What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-05 compared with 2024-03-05 · 320 added, 390 removed, 818 unchanged (46% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Cash Flows

Consolidated Balance Sheets as of December 31, 2024 and 2023

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024, 2023 and 2022

Consolidated Statements of Stockholders' Equity for the years ended December 31, 2024, 2023 and 2022

Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022

Notes to Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of SmartRent, Inc.

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

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We have served as the Company’s auditor since 2020.

Item 1 - Financial Statements

SMARTRENT, INC.

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(in thousands, except per share amounts)

As of December 31,

December 31, 2024

December 31, 2023

Current assets

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Stockholders' equity

Common stock, $ 0.0001 par value;

Class A common stock, $ 0.0001 par value;

500,000 shares authorized as of December 31, 2024 and December 31, 2023, respectively;

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Loss from operations

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)

Other comprehensive loss

17 unchanged sentences

Balance, December 31, 2021

Issuance of Series C Preferred Stock for cash, net of offering costs

Exercise of warrants

Conversion of Convertible Preferred Stock to Common Stock

Reverse recapitalization, net of transaction costs

Stock-based compensation

Redemption of warrants

Common stock warrants issued to customers as consideration

Common stock warrants related to marketing expense

Other comprehensive loss

Balance, December 31, 2021

Stock-based compensation

Tax withholdings related to net share settlement of equity awards

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Balance, December 31, 2023

Stock-based compensation

Issuance of Class A common stock upon vesting of equity awards

Issuance of common stock upon vesting of equity awards

Tax withholdings related to net share settlement of equity awards

Exercise of options

Net settlement related to exercise of options

ESPP purchases

Repurchases of Class A common stock

Other comprehensive loss

Balance, December 31, 2024

See accompanying Notes to Consolidated Financial Statements.

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Depreciation and amortization

Amortization of debt discount

Asset impairment

Impairment of investment in non-affiliate

Non-employee warrant expense

Provision for warranty expense

Loss on extinguishment of debt

Non-cash lease expense

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Provision for excess and obsolete inventory

Provision for doubtful accounts

Provision for expected credit losses

Non-cash legal expense (Note 12 "Commitments and Contingencies")

Change in operating assets and liabilities

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Lease liabilities

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for SightPlan acquisition, net of cash acquired

Payments for iQuue acquisition, net of cash acquired

Payments for investment in non-affiliate

Purchase of property and equipment

Payment for loan receivable

Capitalized software costs

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES

Payment on term loan

Payments of senior revolving facility transaction costs

Payments for repurchases of Class A common stock

Proceeds from warrant exercise

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Taxes paid related to net share settlements of stock-based compensation awards

Convertible preferred stock issued

Payments of convertible stock transaction costs

Proceeds from business combination and private offering

Payments for business combination and private offering transaction costs

Payment of earnout related to acquisition

Net cash (used in) provided by financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net decrease (increase) in cash, cash equivalents, and restricted cash

Net decrease in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash - beginning of period

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Schedule of non-cash investing and financing activities

Right-of-use ("ROU") assets obtained in exchange for new lease liabilities

Accrued property and equipment at period end

Contingent consideration

Acquisition consideration held in escrow

Conversion of convertible preferred stock to common stock

Stock repurchases excise tax charged to equity

See accompanying Notes to Consolidated Financial Statements.

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Its 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.

The Company’s platform lowers operating costs, increases revenues, mitigates operational friction and protects assets for owners and operators, while providing a differentiated, elevated living experience for residents.

The Company’s solutions can help lower operating costs, increase revenue, mitigate operational friction and protect assets for owners and operators, while providing a differentiated, elevated living experience for residents.

The Company is headquartered in Scottsdale, Arizona.

The Company, formerly known as Fifth Wall Acquisition Corp.

I, was originally incorporated in Delaware on November 23, 2020, as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses.

On February 9, 2021, the Company consummated its initial public offering, following which its shares began trading on the Nasdaq National Market.

On April 21, 2021, FWAA entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with SmartRent.com, Inc.

(“Legacy SmartRent”) and Einstein Merger Corp.

I, a wholly owned subsidiary of FWAA.

On August 24, 2021, the transactions contemplated by the Merger Agreement (the “Business Combination”) were consummated.

In connection with the closing of the Business Combination, FWAA changed its name to SmartRent, Inc.

and its shares began trading on the NYSE under the symbol “SMRT.” As a result of the Business Combination, SmartRent, Inc.

became the owner, directly or indirectly, of all of the equity interests of Legacy SmartRent and its subsidiaries.

The Business Combination

The Company entered into the Merger Agreement in April 2021 and consummated the Business Combination in August 2021.

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, the Company changed its name from “Fifth Wall Acquisition Corp.

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

Upon the closing of the Business Combination, the Company's certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of capital stock to 550,000 shares, of which 500,000 shares were designated common stock, $ 0.0001 par value per share, and of which 50,000 shares were designated preferred stock, $ 0.0001 par value per share.

Upon consummation of the Business Combination, each share of Legacy SmartRent convertible preferred stock and common stock issued and outstanding was canceled and converted into the right to receive approximately 4.8846 shares (the “Exchange Ratio”) of the Company’s Class A Common Stock, par value $ 0.0001 per share (“Common Stock”).

Outstanding stock options and RSUs, whether vested or unvested, to purchase or receive shares of Legacy SmartRent common stock granted under the 2018 Stock Plan (see Note 8) converted into stock options and RSUs to purchase shares of the Company’s Common Stock upon the same terms and conditions that were in effect with respect to such stock options and RSUs immediately prior to the Business Combination, after giving effect to the Exchange Ratio.

Outstanding warrants, whether vested or unvested, to purchase shares of Legacy SmartRent common stock (see Note 7) converted into warrants for shares of the Company’s Common Stock upon the same terms and conditions that were in effect with respect to such warrants immediately prior to the Business Combination, after giving effect to the Exchange Ratio.

In connection with the Business Combination,

Holders of less than one thousand shares of FWAA’s Class A Common Stock sold in its initial public offering (the “Initial Shares”) properly exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from FWAA’s initial public offering, calculated as of two business days prior to the consummation of the Business Combination.

Each such share was redeemed for approximately $ 10.00 per share, or $ 2 in the aggregate;

The shares of FWAA Class B Common Stock held by Fifth Wall Acquisition Sponsor, LLC (“Sponsor”) and FWAA’s independent directors automatically converted to 8,625 shares of Common Stock;

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Pursuant to subscription agreements entered into in connection with the Merger Agreement (collectively, the “Subscription Agreements”), certain investors purchased an aggregate of 15,500 newly-issued shares of Common Stock at a purchase price of $ 10.00 per share for an aggregate purchase price of $ 155,000 (the “PIPE Investment”).

At the closing of the Business Combination, the Company consummated the PIPE Investment.

The Company incurred direct and incremental costs of approximately $ 55,981 in connection with the Business Combination and the related equity issuance, consisting primarily of investment banking, legal, accounting, and other professional fees, which were recorded to additional paid-in capital as a reduction of proceeds.

The Company accounted for this transaction as a reverse merger in accordance with GAAP.

Under this method of accounting, FWAA was treated as the “acquired” company for financial reporting purposes.

See Note 2 "Significant Accounting Policies" for further details.

Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy SmartRent issuing stock for the net assets of FWAA, accompanied by a recapitalization.

The net assets of FWAA are stated at historical cost, with no goodwill or intangible assets recorded.

Prior to the Business Combination, Legacy SmartRent and FWAA filed separate standalone federal, state, and local income tax returns.

As a result of the Business Combination, SmartRent, Inc.

files a consolidated income tax return.

For legal purposes, FWAA acquired Legacy SmartRent, and the transaction represents a reverse acquisition for federal income tax purposes - SmartRent, Inc.

is the parent of the consolidated group with SmartRent Technologies, Inc.

as a subsidiary, but in the year of the closing of the Business Combination, the consolidated tax return of SmartRent, Inc.

included a full year period for Legacy SmartRent and stub-year for FWAA starting the day after the closing of the Business Combination.

FWAA filed a short year return for the period prior to the acquisition.

Upon closing of the Business Combination, the Company received gross proceeds of $ 500,628 from the Business Combination and PIPE Investment, offset by offerings costs of $ 55,981 .

SIGNIFICANT ACCOUNTING POLICIES

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The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

The Company's financial statements have been prepared on a consolidated basis and as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 include the consolidated accounts of the Company and its wholly owned subsidiaries.

The Company's financial statements have been prepared on a consolidated basis and as of December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023 and 2022 include the consolidated accounts of the Company.

All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements herein.

Immaterial Restatement of Prior Period Financial Statements

Subsequent to the issuance of the Company’s financial statements for the year ended December 31, 2022, the Company’s management identified an error in the classification of cash paid for capitalized software costs that had previously been included in operating activities but should have been included in investing activities within the statement of cash flows.

As a result, the accompanying consolidated statement of cash flows for the year ended December 31, 2022 has been restated from amounts previously reported.

For the year ended December 31, 2021, no such costs were paid, thus, no restatement was required.

Management determined that the error was not material to previously issued financial statements.

The following table presents the effects of the restatement to the Company’s consolidated statement of cash flows for the year ended December 31, 2022.

As Previously Reported

Cash Flows from Operating Activities:

Change in Prepaid expenses and other Assets

Net cash used in operating activities

Cash Flows from Investing Activities:

Capitalized software costs

Net cash used in investing activities

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Foreign Currency

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The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expense during the reporting period.

These estimates made by management include valuing the Company’s inventories on hand, allowance for doubtful accounts, intangible assets, earnout liabilities, warranty liabilities, stand-alone selling price of items sold, and certain assumptions used in the valuation of equity awards, including the estimated fair value of common stock warrants, and assumptions used to estimate the fair value of stock-based compensation expense.

These estimates made by management include valuing the Company’s inventories on hand, allowance for expected credit losses, intangible assets, earnout liabilities, warranty liabilities, stand-alone selling price of items sold, and certain assumptions used in the valuation of equity awards, including the estimated fair value of common stock warrants, and assumptions used to estimate the fair value of stock-based compensation expense.

Actual results could differ materially from those estimates.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

In March 2022, the Company purchased all of the outstanding equity interests of SightPlan in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used (see Note 14).

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Assets acquired and liabilities assumed by the Company were recorded at their estimated fair values, while goodwill was measured as the excess of the consideration paid over the fair value of the net identifiable assets acquired and liabilities assumed.

In December 2021, the Company purchased all of the outstanding equity interests of iQuue in an acquisition that meets the definition of a business combination, for which the acquisition method of accounting was used.

The acquisition was recorded on the date that the Company obtained control over the acquired business.

The consideration paid was determined on the acquisition date.

The acquisition-related costs, such as professional fees, were excluded from the consideration transferred and recorded as expense in the period incurred.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Net Loss Per Share Attributable to Common Stockholders

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The Company considers any unvested common shares subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock.

The holders of unvested common shares subject to repurchase do not have a contractual obligation to share in losses.

The holders of unvested shares of common stock subject to repurchase do not have a contractual obligation to share in losses.

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase and any shares issuable by the exercise of warrants for nominal consideration.

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The Company believes any risks are mitigated through the size and security of the financial institution at which its cash balances are held.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Restricted Cash

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Accounts receivable consist of balances due from customers resulting from the sale of hardware, professional services and Hosted Services.

Accounts receivable are recorded at invoiced amounts, are non-interest bearing and are presented net of the associated allowance for doubtful accounts on the Consolidated Balance Sheets.

The allowance for doubtful accounts totaled $ 1,361 and $ 606 as of December 31, 2023, and December 31, 2022, respectively.

The provision for doubtful accounts is recorded in general and administrative expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss;

the provision for doubtful accounts totaled $ 819 , $ 242 , and $ 226 for the years ended December 31, 2023, 2022, and 2021, respectively.

There were no material write-offs of accounts receivable for the years ended December 31, 2023, 2022, and 2021.

The Company evaluates the collectability of the accounts receivable balances and has determined the allowance for doubtful accounts based on a combination of factors, which include th e nature of the relationship and the prior collection experience the Company has with the account and an evaluation for current and projected economic conditions as of the Consolidated Balance Sheets date.

Accounts receivable determined to be uncollectible are charged against the allowance for doubtful accounts.

Accounts receivable are recorded at invoiced amounts, are non-interest bearing and are presented net of the associated allowance for expected credit losses on the Consolidated Balance Sheets.

The allowance for expected credit losses totaled $ 2,797 and $ 1,361 as of December 31, 2024, and December 31, 2023, respectively.

The provision for expected credit losses is recorded in general and administrative expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss.

The provision for expected credit losses totaled $ 1,436 , $ 819 and $ 242 for the years ended December 31, 2024, 2023 and 2022, respectively.

The Company evaluates the collectability of the accounts receivable balances and has determined the allowance for expected credit losses based on a combination of factors, which include th e nature of the relationship and the prior collection experience the Company has with the account and an evaluation for current and projected economic conditions as of the Consolidated Balance Sheets date.

Accounts receivable determined to be uncollectible are charged against the allowance for expected credit losses.

Actual collections of accounts receivable could differ from management’s estimates.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Significant Customers

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The Company adjusts the inventory balance based on anticipated obsolescence, usage and historical write-offs.

In August 2023 the Company entered into the Agreement with ADI, pursuant to which, ADI will serve as the Company's 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, which ADI will use to fulfill the Company's sales in exchange for cash.

In August 2023, the Company entered into the Agreement with ADI, pursuant to which, ADI agreed to serve as the Company's non-exclusive hardware fulfillment partner throughout the United States, Canada, and Puerto Rico.

The Company is subject to certain buy-back provisions relating to the transferred inventory.

As of December 31, 2023, the Company recorded $ 851 in connection with the buy back provision, which is recorded in other current liabilities on the balance sheet.

The Company retains control of the inventory transferred to ADI and continues to recognize the inventory on the balance sheet.

Revenue is recognized at a point in time when the inventory is shipped to the customer.

No revenue is recognized when inventory is transferred to ADI.

As of December 31, 2024 and December 31, 2023, the Company recorded $ 537 and $ 851 in connection with the buy-back provision, which is recorded in other current liabilities on the Consolidated Balance Sheets.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Goodwill represents the excess of cost over net assets of the Company's completed business combinations.

The Company tests for potential impairment of goodwill on an annual basis as of September 30 to determine if the carrying value is less than the fair value.

The Company will conduct additional tests between annual tests if there are indications of potential g oodwill impairment.

The Company will conduct additional tests between annual tests if there are indications of potential goodwill impairment.

During the year ended December 31, 2024, the Company conducted an interim test as of July 31, 2024 following the departure of the Company's former Chief Executive Officer ("CEO") and decline in the Company's stock price.

The Company concluded that goodwill was no t impaired as of July 31, 2024.

No goodwill impairment has been recorded as of December 31, 2024 and December 31, 2023 .

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Repairs and maintenance expense for the years ended December 31, 2024, 2023 and 2022 was $ 21 , $ 26 and $ 50 , respectively, and is included in general and administrative expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Depreciation and amortization are included in cost of revenue and general and administrative expenses and are computed using the straight-line basis over estimated useful lives of those assets as follows.

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If such assets are impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The Company classifies an arrangement as a lease at inception by determining if the arrangement conveys the right to control the use of the identified asset for a period of time in exchange for consideration.

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The Company evaluates these options at lease inception and on an ongoing basis.

Renewal and termination options that the Company i s reasonably certain to exercise are included when classifying leases and measuring lease liabilities.

Renewal and termination options that the Company is reasonably certain to exercise are included when classifying leases and measuring lease liabilities.

Operating lease expense is recognized on a straight-line basis over the lease term.

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For the years ended December 31, 2024, 2023 and 2022, warranty expense included in cost of hardware revenue was $ 261 , $ 2,142 and $ 852 , respectively.

As of December 31, 2023, and December 31, 2022, the Company’s warranty allowance was $ 2,215 and $ 2,277 , respectively.

During the year ended December 31, 2020, the Company identified a deficiency with batteries contained in certain hardware sold and has included an estimate of the expected cost to remove these batteries, which were acquired from one supplier, in its warranty allowance.

During the year ended December 31, 2021, the Company identified additional deficient batteries, and while the number of deficient batteries is less than one percent of the total number of all batteries deployed, the Company has elected to replace all such batteries from previously deployed hardware devices.

As of December 31, 2023, and December 31, 2022, $ 864 and $ 1,687 , respectively, is included in the Company’s warranty allowance related to the remaining cost of replacement for this identified battery deficiency.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

During the year ended December 31, 2023, the Company identified a deficiency with the firmware and sensor accuracy of certain hardware sold and has included an estimate of the expected cost to update the related firmware and hardware.

The lower warranty expense during the year ended December 31, 2024 was primarily attributable to the Company's release of an $ 864 accrual related to the replacement of deficient batteries as disclosed in the paragraph below.

As of December 31, 2024, and December 31, 2023, the Company’s warranty allowance was $ 1,077 and $ 2,215 , respectively, and is recorded in other current liabilities on the Consolidated Balance Sheets.

During the year ended December 31, 2020, the Company identified a deficiency with batteries contained in certain hardware sold and included an estimate of the expected cost to remove these batteries, which were acquired from one supplier, in its warranty allowance.

During the year ended December 31, 2024, the Company determined the battery replacements were complete and released the remaining warranty accrual of $ 864 related to the battery deficiency.

As of December 31, 2024 , there is no amount in the Company’s warranty allowance related to the remaining cost of replacement for this identified battery deficiency.

As of December 31, 2023, $ 864 is included in the Company’s warranty allowance related to the remaining cost of replacement for this identified battery deficiency.

During the year ended December 31, 2023, the Company identified a deficiency with the firmware and sensor accuracy of certain hardware sold and included an estimate of the expected cost to update the related firmware and hardware in its warranty allowance.

As of December 31, 2023 , $ 410 is included in the Company’s warranty allowance related to the remaining cost to perform the firmware and hardware updates.

The affected hardware and firmware was fully updated during 2024, and therefore, a s of December 31, 2024 , there is no amount in the Company's warranty allowance related to the remaining cost to perform the firmware and hardware updates.

December 31, 2024

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Non-recurring warranty items incurred

Warranty accrual (reversal) for completed projects

Warranty (reversal) accrual for completed projects

Warranty settlements

Warranty reserve ending balance

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Fair Value of Financial Instruments

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The carrying amounts of the Company’s accounts receivable, accounts payable and accrued and other liabilities approximate their fair values due to their short maturities.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Revenue Recognition

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Included in these contracts are centrally connected devices ("Hub Devices"), which integrate the Company’s enterprise software with third party smart devices.

Historically, the Company only sold non-distinct Hub Devices which only functioned with a subscription to its software.

During the year ended December 31, 2022, the Company began shipping distinct Hub Devices.

Historically, the Company only sold non-distinct Hub Devices.

During the year ended December 31, 2022, the Company began shipping Hub Devices with features that function independently from its software subscription ("distinct Hub Devices").

Non-distinct Hub Devices are recognized as a single performance obligation with the Company’s software in Hosted Services revenue, while distinct Hub Devices are recognized as a separate performance obligation in hardware revenue.

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Also included in the hosted service performance obligation are non-distinct Hub Devices that only function with a subscription to the Company’s software.

Payments are received by the Company by credit card, check or automated clearing house payments and payment terms are determined by individual contracts and generally range from due upon receipt to net 30 days .

Payments are received by the Company by check or automated clearing house payments and payment terms are determined by individual contracts and generally range from due upon receipt to net 30 days .

Taxes collected from customers and remitted to governmental authorities are not included in reported revenue.

4 unchanged sentences

Amounts billed for shipping and handling fees are recorded as revenue.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

• Sales tax collected from customers:

3 unchanged sentences

The Company only applies these steps when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services it transfers to a customer.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

• Significant financing component:

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• Hosted Services Revenue

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

Hosted Services revenue primarily consists of monthly subscription revenue generated from fees that provide customers access to one or more of the Company’s software applications including access controls, asset monitoring and related services, and our Community WiFi solution, which provides communities with a private, device-dedicated WiFi network.

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

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

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Deferred cost of revenue includes all direct costs included in cost of revenue for Hosted Services and non-distinct Hub Devices that have been deferred to future periods.

Stock-Based Compensation

Our stock-based compensation consists of stock options and restricted stock units ("RSUs") granted to our employees and directors during the periods presented.

Stock-based awards are measured based on the grant date fair value.

We estimate the fair value of stock option awards on the grant date using the Black-Scholes option-pricing model.

The fair value of RSUs is based on the grant date fair value of the stock price.

The fair value of these awards is recognized as compensation expense on a straight-line basis over the requisite service period in which the awards are expected to vest.

Forfeitures are recognized as they occur by reversing previously recognized compensation expense.

The Black-Scholes model considers several variables and assumptions in estimating the fair value of stock-based awards.

These variables include the per share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected annual dividend yield, and the expected stock price volatility over the expected term and forfeitures, which are recognized as they occur.

For all stock options granted, we calculated the expected term using the simplified method for “plain vanilla” stock option awards.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Research and Development

These expenses relate to the research and development of new products and services and enhancements to the Company’s existing product offerings.

The Company accounts for the cost of research and development by capitalizing qualifying costs, which are incurred during the product development stage, and amortizing those costs over the product’s estimated useful life.

The Company expenses preliminary evaluation costs as they are incurred before the product development stage, as well as post development implementation and operation costs, such as training, maintenance and minor upgrades.

During the years ended December 31, 2024, 2023 and 2022, the Company capitalized $ 5,270 , $ 3,919 and $ 2,746 , respectively, of research and development costs in other long-term assets on the Consolidated Balance Sheets.

As of December 31, 2024, the Company had capitalized $ 12,334 of research and development costs in other long-term assets on the Consolidated Balance Sheets, of which $ 9,543 remained to be amortized.

As of December 31, 2023, the Company had capitalized $ 7,064 of research and development costs in other long-term assets on the Consolidated Balance Sheets, of which $ 6,163 remains to be amortized.

During the years ended December 31, 2023 and 2022, $ 822 and $ 79 of amortization expense related to capitalized research and development was recorded in research and development expenses on the Consolidated Statements of Operations and Comprehensive Loss, respectively.

There was no such amortization expense recorded during the year ended December 31, 2021.

Advertising costs are expensed as incurred and recorded as a component of sales and marketing expense.

The Company incurred $ 650 , $ 432 and $ 292 of advertising expenses for the years ended December 31, 2024, 2023 and 2022, respectively.

The Company has one operating segment and one reportable segment as its chief operating decision maker, who is its Chief Executive Officer, reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance.

The Company has one operating segment and one reportable segment.

Its chief operating decision maker ("CODM") was the Company's Chief Executive Officer until the Chief Executive Officer’s resignation on July 29, 2024.

On that date, a management committee comprised of certain of the Company’s then executives became the CODM until February 24, 2025 (the “Start Date”) and effective the Start Date, the Company appointed a new President and Chief Executive Officer who currently acts as the CODM .

The CODM reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance.

The Company’s principal operations are in the United States and the Company’s long-lived assets are located primarily within the United States.

The Company held $ 8,280 and $ 8,096 of assets outside the United States at December 31, 2023 , and December 31, 2022, respectively.

Refer to Note 13 - Segment Reporting for more information on the Company's operating and reportable segments.

SMARTRENT, INC.

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Recent Accounting Guidance Not Yet Adopted

In November 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) No.

2023-07 - Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This ASU updates the annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024.

Early adoption is also permitted.

The Company is currently evaluating the potential effect that the updated standard will have on the consolidated financial statement disclosures.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which requires public companies to disclose, in interim and annual reporting periods, additional information about certain expenses in the notes to financial statements.

The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the effect that the updated standard will have on the consolidated financial statement disclosures.

In December 2023, the FASB issued ASU No.

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Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance.

The Company is currently evaluating the potential effect that the updated standard will have on the consolidated financial statement disclosures.

The Company is currently evaluating the effect that the updated standard will have on the consolidated financial statement disclosures.

Recently Adopted Accounting Guidance

In November 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) No.

2023-07 - Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This ASU updates the annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024.

Early adoption is also permitted.

The Company adopted this ASU during the year ended December 31, 2024.

The adoption of this guidance modified the Company's segment disclosures but had no impact on results of operations, cash flows or financial condition.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326)” which modifies the measurement of expected credit losses of certain financial instruments.

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The following tables display the carrying values and fair values of financial instruments.

As of December 31, 2023

As of December 31, 2022

December 31, 2024

December 31, 2023

Assets on the Consolidated Balance Sheets

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The Company reports the current portion of restricted cash as a separate item in the Consolidated Balance Sheets and the non-current portion is a component of other long-term assets in the Consolidated Balance Sheets.

As of December 31, 2023

As of December 31, 2022

December 31, 2024

December 31, 2023

Liabilities on the Consolidated Balance Sheets

4 unchanged sentences

(in thousands, except per share amounts)

In December 2021, the Company purchased all of the outstanding equity interests of iQuue, LLC ("iQuue").

The Company reports the current portion of the acquisition earnout payment as a component of other current liabilities in the Consolidated Balance Sheets and the non-current portion is a component of other long-term liabilities on the Consolidated Balance Sheets.

Earnout payments related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs.

The changes in the fair value of the Company's Level 3 liabilities for the year ended December 31, 2023 and the year ended December 31, 2022 are as follows.

The changes in the fair value of the Company's Level 3 liabilities for the years ended December 31, 2024 and 2023 are as follows.

December 31, 2024

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The following inputs and assumptions were used in the Monte Carlo simulation model to estimate the fair value of the earnout payment as of December 31, 2024 and December 31, 2023.

During the year ended December 31, 2023 the Company determined there was a $ 412 increase in the fair value of the earnout, primarily due to a decreased payment term as the Company is one year closer to the payout date.

During the year ended December 31, 2022, there was a $ 310 increase in the fair value of the earnout, primarily due to a decreased payment term as the Company gets closer to the payout date.

During the year ended December 31, 2024, the Company determined there was a $ 960 decrease in the fair value of the earnout, primarily due to a decrease in the forecasted units expected to be deployed during the earnout period.

During the year ended December 31, 2023, there was a $ 412 increase in the fair value of the earnout, primarily due to a decreased payment term as the Company approached the payment date .

The Company recorded these adjustments in general and administrative expense on the Consolidated Statement of Operations and Comprehensive Loss.

See Note 13 for more information regarding the earnout payment.

The following table sets forth the weighted-average assumptions used to estimate the fair value of the earnout payment as of December 31, 2024 and December 31, 2023.

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SmartRent Solutions

Professional Services

Hosted Services

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As of December 31, 2024 , the Company expects to recognize 40 % of its total deferred revenue within the next 12 months , 19 % of its total deferred revenue between 13 and 36 months , 34 % between 37 and 60 months , and the remainder is expected to be recognized beyond five years .

Contra cts may contain termination for convenience provisions that allow the Company, customer, or both parties the ability to terminate for convenience, either at any time or upon providing a specified notice period, without a substantive termination penalty.

Contracts may contain termination for convenience provisions that allow the Company, customer, or both parties the ability to terminate for convenience, either at any time or upon providing a specified notice period, without a substantive termination penalty.

Included in deferred revenue as of December 31, 2024 and 2023 are $ 15,155 and $ 39,195 , respectively, of prepaid fees related to contracts with termination for convenience provisions which are refundable at the request of the customer.

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Deferred cost of revenue includes all direct costs includ ed in cost of revenue that have been deferred to future periods.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

OTHER BALANCE SHEET INFORMATION

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Total inventory

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The Company writes-down inventory for any excess or obsolete inventories or when the Company believes the net realizable value of inventories is less than the carrying value.

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Total prepaid expenses and other current assets

During the year ended December 31, 2024, the Company recorded $ 3,534 in other current assets related to a lease for its new headquarters in Phoenix, AZ.

"Commitments and Contingencies" - Lease Commitments.

Property and equipment, net consisted of the following.

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Total intangible assets, net

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Amortization expense on all intangible assets was $ 3,874 , $ 3,874 and $ 3,367 for the years ended December 31, 2024 , 2023 and 2022, respectively.

There was no amortization expense for the year ended December 31, 2021 as the assets were acquired on December 31, 2021 or thereafter.

Total future amortization for finite-lived intangible assets is estimated as follows.

Amortization Expense

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Other long-term assets consisted of the following.

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Investment in non-affiliate

Restricted cash, long-term portion

Other long-term assets

Total other long-term assets

Amortization expense on capitalized research and development costs was $ 822 and $ 79 for the years ended December 31, 2023 and 2022, respectively, which is primarily related to capitalized software costs and was recorded in research and development expenses on the Consolidated Statements of Operations and Comprehensive Loss.

There was no such amortization expense recorded during the year ended December 31, 2021.

Amortization expense for capitalized software costs was $ 1,760 , $ 778 and $ 79 for the years ended December 31, 2024 and 2023, respectively.

During the year ended December 31, 2024, the Company recorded $ 2,701 of other long-term assets related to a lease for its new headquarters in Phoenix, AZ.

"Commitments and Contingencies" - Lease Commitments.

In December 2023, the Company invested $ 2,250 in a non-affiliated, privately held entity, under a Simple Agreement for Future Equity ("SAFE") agreement.

The non-affiliated entity provides support and consultation for consumers looking to manage and upgrade the technology within their home.

The Company’s investment in the SAFE is recorded using the cost method of accounting and included under other long-term assets on the Consolidated Balance Sheets, as it is not readily convertible into cash.

If the Company identifies factors that may be indicative of impairment the Company will review the investment for impairment.

For the year ended December 31, 2023, the Company did not identify any factors indicative of impairment.

The Company’s investment in the SAFE is recorded using the cost method of accounting and is included under other long-term assets on the Consolidated Balance Sheets, as it is not readily convertible into cash.

During the year ended December 31, 2024, the Company identified factors indicative of impairment and recorded an impairment charge of $ 2,250 in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss.

During the year ended December 31, 2023, the Company did not identify any factors indicative of impairment.

Accrued expenses and other current liabilities consisted of the following.

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December 31, 2023

Accrued compensation costs

Accrued expenses

Accrued compensation costs

Accrued acquisition consideration

Warranty allowance

Total accrued expenses and other current liabilities

Other long-term liabilities consisted of the following.

December 31, 2024

December 31, 2023

Lease liability, noncurrent

Other long-term liabilities

Total other long-term liabilities

During the year ended December 31, 2024, the Company recorded $ 6,131 in other long-term liabilities related to the lease for its new headquarters in Phoenix, AZ.

"Commitments and Contingencies" - Lease Commitments.

SMARTRENT, INC.

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During the years ended December 31, 2024, 2023 and 2022, the facility fee totaled $ 181 , $ 188 and $ 190 , respectively.

There were no facility fees recorded during the year ended December 31, 2021.

The Senior Revolving Facility contains certain customary affirmative and negative covenants and events of default.

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As of December 31, 2024 and December 31, 2023, there was no outstanding principal amount under the Senior Revolving Facility.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

In August 2019, Legacy SmartRent entered into a loan and security agreement for a Credit Facility.

The Credit Facility provided $ 15,000 of borrowing capacity and consisted of a $ 10,000 Revolving Facility, which originally matured in August 2021 , but was extended to December 2021 , and a $ 5,000 Term Loan Facility, with a maturity date of November 2023 .

The Term Loan Facility was subject to monthly payments of interest, in arrears, accrued on the principal balance of the Term Loan Facility through November 2020 .

Thereafter, and continuing through the Term Loan Facility maturity date, the Term Loan Facility was subject to equal monthly payments of principal plus accrued interest.

Proceeds from the Credit Facility were used for general corporate purposes.

In connection with the Credit Facility, the Company issued warrants (see Note 7) to purchase Legacy SmartRent’s common stock, which were subsequently exercised on September 7, 2021 pursuant to a cashless exercise and resulting in the issuance of 148 shares of Common Stock.

At the time of issuance, the fair value of the warrants was recorded as additional paid-in capital with a reduction to the carrying value of the Term Loan Facility.

The resulting discount from outstanding principal balance of the Term Loan Facility was amortized using the effective interest rate method over the periods to maturity.

Amortization of this discount is recorded as interest expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss and Comprehensive Loss.

In December 2021, the Credit Facility was cancelled upon the repayment in full of the Term Loan Facility principal and accrued interest.

The repayment of the Term Loan Facility was accounted for as an extinguishment of debt.

CONVERTIBLE PREFERRED STOCK AND EQUITY

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As of December 31, 2024, there are no preferred stock issued or outstanding.

As discussed in Note 1, the Company has retroactively adjusted the shares issued and outstanding prior to August 24, 2021 to give effect to the Exchange Ratio to determine the number of shares of Common Stock into which they were converted.

Prior to the Business Combination, Legacy SmartRent had shares of $ 0.00001 par value Series Seed, Series A, Series B, Series B-1, Series C, and Series C-1 preferred stock outstanding, all of which were convertible into shares of common stock of Legacy SmartRent on a 1:1 basis , subject to certain anti-dilution protections.

Upon the closing of the Business Combination, the 24,816 outstanding shares of preferred stock were converted into 121,214 shares of Common Stock of the Company based on the Exchange Ratio of approximately 4.8846 .

As of December 31, 2023, warrants issued as consideration to certain customers to purchase 3,663 shares of Common Stock at $ 0.01 per share remain outstanding.

The warrants vest dependent on the number of installed units, as defined by the warrant agreements, purchased by the customer with certain measurement periods which expire in February 2024 .

The fair value of the vested warrants has been recorded as additional paid-in capital and contra-revenue on the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss, respectively.

During the years ended December 31, 2022 and 2021, the Company recorded $ 72 and $ 121 , respectively, as contra-revenue in the Consolidated Statement of Operations and Comprehensive Loss related to these warrants.

As of December 31, 202 3, the Company determined, based on the count of installed units, the number of warrants to vest would be zero and removed $ 193 from additional paid-in-capital and contra-revenue on the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss.

As of December 31, 2023 , warrants issued to a former investor to purchase 1,874 shares of Common Stock were fully vested and exercised.

The warrants represented compensation paid for marketing services provided by the investor and was accounted for using stock-based compensation guidance.

The warrants vested based on the number of installed units attained over a measurement period.

The warrants fully vested during the three months ended March 31, 2022 and the warrants were exercised during the three months ended June 30, 2022.

The Company recorded the associated marketing expense over the service period as the units were installed with an offset to additional paid-in-capital.

During the years ended December 31, 2022 and 2021, the Company recognized $ 217 and $ 810 of sales and marketing expens e related to these warrants.

No such marketing expense was recorded during the year ended December 31, 2023.

SMARTRENT, INC.

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(in thousands, except per share amounts)

In August 2019, in connection with the Credit Facility (Note 6), Legacy SmartRent issued warrants to purchase common stock of Legacy SmartRent to the lender.

The warrants were exercisable upon issuance until their expiration in August 2029 or earlier upon redemption.

The holder of the warrants, together with any successor or permitted assignee or transferee, was entitled to purchase 33 fully paid and non-assessable shares of the Legacy SmartRent’s common stock at $ 2.30 per share, subject to adjustment pursuant to the warrant.

The fair value of the warrants has been recorded as additional paid in capital and a reduction to the carrying value of the Term Loan Facility.

The resulting discount from outstanding principal balance of the Term Loan Facility was being amortized using the effective interest rate method over the periods to maturity.

Amortization of this discount was recorded as interest expense.

The warrants were exercised during the year ended December 31, 2021 as discussed above (Note 6).

In March 2019, Legacy SmartRent issued a warrant to purchase common stock to the purchaser of a $ 2,500 convertible note.

The warrant represented compensation paid for marketing services to be provided and was accounted for using stock-based compensation guidance.

The warrant vested based on the number of installed units attained over a measurement period, which expired in March 2021.

The variability in the units earned was determined to be a performance condition and did not require classification of the warrant as a liability.

Upon vesting, the warrant holder was entitled to purchase up to 503 fully paid and non-assessable shares of Legacy SmartRent’s common stock at $ 0.01 per share, subject to adjustment pursuant to the warrant.

The Company measured the fair value of the warrant using the Black-Scholes model.

The Company recorded the associated marketing expense over the service period as the units were installed with an offset to additional paid-in-capital.

These warrants were exercised by the holder in March 2021, which resulted in 503 shares of common stock being issued by Legacy SmartRent.

During the years ended December 31, 2023, 2022 and 2021, no sales and marketing expense related to these warrants was recorded in the accompanying Consolidated Statements of Operations and Comprehensive Loss.

As of December 31, 2024 , warrants issued as consideration to certain customers to purchase 3,663 shares of Class A Common Stock at $ 0.01 per share were no longer outstanding.

The vesting of the warrants was dependent on the number of installed units, as defined by the warrant agreements, purchased by the customer with certain measurement periods which expired in February 2024 .

The fair value of the vested warrants was recorded as additional paid-in capital and contra-revenue on the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss, respectively.

Based on the count of installed units as of February 2024, the number of warrants to vest is zero and as of December 31, 2023, the Company removed $ 193 from additional paid-in-capital and contra-revenue on the accompanying Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss.

There was no contra-revenue recorded related to these warrants during the years ended December 31, 2024, 2023 and 2022.

Stock Repurchase Program

In March 2024, the Company's Board of Directors (the "Board") authorized a stock repurchase program pursuant to which we may repurchase up to $ 50,000 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.

The repurchase program does not obligate us to acquire any particular amount of our Class A common stock and may be suspended at any time at our discretion.

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.

During the year ended December 31, 2024, the Company repurchased and subsequently retired 15,150 shares of our Class A common stock under the stock repurchase program at an average price of $ 1.89 per share for a total of $ 28,566 , including $ 151 of broker fees.

The Company has elected to record the amount paid to repurchase the shares in excess of the par value entirely to accumulated deficit.

As of December 31, 2024, approximately $ 21,587 remained available for stock repurchases pursuant to our stock repurchase program.

STOCK-BASED COMPENSATION

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The purpose of the 2018 Stock Plan was to advance the interests of Legacy SmartRent and its stockholders by providing an incentive to attract, retain and reward persons performing services for Legacy SmartRent and by motivating such persons to contribute to the growth and profitability of Legacy SmartRent.

The 2018 Stock Plan seeks to achieve this purpose by providing awards in the form of stock options and restricted stock purchase rights.

The 2018 Stock Plan sought to achieve this purpose by providing awards in the form of stock options and restricted stock purchase rights.

Awards granted as stock options under the 2018 Stock Plan generally expire no later than ten years from the date of grant and become vested and exercisable over a four-year period.

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In connection with the Business Combination, the Board approved and implemented the SmartRent, Inc.

2021 Plan (the "2021 Plan").

The purpose of the 2021 Plan is to enhance the Company's ability to attract, retain and motivate persons who make, or are expected to make, important contributions to the Company by providing these individuals with equity ownership opportunities and equity-linked compensation opportunities.

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The 2021 Plan authorizes the administrator of the 2021 Plan (generally, the Board or its compensation committee) to provide incentive compensation in the form of stock options, restricted stock and stock units, performance shares and units, other stock-based awards and cash-based awards.

Under the 2021 Plan, the Company is authorized to issue up to 15,500 shares of common stock.

Non-employee board member RSUs generally will vest either over one year or three years .

The RSUs and options granted to employees are generally subject to a four-year vesting schedule and all vesting generally shall be subject to the recipient’s continued employment with the Company or its subsidiaries through the applicable vesting dates.

The table below summarizes the activity pursuant to the 2021 Plan, for the years ended December 31, 2023, 2022, and the shares available for future issuances as of December 31, 2023, 2022 and 2021.

Under the 2021 Plan, the Company is authorized to issue up to 15,500 shares of Class A common stock.

On May 14, 2024, the Company's stockholders approved the 2021 Plan, as amended and restated, which increased the number of shares reserved for issuance thereunder by 8,900 shares of Class A common stock.

The Company is authorized to issue up to a total of 24,400 shares of Class A common stock under the 2021 Plan, as amended and restated.

Non-employee board member RSUs generally will vest either over one year or three years , subject to the recipient’s continued service through the applicable vesting date or dates.

The RSUs and options granted to employees are generally subject to a four-year vesting schedule and all vesting generally shall be subject to the recipient’s continued service with the Company or its subsidiaries through the applicable vesting dates.

The table below summarizes the activity pursuant to the 2021 Plan, for the years ended December 31, 2024 and 2023, and the shares available for future issuances as of December 31, 2024 and 2023.

Shares Available for Future Issuance

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Shares available as of December 31, 2023

Stock options issued, net

Additions to the plan

Stock options forfeited, net

RSUs issued, net

Shares available as of December 31, 2024

The table below summarizes the activity related to stock options, pursuant to the 2018 Plan and 2021 Plan, for the years ended December 31, 2023 and 2022.

The table below summarizes the activity related to stock options, pursuant to the 2018 Stock Plan and 2021 Plan, for the years ended December 31, 2024 and 2023.

Options Outstanding

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As of December 31, 2024, there is $ 3,200 of unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.8 years.

The table below summarizes the activity related to RSUs, pursuant to the 2018 Plan and 2021 Plan, for the years ended December 31, 2023 and 2022.

The table below summarizes the activity related to RSUs, pursuant to the 2018 Stock Plan and 2021 Plan, for the years ended December 31, 2024 and 2023.

Restricted Stock Units

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December 31, 2024

No right to any Common Stock is earned or accrued until such time that vesting occurs, nor does the grant of the RSU award confer any right to continue vesting or employment.

No right to any Class A Common Stock is earned or accrued until such time that vesting occurs, nor does the grant of the RSU award confer any right to continue vesting or employment or other service.

Compensation expense associated with the unvested RSUs is recognized on a straight-line basis over the vesting period.

During the years ended December 31, 2023, 2022 and 2021 respectively, stock-based compensation expense of $ 11,273 , $ 11,955 and $ 6,413 was recognized in connection with the vesting of all RSUs.

During the years ended December 31, 2024, 2023 and 2022, stock-based compensation expense of $ 10,154 , $ 11,273 and $ 11,955 , respectively, was recognized in connection with the vesting of all RSUs.

As of December 31, 2024, there is $ 11,095 of unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted-average period of 2.1 years.

Employee Stock Purchase Plan

The Company has the ability to initially issue up to 2,000 shares of Common Stock under the ESPP, subject to annual increases effective as of January 1, 2022, and each subsequent January 1 through and including January 1, 2030, in an amount equal to the smallest of (i) 1 % of the number of shares of the Common Stock outstanding as of the immediately preceding December 31, (ii) 2,000 shares or (iii) such amount, if any, as the Board may determine.

The Company has the ability to initially issue up to 2,000 shares of Class A Common Stock under the ESPP, subject to annual increases effective as of January 1, 2022, and each subsequent January 1 through and including January 1, 2030, in an amount equal to the smallest of (i) 1 % of the number of shares of the Class A Common Stock outstanding as of the immediately preceding December 31, (ii) 2,000 shares or (iii) such amount, if any, as the Board may determine.

The ESPP allows employees to purchase shares of the Company's Class A Common Stock approximately every six months at a per share purchase price equal to 85 percent of the quoted market price of a share of the Company’s Class A Common Stock on (i) the first day of the offering period or (ii) the applicable purchase date of such offering period, whichever quoted market price is lower.

During the years ended December 31, 2024, 2023 and 2022, stock-based compensation expense of $ 88 , $ 235 and $ 288 , respectively, was recognized in connection with the ESPP.

The table below summarizes the activity related to the ESPP for the years ended December 31, 2024 and 2023.

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(in thousands, except per share amounts)

The ESPP allows employees to purchase shares of the Company's Class A Common Stock at 85 percent of its quoted market price.

During the years ended December 31, 2023 and 2022, stock-based compensation expense of $ 235 and $ 288 , respectively, was recognized in connection with the ESPP.

No expense related to the ESPP was recognized during the year ended December 31, 2021.

Stock-Based Compensation

The fair value of stock option grants is estimated by the Company on the date of grant using the Black Scholes-Merton option pricing model with the following weighted-average assumptions for the years ended December 31, 2023 and 2022.

During the years ended December 31, 2024, 2023 and 2022, there were options granted covering 2,527 , 3,299 and 175 shares, respectively.

There were no options granted during the year ended December 31, 2021.

The fair value of stock option grants is estimated by the Company on the date of grant using the Black Scholes option pricing model with the following weighted-average assumptions for the years ended December 31, 2024, 2023 and 2022 .

For the years ended December 31,

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General and administrative

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

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

The Company and Mr.

Haldeman entered into a Separation Agreement and Release (the “Separation Agreement”).

The Separation Agreement provides that, in exchange for Mr.

Haldeman executing a release of claims in favor of the Company and its affiliates, complying with restrictive covenants (including a non-compete), resigning from the Board and agreeing to other terms of the Separation Agreement, Mr.

Haldeman received accelerated vesting of any unvested equity awards (excluding performance based awards) that would have vested had Mr.

Haldeman remained employed during the eighteen-month period immediately following the separation date.

Pursuant to the Separation Agreement, 1,359 stock options and 342 shares of restricted stock units were accelerated to vest on July 29, 2024.

The Company accounted for the modification of existing awards as a Type III modification under ASC 718, Compensation—Stock Compensation and during the year ended December 31, 2024 , the Company recognized $ 820 and $ 449 related to the acceleration of Mr.

Haldeman's RSU and stock option awards, respectively.

During the years ended December 31, 2023 and 2022, stock-based compensation expense of $ 109 and $ 811 , respectively, was recognized for 844 shares granted in connection with the Company's February 2020 acquisition of a foreign supplier and are recorded as a component of general and administrative expense.

There was no such stock-based compensation expense recording during the year ended December 31, 2024 .

The Company's components of income tax (benefit) expense consisted of the following.

6 unchanged sentences

Income tax (benefit) expense

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The following table presents a reconciliation of the Company’s effective tax rates for the periods indicated.

4 unchanged sentences

Change in valuation allowance

SPAC transaction costs

Stock compensation

2 unchanged sentences

Effective Tax Rate

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Tax effects of temporary differences can give rise to significant portions of deferred tax assets and deferred tax liabilities.

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The net valuation allowance increased by $ 9,122 from $ 71,490 to $ 80,612 in 2024.

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

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

As of December 31, 2024, the Company has gross net operating losses of $ 222,864 and $ 215,389 for federal and state income tax return purposes, respectively.

Federal net operating losses can be carried forward indefinitely, while State NOLs will expire between 2032 and 2044 .

The Company also has $ 145 of R&D credits available that expire in 2039 .

The Tax Reform Act of 1986 (the "Act") provides for a limitation of the annual use of the net operating loss carryforwards following certain ownership changes (as defined by the Act and codified under IRC 382) that could limit the company's ability to utilize these carryforwards.

Should the limitation apply, the related net operating loss and Section 163(j) deferred tax assets and the valuation allowance would be reduced by the same amount.

The Company has not performed a Section 382 analysis.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The Company recorded net deferred tax liabilities during the year ended December 31, 2022, due to the acquisition of SightPlan.

Those net deferred tax liabilities provided a source of taxable income to offset future tax deductions from deferred tax assets, and as a result, management reduced the valuation allowance by $ 5,902 during the year ended December 31, 2022 (Note 13).

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 Company has conducted an analysis under Section 382 of the Code to determine whether there would be any limitation on our ability to utilize our tax attributes.

We have not experienced any limitations on the ability to use these tax attributes as the result of our analysis.

We continue to analyze any shifts in ownership which may limit our ability to use these tax attributes in the future.

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 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.

To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.

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 the Company continues to evaluate the IRA, it does not believe it will have a material effect on its audited financial statements, including on its effective tax rate or on its liquidity.

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.

The Company files income tax returns in the U.S.

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The Company is subject to Indian income tax examinations for all tax years beginning in 2022.

The Company evaluates uncertain tax positions which requires significant judgments and estimates regarding the recoverability of deferred tax assets, the likelihood of the outcome of examinations of tax positions that may or may not be currently under review and potential scenarios involving settlements of such matters.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The Company evaluates uncertain tax positions which requires significant judgments.

The Company believes that it has established an adequate allowance for its uncertain tax positions, although it can provide no assurance that the final outcome of these matters will not be materially different.

A summary of changes in the Company's gross unrecognized tax benefits for the years ended December 31, 2024 and 2023 is as follows (in thousands):

7 unchanged sentences

Unrecognized tax benefits - December 31 (tax-effected)

The total balance of unrecognized tax benefits as of December 31, 2023 would not impact the effective tax rate if recognized, as the Company is in a full valuation allowance and the unrecognized tax benefit is a deferred tax asset.

The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefit as a component of income tax expense.

The Company has no t accrued penalties and interest as of December 31, 2024.

The Company expects the unrecognized tax benefits to reverse in full within the next 12 months.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

NET LOSS PER SHARE

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RELATED-PARTY TRANSACTIONS

A member of the Board serves on the board of directors of a SmartRent customer.

A member of the Board served on the board of directors of a SmartRent customer until June 2024.

For the six months ended June 30, 2024, the Company earned revenue from this customer of $ 1,298 .

There was no related party relationship beyond June 30, 2024.

For the years ended December 31, 2023 and 2022, the Company earned revenue from this customer of $ 3,738 and $ 3,598 , respectively.

As of December 31, 2023, and 2022, the Company had receivables due from this customer of $ 1,352 and $ 287 , respectively.

As of December 31, 2023 , the Company had receivables due from this customer of $ 1,352 .

There was no related party relationship as of December 31, 2024.

All business dealings with the customer were entered into in the ordinary course of business and the arrangements are on terms no more favorable than terms that would be available to unaffiliated third parties under the same or similar circumstances.

During the years ended December 31, 2022 and 2021, respectively, the Company incurred marketing expenses of $ 217 and $ 810 in connection with the vesting of warrants held by a former investor (see Note 7).

During the years ended December 31, 2022 and 2021, the Company incurred consulting expense of $ 20 and $ 110 related to services provided by companies in which one of the Company's former executives had control or significant influence.

During the year ended December 31, 2022, the Company incurred marketing expenses of $ 217 in connection with the vesting of warrants held by a former investor (see Note 7).

During the year ended December 31, 2022, the Company incurred consulting expense of $ 20 related to services provided by companies in which one of the Company's former executives had control or significant influence.

In March 2022, the Company purchased all of the outstanding equity interests of SightPlan (see Note 14).

2 unchanged sentences

The director did not participate in any negotiations, recused himself from all Board discussions related to the SightPlan acquisition, and did not vote on the matter.

Entities affiliated with RETV Management, LLC ("RET"), which at the time of the SightPlan acquisition held more than 5 % of the outstanding shares of the Company's Common Stock, held more than 17 % of th e fully diluted shares outstanding of SightPlan (the “RET SightPlan Holdings”).

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Entities affiliated with RETV Management, LLC ("RET"), which at the time of the SightPlan acquisition held more than 5 % of the outstanding shares of the Company's Common Stock, held more than 17 % of the fully diluted shares outstanding of SightPlan (the “RET SightPlan Holdings”).

As consideration for the RET SightPlan Holdings, entities affiliated with RET received $ 22,271 at the closing of the SightPlan acquisition.

1 unchanged sentence

Further, RET did not assist the Company with any negotiations or participate in the Board discussions related to the SightPlan acquisition.

As of December 31, 2023 , RET does no t hold any outstanding shares of the Company's Common Stock.

COMMITMENTS AND CONTINGE NCIES

As of December 31, 2024 and 2023, RET does no t hold any outstanding shares of the Company's Common Stock.

COMMITMENTS AND CONTINGENCIES

Lease Commitments

1 unchanged sentence

These leases are accounted for as operating leases and have remaining lease terms of 2 months to 7.75 years .

If an optional renewal is reasonably certain to be exercised at lease commencement, the lease term will include the optional period for purposes of measuring the initial ROU asset and lease liability.

In addition to monthly rent payments, the Company reimburses the lessors for its share of operating expenses as defined in the leases.

Such amounts are not included in the measurement of the lease liability but are recognized as a variable lease expense when incurred.

One of these leases includes a single, five-year extension option .

The Company has chosen not to exercise this extension option.

During the years ended December 31, 2022 and 2021, the Company obtained $ 2,776 and $ 3,007 of ROU assets, respectively, in exchange for lease obligations in connection with its operating leases.

The leases do not include any restrictions or covenants that had to be accounted for under the lease guidance.

During the year ended December 31, 2024 , the Company entered into a new office lease in Scottsdale, AZ for 38,820 square feet commencing on August 1, 2024 for its corporate headquarters.

The term of the lease is 8.17 years.

During the year ended December 31, 2024, the Company obtained $ 2,701 of ROU assets in exchange for lease obligations in connection with its operating leases.

No new leases were entered into during the year ended December 31, 2023.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

During the year ended December 31, 2022, the Company obtained $ 2,776 of ROU assets in exchange for lease obligations in connection with its operating leases.

Lease agreements entered into by the Company do not specify an implicit borrowing rate, however we utilize an incremental borrowing rate based on the lease term on a collateralized basis.

ROU assets and lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date.

1 unchanged sentence

The weighted-average lease term was 6.5 years, 2.4 years and 3.1 years at December 31, 2024, 2023 and 2022, respectively.

During the years ended, and as of December 31, 2023, 2022 and 2021 the Company had no finance leases.

During the years ended December 31, 2024 , 2023 and 2022, the Company had no finance leases.

During the years ended December 31, 2024, 2023 and 2022 the Company incurred rent and other related occupancy expenses of $ 2,159 , $ 1,374 and $ 1,614 , respectively.

9 unchanged sentences

Lease liability, noncurrent

The Company had $ 2,550 and $ 3,968 of ROU assets, net of related amortization, related to its lease liabilities at December 31, 2023 and 2022, respectively, and are included in other long-term assets on the Consolidated Balance Sheets.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The Company had $ 3,808 and $ 2,550 of ROU assets, net of related amortization , related to its lease liabilities at December 31, 2024 and December 31, 2023, respectively, and are included in other long-term assets on the Consolidated Balance Sheets.

The noncurrent portion of the Company’s lease liability is included in other long-term liabilities on the Consolidated Balance Sheets.

5 unchanged sentences

The Company does not believe that the outcome of these proceedings or matters will have a material effect on the consolidated financial statements.

The Company entered into an agreement with a supplier in April 2020, as further amended in March 2021, to purchase minimum volumes of certain products through August 2022.

In April 2020, the Company entered into an agreement with a supplier, as further amended in March 2021 (the "Supplier Agreement"), to purchase minimum volumes of certain products through August 2022.

Due to significant failure rates and other defects, the Company ceased ordering product from this supplier as of December 2020.

Despite the Company’s requests, the supplier indicated they are not willing to refund the Company for the malfunctioning products previously purchased, and therefore, the Company filed a complaint against the supplier on March 22, 2022 in the Superior Court for the State of California, County of Santa Clara.

On July 26, 2022, the supplier filed a cross-complaint against the Company for breach of contract and other allegations.

The Company denies the allegations in the supplier’s complaint and does not believe it has any further commitment to the supplier.

The parties are now engaging in discovery, and trial has been set for November 2024.

During the year ended December 31, 2024, the Company recorded a legal expense of $ 5,300 within general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss.

The final settlement agreement was signed in June 2024.

In July 2024, the inventory was returned to the supplier and the Court granted the parties' Request for Dismissal of the action with prejudice.

In February 2024, a putative class action complaint was filed against Fifth Wall Acquisition Sponsor, LLC, Fifth Wall Asset Management, LLC (the “FWAA Defendants”), and the individual directors of Fifth Wall Acquisition Corp.

I (“FWAA”) (the “Director Defendants” and collectively the “Defendants”) in the Delaware Court of Chancery by a stockholder of FWAA for purported damages arising from the business combination with SmartRent.com, Inc.

(“the 2024 Class Action”).

The complaint asserts claims for (i) breach of fiduciary duty against the Director Defendants;

(ii) aiding and abetting breach of fiduciary duty claims against Fifth Wall Asset Management LLC;

and (iii) unjust enrichment claims against all Defendants, for purported actions relating to FWAA’s August 24, 2021 merger with legacy SmartRent.com, Inc.

The parties are engaged in discovery and document production to date, and the Company and the defendants believe the allegations and claims made in the complaint are without merit.

As the surviving entity following the business combination, the Company presently has certain advancement obligations to the Director Defendants in connection with the 2024 Class Action which includes the costs of their defense of such litigation.

While the Director Defendants are the beneficiaries of coverage for such costs up to $ 10,000 by directors’ and officers’ insurance (“D&O insurance”), the D&O insurance is subject to a retention of $ 5,000 .

The Company has notified the relevant D&O insurance carriers of the 2024 Class Action and is litigating coverage and allocation issues in a separate action filed in the Delaware Superior Court in December 2024.

In May 2021, the Company entered into a licensing agreement with a service provider, as further amended in July 2021 (the "Service Provider Agreement"), to license the provider’s software and participate in the provider’s energy demand response program to generate revenue for the Company.

The Company paid the service provider $ 3,500 for the first 25 months of the 60-month license, with no additional payment due until July 2023.

In October 2022, the Company sought to rescind the Agreement on the basis that it believed it was misled about the business opportunity available and the nature of the parties’ arrangement .

In January 2024, the service provider brought suit against the Company for breach of contract in the Superior Court of California for the County of San Francisco seeking damages for the Company’s failure to make the monthly $ 140 payments for the license.

In February 2024, the Company filed a cross-complaint against the service provider for fraudulent inducement;

breach of contract;

and related equitable claims.

The parties engaged in substantial written discovery and depositions.

In January 2025, the Company moved for summary judgment on the Agreement’s limitation of liability provision, asserting that the service provider could not recover damages under the contract.

In February 2025, the service provider filed a motion for summary judgment on its breach of contract claim.

Pending the cross motion hearing in April 2025, the parties participated in a mediation in February 2025, which ultimately led to the parties agreement to settle the matter.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

In April 2023, a collective action was filed against the Company in Federal Court in Georgia (the "Federal Court") by two former employees alleging failure to pay overtime wages in violation of the Fair Labor Standards Act (“FLSA”).

The plaintiffs claim they were improperly classified as exempt employees under the FLSA and thus should have been entitled to overtime pay.

Limited discovery was conducted in 2023, and Plaintiffs moved for conditional certification of a collective class in July 2023, which was granted on March 31, 2024.

Notice was issued to potential class members, who had until July 15, 2024, to opt into the lawsuit.

In October 2024, the parties engaged in a private mediation and agreed to settle the matter for a total amount of $ 1,500 , inclusive of all Plaintiffs’ attorneys’ fees and costs and related releases, subject to a written agreement and the Federal Court’s approval.

As of December 31, 2024, the Company recorded a legal accrual of $ 1,500 related to this matter within general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss and accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The settlement amount was paid in full in January 2025.

The Company regularly reviews outstanding legal claims, actions and enforcement matters, if any exist, to determine if accruals for expected negative outcomes of such matters are probable and can be reasonably estimated.

1 unchanged sentence

There is no assurance that the Company's accruals for loss contingencies will not need to be adjusted in the future.

The amount of such adjustment could significantly exceed the accruals the Company has reco rded.

The Company had no such accruals as of December 31, 2023 or December 31, 2022 .

The amount of such adjustment could significantly exceed the accruals the Company has recorded.

As of December 31, 2024 , an accrual of $ 1,500 was included within accrued expenses and other current liabilities related to the legal matters discussed above.

The Company had no such accruals as of December 31, 2023.

SEGMENT REPORTING

The Company operates as a single operating segment, which is also its only reportable segment as its CODM, which is currently the Company's CEO , reviews financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance.

The Company’s principal operations are in the United States and the Company’s long-lived assets are located primarily within the United States.

The Company held $ 8,023 and $ 8,280 of assets outside the United States on December 31, 2024, and December 31, 2023, respectively.

SMARTRENT, INC.

1 unchanged sentence

(in thousands, except per share amounts)

The CODM uses revenue, gross margin, operating expenses, and net income as the primary measures to assess performance and to make strategic decisions regarding product development, market expansion, and resource allocation.

Key financial performance measures of the segment are as follows.

For the years ended December 31,

Professional Services

Deferred hub amortization

Total revenue

Cost of revenue

Professional Services

Deferred hub amortization

Total cost of revenue

Operating expenses

Operating expenses excluding stock compensation and depreciation and amortization

Stock compensation

Depreciation and amortization

Total operating expenses

Loss from operations

Other segment items (1)

(1) Other segment items include interest income, net, other income (expense), net, and income tax expense (benefit).

The CODM is regularly provided with the consolidated cost of revenue and consolidated operating expenses as noted on the face of the Consolidated Statement of Operations and Comprehensive Loss, as these make up the significant expenses included in the measure of the segment profit or loss.

Reported segment revenues less the significant expenses defined in accordance with ASC 280-10-50-26A is equal to the reported segment profit or loss, and thus there are no other segment items to disclose herein.

The Company considers these categories significant based on their materiality to the segment’s results and their importance in the CODM’s evaluation of segment performance and resource allocation decisions.

BUSINESS ACQUISITIONS

5 unchanged sentences

The preliminary purchase price consisted of $ 131,781 of cash and restricted cash and a post-closing downward adjustment of $ 127 reflecting the difference between estimated and actual net working capital of SightPlan on the acquisition date.

On the acquisition date, the Company paid cash consideration of $ 130,931 and placed $ 850 in escrow accounts legally owned by the Company.

On the acquisition

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

date, the Company paid cash consideration of $ 130,931 and placed $ 850 in escrow accounts legally owned by the Company.

During the year ended December 31, 2022, consideration held in escrow of $ 850 was distributed.

24 unchanged sentences

Changes to accounts receivable, net and other assets were immaterial.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Cash paid at acquisition

6 unchanged sentences

Compensation and other non-recurring acquisition related costs are included in general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Loss.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The fair value of the assets acquired includes accounts receivable of $ 1,255 .

19 unchanged sentences

During the years ended December 31, 2024, 2023 and 2022, the Company recorded amortization expense of $ 3,621 , $ 3,622 and $ 2,806 , respectively, related to intangible assets.

There was no such amortization expense recorded in the year ended December 31, 2021 as the acquisition occurred on March 22, 2022.

These intangible assets are deductible over 15 years for income tax purposes.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

Pro Forma Operating Results

The Company’s Consolidated Balance Sheet as of December 31, 2023 and December 2022, and other financial statements presented herein for the three and years ended December 31, 2023 and 2022 include the results of operations of SightPlan since the acquisition date.

The Company’s Consolidated Balance Sheet as of December 31, 2024 and December 2023, and other financial statements presented herein for the years ended December 31, 2024, 2023 and 2022 include the results of operations of SightPlan since the acquisition date.

The following unaudited pro forma information presents consolidated financial information as if the SightPlan acquisition had occurred on January 1, 2022.

2 unchanged sentences

For the years ended December 31,

iQuue Acquisition

In December 2021, the Company purchased all of the outstanding equity interests of iQuue, LLC.

iQuue was founded in 2015 and is headquartered in Altamonte Springs, Florida.

iQuue is a SaaS company providing a smart home and smart building technology platform for property owners, managers, and residents in the multifamily industry.

Backed by Samsung SmartThings, the iQuue technology platform is capable of integrating with any smart device.

iQuue offerings include access control, door code management, managed WiFi, and professional installation.

The Company accounted for the iQuue acquisition as a business combination.

The preliminary purchase price consisted of $ 7,213 of cash and restricted cash, estimated fair market value of $ 5,230 in contingent consideration relating to three earnout payments tied to the attainment of installed unit targets during the period of December 31, 2021 to June 30, 2025, and a Net Working Capital Adjustment of $ 508 to be paid out 91 days after the acquisition date.

On the acquisition date, the Company paid cash of $ 6,192 , and placed $ 1,021 in escrow accounts.

As of December 31, 2023, the current escrow deposits are classified as “Restricted cash, current portion” in the Consolidated Balance Sheets.

The Company determines current or non-current classification based on the expected duration of the restriction.

The maximum value of the earnout payments is $ 6,375 .

To the extent these are earned, they will be payable in cash on, or promptly after, the earnout period dates of December 31, 2022, December 31, 2023, and June 30, 2025.

The fair value of the earnout payments is determined using the Monte Carlo simulation model based on installed unit projections during the period of December 31, 2021 through June 30, 2025, implied revenue volatility, a risk-adjusted discount rate, and a credit spread.

Each reporting period, the Company is required to remeasure the fair value of the earnout liability as assumptions change and such adjustments will be recorded as a general and administrative expense within the Consolidated Statement of Operations and Comprehensive Loss.

The fair value of the earnout liability falls within Level 3 of the fair value hierarchy as a result of the unobservable inputs used for the measurement.

During the years ended December 31, 2023 and 2022, the Company determined there was an increase of $ 412 and $ 310 , respectively, in the fair value of the earnout and therefore, recorded the adjustment in general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Loss.

The fair value of the earnout as of December 31, 2023 and 2022 was $ 4,250 and $ 5,540 , respectively.

As part of the business combination, the Company agreed to pay up to approximately $ 742 to the former shareholders of iQuue over the next three years , subject to the shareholders’ continued employment at the Company.

As this payment is contingent upon the continuous service of the key employees, it is accounted for as post-combination compensation expense and is being recognized ratably over the service period of three years .

The Company deposited $ 742 cash in escrow on the acquisition date for this obligation.

The current portion of the escrow deposit is classified as “Restricted cash, current portion” and the non-current portion is classified as a component of "Other long-term assets" on the Consolidated Balance Sheets.

During the year ended December 31, 2023 and 2022, the Company recognized $ 247 and $ 247 , respectively, of compensation expense in connection with this bonus.

No such compensation expense was recorded during the year ended December 31, 2021.

SMARTRENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

The total purchase consideration and the fair values of the acquired assets and liabilities at the acquisition date were as follows.

Consideration

Cash paid at acquisition

Contingent consideration

Cash consideration held in escrow

Net working capital adjustment

Fair value of total consideration transferred

Recognized amounts of identifiable assets acquired and liabilities assumed

Accounts receivable

Intangible assets

Prepaid expenses and other assets

Total identifiable net assets acquired

Accounts payable

Deferred revenue

Accrued expenses and other liabilities

Total liabilities assumed

Total identifiable assets

The Company recognized approximately $ 576 and $ 547 of compensation expense related to the iQuue acquisition during the years ended December 31, 2023 and 2022, respectively.

No such compensation expense was recorded during the year ended December 31, 2021.

The Company recognized $ 43 and $ 116 of other non-recurring acquisition related costs that were expensed during the years ended December 31, 2023 and 2022, respectively.

No such non-recurring cost was recorded during the year ended December 31, 2021.

Compensation and other non-recurring acquisition related costs are included in general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Loss.

The fair value of the assets acquired includes accounts receivable of $ 721 .

The gross amount due under contracts for accounts receivable is $ 721 , all of which is expected to be collected.

The Company did not acquire any other class of receivable as a result of the acquisition of iQuue.

The aggregate purchase price has been allocated to the assets acquired and liabilities assumed based on the fair market value of such assets and liabilities at the date of acquisition.

Intangible assets associated with the acquisition totaled $ 3,590 and primarily related to customer relationships.

The excess purchase price over the fair value of net assets acquired was recognized as goodwill and totaled $ 8,504 .

The goodwill is attributable primarily to the workforce of the acquired business and expected synergies with the Company’s existing operations and is deductible over 15 years for income tax purposes.

The Company recorded intangible assets at their fair value, which consisted of the following.

Estimated useful life (in years)

December 31, 2021

Customer relationships

Developed technology

Total intangible assets

SUBSEQUENT EVENTS

In connection with the preparation of the accompanying consolidated financial statements, the Company has evaluated events and transactions occurring after December 31, 2024 and through March 5, 2025, the date these financial statements were issued, for potential recognition or disclosure and has determined that there are no additional items to disclose except as disclosed below.

In January 2025, the Company 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 will replaces Daryl Stemm who had been serving as Interim Principal Executive Officer since July 29, 2024.

Stemm will continue to serve as the Company’s Chief Financial Officer.

The Management Committee of SmartRent and the Operating Committee of the Board, both formed to guide the Company through its Chief Executive Officer transition, dissolved effective as of the Start Date.

SMARTRENT, INC.

1 unchanged sentence

(in thousands, except per share amounts)

The valuation of intangible assets was determined using an income approach methodology.

The fair value of the customer relationship intangible assets was determined using the multi-period excess earnings method based on discounted projected net cash flows associated with the net earnings attributable to the acquired customer relationships.

The fair value of the acquired developed technology was determined using the relief from royalty method, which measures the value by estimating the cost savings associated with owning the asset rather than licensing it.

The income approach methodology involves estimating cash flows over the remaining economic life of the intangible assets, which are considered from a market participant perspective.

Key assumptions used in estimating future cash flows included projected revenue growth rates and customer attrition rates.

The projected future cash flows were discounted to present value using an appropriate discount rate.

As such, all aforementioned intangible assets were valued using Level 3 inputs.

During the years ended December 31, 2023 and 2022, the Company recorded amortization expense of $ 253 and $ 562 , respectively, related to intangible assets.

There was no such amortization expense recorded for the year ended December 31, 2021 as the acquisition occurred on December 31, 2021.

These intangible assets are deductible over 15 years for income tax purposes.

The Company’s Consolidated Balance Sheets as of December 31, 2023 and 2022, and other financial statements presented herein for the year ended December 31, 2023 and 2022 include the results of operations of iQuue since the acquisition date.

Pro forma disclosures have not been provided since the acquisition did not have, and is not expected to have, a material impact on the Company’s results of operations.

SUBSEQUENT EVENTS

In connection with the preparation of the accompanying consolidated financial statements, the Company has evaluated events and transactions occurring after December 31, 2023 and through March 5, 2024, the date these financial statements were issued, for potential recognition or disclosure and has determined that there are no additional items to disclose except as disclosed below.

In January 2025, the Board adopted the SmartRent, Inc.

2025 Inducement Equity Incentive Plan (the “Inducement Plan”), pursuant to which the Company may grant equity awards that are intended to qualify as employment inducement awards under the New York Stock Exchange Listed Company Manual Rule 303A.08 and any applicable interpretive material and other guidance issued under such rule (together, the “Inducement Listing Rule”), from time to time as determined by the Committee (as defined in the Inducement Plan), the Board’s Compensation Committee, or a majority of the Company’s “Independent Directors” (as defined under the applicable rules of the New York Stock Exchange).

Upon adoption of the Inducement Plan, and subject to the adjustment provisions therein, the Company reserved 6,500 shares of Common Stock for issuance pursuant to equity awards granted under the Inducement Plan.

In January 2025, the Board, upon the recommendation of the Board’s Nominating and Corporate Governance Committee (the “Nominating Committee”), appointed Ana Pinczuk to the Board as a Class III director to serve until the Company’s 2027 annual meeting of stockholders.

The Board also appointed Ms.

Pinczuk to serve as a member of the Board’s Compensation Committee and the Nominating and Corporate Governance Committee.

In January 2025, issuable shares of the Company’s Class A Common Stock under the ESPP increased by 1,920 shares.

In January 2024, the Board of Directors approved 1,653 RSUs and 2,527 Option awards to certain employees under the 2021 Incentive Stock Plan.

In January 2024, the Company made an earnout payment of $ 1,530 in connection with the iQuue acquisition.

In January and February 2024, 542 shares of the Company's Class A Common Stock were issued to certain employees related to vested RSUs, exercised options, and ESPP purchases.

In March 2024, the board of directors of the Company authorized the repurchase of up to $ 50,000 of the Company’s Class A common stock.

Repurchases 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.

The repurchase program does not obligate the Company to acquire any particular amount of its Class A common stock and may be suspended at any time at the Company’s discretion.

In January 2025, the Board of Directors approved 5,887 RSUs to certain employees under the 2021 Incentive Stock Plan.

In January and February 2025, 652 shares of the Company's Class A Common Stock were issued to certain employees related to vested RSUs and ESPP purchases.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data