December 31, 2023, partially offset by a 12% increase in the number of cumulative active subscriptions for our Hosted Services during the year ended December 31, 2024 compared to the year ended December 31, 2023.

Overall decreases in New Units Deployed and Units Shipped are primarily attributable to our customers' decisions to defer capital expenditures, driven by broader macroeconomic conditions.

In addition, changes in leadership and the structure of our sales organization have impacted sales and overall volumes.

Years ended December 31,

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Average aggregate units deployed

Non-distinct hub amortization ARPU

Bookings (in thousands)

Units Booked SaaS ARPU

Hardware revenue increased by $49.8 million, or 57%, to approximately $137.2 million for the year ended December 31, 2023, from $87.4 million for the year ended December 31, 2022.

This increase in hardware revenue was driven by our Smart Communities Solutions and resulted from a 13% increase in units shipped to 226,722 for the year ended December 31, 2023 from 200,169 for the year ended December 31, 2022, and an ARPU increase of 39% to $605.15 for the 2023 period from $436.49 for the 2022 period.

The increase in ARPU is primarily driven by hardware revenue recognized on the shipment of Hub Devices with features that function independently from its software subscription (“distinct Hub Devices") during the year ended December 31, 2023.

During the year ended December 31, 2022, exclusively Hub Devices which only functioned with a subscription to its software (“non-distinct Hub Devices") were shipped, and thus, no hardware revenue was recognized for these devices.

See Note 2, "Significant Accounting Policies" - Revenue Recognition for more information on revenue recognition related to Hub Devices.

Professional services revenue increased by $3.2 million, or 10%, to $35.5 million for the year ended December 31, 2023, from $32.3 million for the year ended December 31, 2022.

Of the $3.2 million increase, $1.7 million and $1.0 million was driven by our Access Control and Community WiFi solutions, respectively.

Professional services ARPU increased by 32% to $205.65 for the year ended December 31, 2023 from $155.51 for the year ended December 31, 2022.

Hardware revenue decreased by $54.4 million, or 40%, to $82.8 million for the year ended December 31, 2024, from $137.2 million for the year ended December 31, 2023.

This decrease in hardware revenue was driven by a decrease in revenue related to our Smart Apartments Solutions and resulted from a 25% decrease in Units Shipped to 169,476 for the year ended December 31, 2024 from 226,722 for the year ended December 31, 2023, and a Hardware ARPU decrease of 19% to $489 for the 2024 period from $605 for the 2023 period.

The Hardware ARPU decrease was primarily attributable to a change in product mix which was more heavily weighted to our Alloy SmartHome hardware.

The impact of the decrease in hardware revenue was mitigated by an increase in hardware gross margin, primarily driven by the product mix change in the current period.

Professional services revenue decreased by $16.7 million, or 47%, to $18.8 million for year ended December 31, 2024, from $35.5 million for the year ended December 31, 2023.

The decrease in professional services revenue was driven by a $17.5 million decrease in revenue related to our Smart Apartments solution.

New Units Deployed decreased by 48% to 89,806 units for the year ended December 31, 2024 from 172,495 units for the year ended December 31, 2023.

Hosted Services revenue increased by $16.0 million, or 33%, to approximately $64.1 million for the year ended December 31, 2023, from $48.1 million for the year ended December 31, 2022.

Of the $64.1 million revenue in 2023, $23.0 million is related to hub amortization and $41.1 million is related to SaaS revenue.

Revenue increased from hub amortization and SaaS by $2.7 million and $13.3 million, respectively, from the year ended December 31, 2022 to the year ended December 31, 2023.

The increase from both components of Hosted Services revenue resulted primarily from a 32% increase in the aggregate number of Units Deployed, primarily of our Smart Apartment solution, from 547,196 units at December 31, 2022 to 719,691 units at December 31, 2023 and an increase in SaaS ARPU of 2% to $5.40 for the year ended December 31, 2023 from $5.32 for the year ended December 31, 2022.

Approximately $2.9 million of the 2023 increase in SaaS was contributed from our Smart Operations Solutions.

Additionally, our Hosted Services growth is driven by our ability to retain our customers and minimize Customer Churn.

Customer Churn is defined as the total number of units previously deployed during the period at a given property where a customer has cancelled all product subscriptions.

We have not experienced Customer Churn in our Smart Apartment solution since inception.

We have received cancellations on our stand-alone Self-Guided Tour solution, which is considered Customer Churn when it is the only SmartRent product at the given location prior to cancellation.

Including these Self-Guided Tour cancellations, our Customer Churn rate for our Smart Communities Solutions is 0.02% for the year ended December 31, 2023 compared to 0.01% for the year ended December 31, 2022.

Our Customer Churn rate is calculated by dividing the Customer Churn on our Smart Communities Solutions by our aggregate Units Deployed for a given period.

With respect to our SaaS subscriptions, our Net Revenue Retention was 105% for the year ended December 31, 2023.

We calculate our Net Revenue Retention as of the end of a given period by dividing monthly recurring revenue ("MRR") at the end of the period (excluding MRR from properties deployed during the current period) by MRR for the same period in the prior year.

Net Revenue Retention includes any reductions in revenue caused by cancellations or downgrades, offset by additions to revenue from price increases on existing products, additions of new products at existing properties and subscription upgrades.

We calculate non-distinct hub amortization ARPU as total revenue contribution from non-distinct hub amortization during a given period divided by the average aggregate Units Deployed in the same period.

Bookings represent the contract value of hardware, professional services, and the first year of ARR for binding orders executed during a stated measurement period.

We calculate Units Booked SaaS ARPU as the first year ARR for binding orders executed during the stated measurement period divided by the total Units Booked in the same period.

We don’t expect to deploy any more non-distinct Hub Devices, thus, the revenue contribution from hub amortization should decrease in future periods until the non-distinct Hub Devices are fully amortized.

This was partially offset by an increase in Professional services ARPU of 35% to $344 for the year ended December 31, 2024 from $255 for the year ended December 31, 2023.

Hosted Services revenue increased by $9.0 million, or 14%, to $73.2 million for the year ended December 31, 2024, from $64.2 million for the year ended December 31, 2023.

Of the $73.2 million revenue in 2024, $51.6 million is related to SaaS Revenue and $21.6 million is related to hub amortization.

Revenue from SaaS increased by $10.5 million and revenue from hub amortization decreased by $1.5 million from the year ended December 31, 2023 to the year ended December 31, 2024.

The increase of Hosted Services revenue resulted primarily from a 12% increase in the aggregate number of Units Deployed, primarily of our Smart Apartment solution, from 719,691 units at December 31, 2023 to 809,497 units at December 31, 2024 and an increase in SaaS ARPU of 4% to $5.63 for the year ended December 31, 2024 from $5.40 for the year ended December 31, 2023.

We don’t expect to deploy any more non-distinct Hub Devices, thus, the revenue contribution from hub amortization should continue to decrease in future periods until the non-distinct Hub Devices are fully amortized.

The table below shows the expected revenue contribution from hub amortization.

For the years ended December 31,

(dollars in thousands)

Revenue contribution from hub amortization

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.

We had 173,195 and 282,512 Units Booked during the years ended December 31, 2023 and 2022, respectively.

Cost of Revenue

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Total cost of revenue

Total cost of revenue increased by $20.8 million, or 13%, to $187.3 million for the year ended December 31, 2023, from $166.5 million for the year ended December 31, 2022.

The increase in cost of revenue resulted primarily from a 13% increase in units shipped of our Smart Apartment solution hardware devices and the shipment of distinct Hub Devices in the current period.

Hardware cost of revenue increased by $25.5 million, or 31%, to $108.8 million for the year ended December 31, 2023, from $83.3 million for the year ended December 31, 2022.

This increase in hardware cost of revenue was primarily attributable to approximately $26.4 million of additional cost resulting from greater sales volumes and the shipment of distinct Hub Devices during the year ended December 31, 2023, partially offset by reductions to other costs of revenue attributable to improved processes and efficiencies.

Total cost of revenue decreased by $72.8 million, or 39%, to $114.5 million for the year ended December 31, 2024, from $187.3 million for the year ended December 31, 2023.

The decrease in cost of revenue resulted primarily from a 48% decrease in New Units Deployed, a favorable product mix of our hardware devices (more heavily weighted to Alloy SmartHome hardware), and a 25% decrease in Units Shipped of our Smart Apartment solution hardware devices.

Hardware cost of revenue decreased by $50.0 million, or 46%, to $58.8 million for the year ended December 31, 2024, from $108.8 million for the year ended December 31, 2023.

This decrease in hardware cost of revenue was primarily attributable to a favorable product mix (more heavily weighted to Alloy SmartHome hardware), resulting in improved hardware gross margin compared to the prior period, and a 25% decrease in Units Shipped.

Professional services cost of revenue decreased by $24.3 million, or 44%, to $31.2 million for the year ended December 31, 2024, from $55.5 million for the year ended December 31, 2023.

The decrease in professional services cost of revenue is primarily attributable to a decrease in personnel-related costs, and related travel, of $7.1 million.

This was partially offset by an increase of approximately $3.8 million resulting from an increase in third-party direct labor costs.

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 to $23.0 million for the year ended December 31, 2023, from $23.6 million for the year ended December 31, 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.

The decrease in professional services cost of revenue is primarily attributable to a decrease of approximately $18.6 million in third-party direct labor costs due to a 48% decrease in New Units Deployed, and a decrease of $4.4 million in personnel-related costs including travel.

Additionally, 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, resulting in improved professional services gross margin compared to the previous period.

We believe we will continue to improve efficiency in future periods.

Hosted Services cost of revenue increased by approximately $1.6 million, or 7%, to $24.6 million for the year ended December 31, 2024, from $23.0 million for the year ended December 31, 2023.

The increase resulted from a 12% increase in the aggregate number of Units Deployed and the resulting increase in the number of active subscriptions for our software service applications and an increase in personnel-related costs of $0.8 million, partially offset by a $1.4 million decrease in hub amortization.

Our Hosted Services gross margin improved when compared to the same period in the prior year primarily driven by economies of scale related to our SaaS products.

Additionally, Hosted Services attributable to hub amortization, which has a lower margin than our SaaS products, continues to represent a smaller portion of our Hosted Services cost of revenue.

Operating Expenses

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General and administrative

Research and development expenses decreased by $0.6 million, or 2%, to $28.8 million for the year ended December 31, 2023, from $29.4 million for the year ended December 31, 2022, resulting primarily from a decrease of approximately $0.5 million of personnel-related expenses recorded during the year ended December 31, 2023.

Sales and marketing expenses decreased by $1.7 million, or 8%, to $19.2 million for the year ended December 31, 2023 from $20.9 million for the year ended December 31, 2022, resulting primarily from a decrease of approximately $0.8 million in stock-based compensation, and $0.5 million in conference and trade show expenses.

For the year ended December 31, 2023, general and administrative expenses decreased by $10.6 million, or 19%, to $44.7 million, from $55.3 million for the year ended December 31, 2022, resulting primarily from a $4.4 million asset impairment related to a prepaid license agreement during the year ended December 31, 2022.

Additionally, business insurance and third-party consulting expenses decreased by $2.3 million and $2.0 million, respectively.

Research and development expenses increased by $0.6 million, or 2%, to $29.4 million for the year ended December 31, 2024, from $28.8 million for the year ended December 31, 2023, primarily related to an increase of $0.3 million in business applications and software and $0.2 million in personnel-related expenses.

We believe our research and development costs will increase in absolute dollars as we increase our investment in product development to enhance the capabilities of our solutions and introduce new products and features.

Sales and marketing expenses decreased by $0.8 million, or 4%, to $18.4 million for the year ended December 31, 2024 from $19.2 million for the year ended December 31, 2023, resulting primarily from a decrease of approximately $1.2 million in personnel-related expenses, partially offset by an increase of $0.3 million in business applications and software.

We believe our sales and marketing expenses will increase in future periods as we continue to invest in building a scalable sales team, which began with hiring our new Chief Revenue Officer in September 2024.

For the year ended December 31, 2024, general and administrative expenses increased by $9.6 million, or 22%, to $54.3 million, from $44.7 million for the year ended December 31, 2023, resulting primarily from $11.3 million in legal fees and settlements during the year ended December 31, 2024, including $5.0 million from the settlement of a dispute with a supplier which resulted in returning $5.0 million of inventory to the supplier.

"Commitments and Contingencies" - Legal Matters for a discussion of legal proceedings in which we are involved.

Additionally, severance expense increased by $2.5 million.

These increases were partially offset by a decrease of $4.5 million in personnel-related expenses.

Years ended December 31,

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Interest income, net

Other (expense) income, net

Interest income, net increased by $6.6 million to approximately $8.5 million for the year ended December 31, 2023, from $1.9 million for the year ended December 31, 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 $0.7 million, or 119%, to $(0.1) million for the year ended December 31, 2023, from $0.6 million for the year ended December 31, 2022.

The decrease in both periods is primarily due to foreign currency adjustments.

Other income (expense), net

Interest income, net decreased by approximately $0.4 million to $8.2 million for the year ended December 31, 2024, from $8.6 million for the year ended December 31, 2023.

The decrease in net interest income is primarily attributable to a lower cash balance on which we’re earning interest, and a decrease in interest rates throughout the year.

Years ended December 31,

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Loss before income taxes

Income tax benefit

Income tax expense (benefit)

We provided a full valuation allowance on our net U.S.

federal and state deferred tax assets at December 31, 2023, and December 31, 2022.

As of December 31, 2023, we had U.S.

federal net operating losses of $3.7 million that begin to expire in 2032 and $200.9 million which will be carried forward indefinitely.

As of December 31, 2023, we had $193.4 million of state net operating loss carryforwards that expire on varying dates.

The income tax benefit is related to the federal, state, and international taxes offset by a change in the valuation allowance.

The Company also has $0.1 million of R&D credits available that expire in 2039.

On August 16, 2022, the Inflation Reduction Act ("IRA") (H.R.

5376) was signed into law in the United States.

The IRA implements a 15% minimum tax on financial statement income of certain large corporations and a 1% excise tax on stock repurchases, among other things.

While we continue to evaluate the IRA, we do not believe it will have a material effect on our audited financial statements, including on our effective tax rate or on our liquidity.

federal and state deferred tax assets as of December 31, 2024, and December 31, 2023.

As of December 31, 2024, we had $222.9 million of U.S.

federal and $215.4 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 2032 and 2044 for state tax purposes.

The income tax expense is related to the federal, state, and international taxes payable offset by a change in the valuation allowance.

We do not currently expect the Inflation Reduction Act to have a material impact on our financial results, including on our annual estimated effective tax rate.

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.

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 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, non-recurring warranty provisions, asset impairment, loss on extinguishment of debt, 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.

We define EBITDA as net income (loss) computed in accordance with GAAP before interest income, net, income tax expense (benefit) and depreciation and amortization.

We define Adjusted EBITDA as EBITDA before expenses related to non-recurring legal matters, stock-based compensation, impairment of investment in a non-affiliate, non-employee warrant expense, non-recurring warranty provisions, asset impairment, compensation expense in connection with acquisitions, other acquisition expenses, 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.

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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.

The GAAP measure most directly comparable to EBITDA and Adjusted EBITDA is net income (loss).

EBITDA and Adjusted EBITDA are not used as measures of our liquidity and should not be considered alternatives to net income (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.

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(dollars in thousands)

Interest (income) expense, net

Income tax (benefit) expense

Interest income, net

Income tax expense (benefit)

Depreciation and amortization

Legal matter (1)

Stock-based compensation

Impairment of investment in non-affiliate

Non-employee warrant expense

Compensation expense in connection with acquisitions

Non-recurring warranty provision

Asset impairment

Severance charges

Compensation expense in connection with acquisitions

Other acquisition expenses

Loss on extinguishment of debt

Non-recurring warranty provision

Other non-operating expenses (2)

Adjusted EBITDA

(1) Refer to Note 12 "Commitments and Contingencies".

(2) During the year ended December 31, 2024, other non-operating expenses includes $3,183 of severance expense and $1,065 of CEO transition expenses.

During the year ended December 31, 2023, other non-operating expenses includes $1,070 of severance expense.

There were no such expenses during the year ended December 31, 2022.

Liquidity and Capital Resources

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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 the Agreement with 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 has agreed to transfer certain of its inventory to ADI, to fulfill our sales in exchange for cash.

No revenue is recognized when inventory is transferred to ADI.

We believe the Agreement will result in a net positive cash flow impact in future periods.

Debt Issuances

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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.

Legacy SmartRent Preferred Stock Issuances

In February and March 2021, Legacy SmartRent issued approximately 3.4 million shares of Series C Preferred Stock (which automatically converted into a number of shares of Common Stock upon consummation of the Business Combination) in exchange for $35.0 million gross cash proceeds.

Expenses in connection with the issuance of the Series C Preferred Stock were $0.2 million, resulting in net cash proceeds of $34.8 million.

We have incurred negative cash flows from operating activities and significant losses from operations in the past as reflected in our accumulated deficit of $285.5 million as of December 31, 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.

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Stock Repurchase Program

In March 2024, our Board of Directors authorized a stock repurchase program pursuant to which we may repurchase up to $50 million of our Class A common stock.

In March 2024, the Board authorized a stock repurchase program pursuant to which we may repurchase up to $50 million of our Class A common stock.

Repurchases under the program may be made from time to time through open market purchases or through privately negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors.

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The timing and number of shares repurchased will depend on a variety of factors, including the stock price, business and market conditions, corporate and regulatory requirements, alternative investment opportunities, acquisition opportunities, and other factors.

To date, we have not made any repurchases under our stock repurchase program, and $50 million remains available for future repurchases.

During the year ended December 31, 2024, we repurchased 15.2 million shares of our Class A common stock under the stock repurchase program at an average price of approximately $1.89 per share for a total of $28.6 million, including $0.2 million of broker fees.

As of December 31, 2024, approximately $21.6 million remained available for stock repurchases pursuant to our stock repurchase program.

Cash Flow Summary - Years Ended December 31, 2024, 2023 and 2022

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(dollars in thousands)

Net cash provided by (used in)

Net cash (used in) provided by

Operating activities

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Operating Activities

For the year ended December 31, 2024, our operating activities used $32.9 million in cash resulting primarily from our net loss of $33.6 million and $28.4 million used in changes in our operating assets and liabilities, partially offset by approximately $29.1 million provided by non-cash expenses.

Changes in our operating assets and liabilities primarily resulted from a $35.5 million decrease in deferred revenue, an $6.4 million decrease in accounts payable, and a $0.7 million decrease in accrued expenses and other liabilities, partially offset by an $11.2 million decrease in deferred cost of revenue and a $4.5 million decrease in prepaid expenses and other assets.

Non-cash expenses consisted primarily of stock-based compensation of $12.1 million, non-cash legal expenses of $5.0 million, in which the Company agreed to settle a legal dispute with a supplier by returning $5.0 million of inventory, depreciation and amortization of $6.5 million, provision for excess and obsolete inventory of $2.6 million and impairment of investment in non-affiliate of $2.3 million.

For the year ended December 31, 2023, our operating activities resulted in net proceeds of $6.0 million in cash resulting primarily from $27.8 million provided by non-cash expenses and $12.8 million provided by changes in our operating assets and liabilities, partially offset by our net loss of $34.6 million.

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Changes in our operating assets and liabilities primarily resulted from a $31.7 million decrease in inventory and a $13.0 million decrease in deferred cost of revenue, partially offset by a $16.8 million decrease in deferred revenue and an $11.0 million decrease in accrued expenses and other liabilities.

While the Agreement with ADI did not have a cash flow impact during the year ended December 31, 2023, we believe the Agreement will have a positive impact on cash flow in future periods.

For the year ended December 31, 2022, our operating activities used $77.8 million in cash resulting primarily from our net loss of $96.3 million and $4.9 million used in changes in our operating assets and liabilities, partially offset by $23.4 million provided by non-cash expenses.

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Non-cash expenses consisted primarily of stock-based compensation of $13.7 million, compensation expense related to acquisitions of $5.0 million, $4.4 million of asset impairment, and depreciation and amortization of $4.3 million, partially offset by a deferred tax benefit of $5.7 million resulting from the SightPlan acquisition.

For the year ended December 31, 2021, our operating activities used $70.4 million in cash resulting primarily from our net loss of $72.0 million, which was partially offset by $18.0 million of non-cash expenses consisting primarily of $8.1 million for stock-based compensation and $7.6 million for the provision for warranty expenses.

For the year ended December 31, 2021, we used $16.4 million net cash from changes in our operating assets and liabilities resulting primarily from increases of $24.0 million in

accounts receivable, $15.8 million in inventory, $11.3 million in prepaid expenses and other assets, and $9.3 million in deferred cost of revenue.

These uses were partially offset by an increase of $38.9 million in deferred revenue and an increase of $3.8 million in accounts payable.

Investing Activities

For the year ended December 31, 2024, we used $7.6 million of cash for investing activities, resulting primarily from cash paid of $5.8 million for capitalized internal-use software development costs and $1.8 million for the purchase of property and equipment.

For the year ended December 31, 2023, we used $6.0 million of cash for investing activities, resulting primarily from cash paid of $3.6 million for capitalized internal-use software development costs and $2.3 million cash paid for investment in non-affiliate.

For the year ended December 31, 2022, we used $134.0 million of cash for investing activities, resulting primarily from $129.7 million used for the SightPlan acquisition, net of cash acquired.

For the year ended December 31, 2021, we used $9.4 million of cash for investing activities, resulting primarily due to $5.9 million used for the iQuue acquisition, net of cash acquired.

Financing Activities

For the year ended December 31, 2024, our financing activities used $33.0 million of cash, resulting primarily from $28.6 million used for repurchases of Class A common stock, $2.0 million used for taxes paid related to net share settlements of stock-based compensation awards and $1.5 million used for earnout payments related to the iQuue LLC acquisition (the "iQuue acquisition").

For the year ended December 31, 2023, our financing activities used $1.9 million of cash, resulting primarily from $1.7 million used for earnout payments related to the iQuue acquisition.

For the year ended December 31, 2022, our financing activities used $2.8 million of cash primarily for taxes paid related to net share settlements of stock-based compensation awards.

For the year ended December 31, 2021, our financing activities provided $473.9 million of cash consisting primarily of net proceeds from the consummation of the Business Combination in the amount of $444.6 million and convertible preferred stock issued of $34.8 million, net of expenses.

The proceeds were partially offset by paying off the balance of the Term Loan Facility.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2024.

Critical Accounting Policies and Estimates

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with GAAP.

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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.

Payments we receive by 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.

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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 software during the contracted-use term.

The hardware performance obligation includes the delivery of hardware, and the Hosted Services performance obligation allows the customer use of our 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.

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Under the accelerated attribution method, compensation expense is recognized over the remaining requisite service period for each service condition tranche as though each tranche is, in substance, a separate award.

In August 2021, the Company completed the merger with FWAA, which met the liquidity event vesting condition and triggered the recognition of compensation expense for RSUs for which the time-based vesting condition had been satisfied or partially satisfied.

In August 2021, the Company completed the merger with FWAA, which met the liquidity event vesting condition and triggered the recognition of compensation expense for awards of RSUs, or applicable portions of such awards, for which the time-based vesting condition had been satisfied.

Emerging Growth Company Status

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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.

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 first fiscal year following the fifth anniversary of the initial public offering by FWAA (the "FWAA IPO"), which closed on February 9, 2021, (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.

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 first fiscal year following the fifth anniversary of the initial public offering by FWAA, which closed on February 9, 2021, (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

See Note 2, “Significant Accounting Policies” - Recent Accounting Guidance for more information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis