SmartRent, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 59 Consolidated Balance Sheets as of December 31, 2025 and 2024 60 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2025, 2024 and 2023 61 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2025, 2024 and 2023 62 Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023 63 Notes to Consolidated Financial Statements 65 58 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of SmartRent, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of SmartRent, Inc. and subsidiaries (the "Company") as of December 31, 2025 and 2024, 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, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Tempe, Arizona March 4, 2026 We have served as the Company's auditor since 2020. 59 SMARTRENT, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) As of December 31, 2025 December 31, 2024 ASSETS Current assets Cash and cash equivalents $ 104,550 $ 142,482 Accounts receivable, net 47,401 59,299 Inventory 26,670 35,261 Deferred cost of revenue, current portion 3,068 8,727 Prepaid expenses and other current assets 6,189 11,881 Total current assets 187,878 257,650 Property and equipment, net 5,121 2,451 Deferred cost of revenue 121 3,073 Goodwill 92,339 117,268 Intangible assets, net 19,501 23,375 Other long-term assets 15,965 16,359 Total assets $ 320,925 $ 420,176 LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 13,012 $ 8,716 Accrued expenses and other current liabilities 14,040 27,245 Deferred revenue, current portion 32,966 35,071 Total current liabilities 60,018 71,032 Deferred revenue 22,968 52,588 Other long-term liabilities 5,800 7,121 Total liabilities 88,786 130,741 Commitments and contingencies (Note 12) Convertible preferred stock, $ 0.0001 par value; 50,000 shares authorized as of December 31, 2025 and December 31, 2024; no shares of preferred stock issued and outstanding as of December 31, 2025 and December 31, 2024 - - Stockholders' equity Class A common stock, $ 0.0001 par value; 500,000 shares authorized as of December 31, 2025 and December 31, 2024, respectively; 189,677 and 192,049 shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively 19 19 Additional paid-in capital 645,051 637,361 Accumulated deficit ( 413,294 ) ( 347,847 ) Accumulated other comprehensive loss 363 ( 98 ) Total stockholders' equity 232,139 289,435 Total liabilities, convertible preferred stock and stockholders' equity $ 320,925 $ 420,176 See accompanying Notes to Consolidated Financial Statements. 60 SMARTRENT, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except per share amounts) For the years ended December 31, 2025 2024 2023 Revenue Hardware $ 57,973 $ 82,844 $ 137,201 Professional services 21,133 18,803 35,473 Hosted services 73,220 73,238 64,164 Total revenue 152,326 174,885 236,838 Cost of revenue Hardware 52,829 58,833 108,780 Professional services 26,167 31,160 55,495 Hosted services 23,461 24,554 23,034 Total cost of revenue 102,457 114,547 187,309 Operating expense Research and development 26,224 29,369 28,805 Sales and marketing 19,451 18,446 19,209 General and administrative 43,241 54,295 44,674 Total operating expense 88,916 102,110 92,688 Impairment charge 24,929 - - Loss from operations ( 63,976 ) ( 41,772 ) ( 43,159 ) Interest income 4,299 8,642 8,977 Interest expense ( 378 ) ( 400 ) ( 397 ) Other (expense) income, net ( 462 ) 154 ( 116 ) Loss before income taxes ( 60,517 ) ( 33,376 ) ( 34,695 ) Income tax expense (benefit) 41 267 ( 108 ) Net loss $ ( 60,558 ) $ ( 33,643 ) $ ( 34,587 ) Other comprehensive loss Foreign currency translation adjustment 461 118 ( 40 ) Comprehensive loss $ ( 60,097 ) $ ( 33,525 ) $ ( 34,627 ) Net loss per common share Basic and diluted $ ( 0.32 ) $ ( 0.17 ) $ ( 0.17 ) Weighted-average number of shares used in computing net loss per share Basic and diluted 189,679 199,181 200,700 See accompanying Notes to Consolidated Financial Statements. 61 SMARTRENT, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands) Convertible Preferred Stock Common Stock Shares Amount (Par Value $0.0001) Shares Amount (Par Value $0.0001) Additional Paid In Capital Accumulated Deficit Accumulated other comprehensive income (loss) Total Stockholders' Equity (Deficit) Balance, December 31, 2022 - - 198,525 20 615,281 ( 250,925 ) ( 176 ) 364,200 Stock-based compensation - - - - 13,271 - - 13,271 Issuance of common stock upon vesting of equity awards - - 2,259 - - - - - Tax withholdings related to net share settlement of equity awards - - ( 658 ) - ( 1,925 ) - - ( 1,925 ) Exercise of options - - 3,035 - 913 - - 913 Net settlement related to exercise of options - - ( 148 ) - - - - - ESPP purchases - - 314 - 809 - - 809 Common stock warrants issued to customers as consideration - - ( 193 ) - - ( 193 ) Net Loss - - - - - ( 34,587 ) - ( 34,587 ) Other comprehensive loss - - - - - - ( 40 ) ( 40 ) Balance, December 31, 2023 - - 203,327 20 628,156 ( 285,512 ) ( 216 ) 342,448 Stock-based compensation - - - - 12,071 - - 12,071 Issuance of Class A common stock upon vesting of equity awards - - 775 - - - - - Issuance of common stock upon vesting of equity awards - - 1,486 - - - - - Tax withholdings related to net share settlement of equity awards - - ( 1,708 ) - ( 1,956 ) - - ( 1,956 ) Exercise of options - - 4,543 - ( 1,496 ) - - ( 1,496 ) Net settlement related to exercise of options - - ( 1,517 ) - - - - - ESPP purchases - - 293 - 586 - - 586 Repurchases of Class A common stock - - ( 15,150 ) ( 1 ) - ( 28,692 ) - ( 28,693 ) Net Loss - - - - - ( 33,643 ) - ( 33,643 ) Other comprehensive loss - - - - - - 118 118 Balance, December 31, 2024 - - 192,049 19 637,361 ( 347,847 ) ( 98 ) 289,435 Stock-based compensation - - - - 8,779 - - 8,779 Issuance of Class A common stock upon vesting of equity awards - - 906 - - - - - Issuance of common stock upon vesting of equity awards - - 2,206 - - - - - Tax withholdings related to net share settlement of equity awards - - ( 668 ) - ( 1,374 ) - - ( 1,374 ) ESPP purchases - - 268 - 285 - - 285 Repurchases of Class A common stock - - ( 5,084 ) - - ( 4,889 ) - ( 4,889 ) Net Loss - - - - - ( 60,558 ) - ( 60,558 ) Other comprehensive loss - - - - - - 461 461 Balance, December 31, 2025 - $ - 189,677 $ 19 $ 645,051 $ ( 413,294 ) $ 363 $ 232,139 See accompanying Notes to Consolidated Financial Statements. 62 SMARTRENT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the years ended December 31, 2025 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 60,558 ) $ ( 33,643 ) $ ( 34,587 ) Adjustments to reconcile net loss to net cash used by operating activities Depreciation and amortization 8,430 6,495 5,533 Impairment of investment in non-affiliate - 2,250 Goodwill impairment 24,929 - - Non-employee warrant expense - - ( 193 ) (Recovery of) provision for warranty expense ( 663 ) ( 1,295 ) 2,135 Non-cash lease expense 999 1,443 1,104 Stock-based compensation related to acquisition - - 109 Stock-based compensation 8,779 12,071 13,162 Compensation expense related to acquisition - - 2,057 Change in fair value of earnout related to acquisition ( 294 ) ( 960 ) 412 Non-cash interest expense 138 146 139 Provision for excess and obsolete inventory 4,165 2,606 2,494 (Recovery of) Provision for expected credit losses ( 666 ) 1,436 819 Non-cash legal expense (Note 12 "Commitments and Contingencies") - 4,955 - Change in operating assets and liabilities Accounts receivable 12,915 1,101 ( 177 ) Inventory 4,496 ( 1,279 ) 31,689 Deferred cost of revenue 8,611 11,245 13,003 Prepaid expenses and other assets 6,568 4,541 838 Accounts payable 4,190 ( 6,402 ) ( 3,484 ) Accrued expenses and other liabilities ( 11,289 ) ( 658 ) ( 11,046 ) Deferred revenue ( 31,733 ) ( 35,497 ) ( 16,800 ) Lease liabilities ( 592 ) ( 1,468 ) ( 1,226 ) Net cash (used in) provided by operating activities ( 21,575 ) ( 32,913 ) 5,981 CASH FLOWS FROM INVESTING ACTIVITIES Payments for investment in non-affiliate - - ( 2,250 ) Purchase of property and equipment ( 3,553 ) ( 1,767 ) ( 147 ) Capitalized software costs ( 5,072 ) ( 5,832 ) ( 3,626 ) Net cash used in investing activities ( 8,625 ) ( 7,599 ) ( 6,023 ) CASH FLOWS FROM FINANCING ACTIVITIES Payments for repurchases of Class A common stock ( 4,889 ) ( 28,566 ) - Proceeds from options exercise - ( 1,496 ) 913 Proceeds from ESPP purchases 285 586 809 Taxes paid related to net share settlements of stock-based compensation awards ( 1,374 ) ( 1,956 ) ( 1,925 ) Payment of earnout related to acquisition ( 1,466 ) ( 1,530 ) ( 1,702 ) Net cash used in financing activities ( 7,444 ) ( 32,962 ) ( 1,905 ) Effect of exchange rate changes on cash and cash equivalents ( 288 ) 247 ( 57 ) Net decrease in cash, cash equivalents, and restricted cash ( 37,932 ) ( 73,227 ) ( 2,004 ) Cash, cash equivalents, and restricted cash - beginning of period 142,482 215,709 217,713 Cash, cash equivalents, and restricted cash - end of period $ 104,550 $ 142,482 $ 215,709 Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets Cash and cash equivalents $ 104,550 $ 142,482 $ 215,214 Restricted cash, current portion - - 495 Total cash, cash equivalents, and restricted cash $ 104,550 $ 142,482 $ 215,709 See accompanying Notes to Consolidated Financial Statements. 63 SMARTRENT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (in thousands) For the years ended December 31, 2025 2024 2023 Supplemental disclosure of cash flow information Interest paid $ 203 $ 259 $ 97 Cash paid for income taxes 402 236 78 Schedule of non-cash investing and financing activities Right-of-use ("ROU") assets obtained in exchange for new lease liabilities - 6,235 - Accrued property and equipment at period end 24 136 9 Stock repurchases excise tax charged to equity 3 127 - See accompanying Notes to Consolidated Financial Statements. 64 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) NOTE 1. DESCRIPTION OF BUSINESS SmartRent, Inc., and its wholly owned subsidiaries (collectively, the "Company"), is an enterprise real estate technology company that provides comprehensive management software and applications designed for property owners, managers and residents. Its suite of products and services, which includes both smart building hardware and cloud-based software-as-a-service ("SaaS") solutions, provides seamless visibility and control over real estate assets. 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 Phoenix, Arizona. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation 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, 2025 and 2024 and for the years ended December 31, 2025, 2024 and 2023 include the consolidated accounts of the Company. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements herein. Foreign Currency SmartRent, Inc.'s functional and reporting currency is United States Dollars (“USD”) and its foreign subsidiaries have a functional currency other than USD. Financial position and results of operations of the Company's international subsidiaries are measured using local currencies as the functional currency. Assets and liabilities of these operations are translated at the exchange rates in effect at the end of each reporting period. The Company's international subsidiaries' statements of operations accounts are translated at the weighted-average rates of exchange prevailing during each reporting period. Translation adjustments arising from the use of differing currency exchange rates from period to period are included in accumulated other comprehensive loss in stockholders’ equity. Gains and losses on foreign currency exchange transactions, as well as translation gains or losses on transactions denominated in currencies other than an entity’s functional currency, are reflected in the Consolidated Statements of Operations and Comprehensive Loss. Liquidity The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. Management believes that currently available resources will provide sufficient funds to enable the Company to meet its obligations for at least one year past the issuance date of these financial statements. The Company may need to raise additional capital through equity or debt financing to fund future operations until it generates positive operating cash flows. There can be no assurance that such additional equity or debt financing will be available on terms acceptable to the Company, or at all. Use of Estimates 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 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. 65 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) Net Loss Per Share Attributable to Common Stockholders The Company follows the two-class method to include the dilutive effect of securities that participated in dividends, if and when declared, when computing net income per common share. The two-class method determines net income per common share for each class of common stock and participating securities according to dividends, if and when declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The anti-dilutive effect of potentially dilutive securities is excluded from the computation of net loss per share because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive. 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 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. Diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. For periods in which the Company reports a net loss, the diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because inclusion of such potentially dilutive shares on an as-converted basis would have been anti-dilutive. Cash and Cash Equivalents The Company considers financial instruments with an original maturity of three months or less to be cash and cash equivalents. The Company maintains cash and cash equivalents at multiple financial institutions, and, at times, these balances exceed federally insurable limits. As a result, there is a concentration of credit risk related to amounts on deposit. The Company believes any risks are mitigated through the size and security of the financial institution at which its cash balances are held. Accounts Receivable, net 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 expected credit losses on the Consolidated Balance Sheets. The allowance for expected credit losses totaled $ 2,131 and $ 2,797 as of December 31, 2025, and December 31, 2024, 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 $ ( 666 ) , $ 1,436 and $ 819 for the years ended December 31, 2025, 2024 and 2023, respectively. The negative amount for the year ended December 31, 2025 is primarily attributable to the collections of accounts previously reserved as expected credit losses. 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. 66 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) Significant Customers A significant customer represents 10 % or more of the Company’s total revenue or net accounts receivable balance at each respective Consolidated Balance Sheet date. Revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable for each significant customer follows. Accounts Receivable Revenue As of For the years ended December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024 December 31, 2023 Customer A * 14 % * * 12 % Customer B 11 % 12 % 12 % 12 % * Customer C 24 % 21 % * 10 % * Customer D * * 13 % 12 % 12 % * Total less than 10% for the respective period Inventory Inventories, which are comprised of smart home equipment and components, are stated at the lower of cost or net realizable value with cost determined under the first-in, first-out method. 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 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, 2024, the Company recorded $ 537 in connection with the buy-back provision, which is recorded in other current liabilities on the Consolidated Balance Sheets. As of December 31, 2025 , no such provision was recorded. Goodwill 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 goodwill impairment. During the three months ended March 31, 2025, the Company experienced a sustained decline in stock price, resulting in a significant decrease in market capitalization. As a result, the Company conducted an interim impairment test utilizing the qualitative approach and determined that impairment is more likely than not. As a result, the Company then performed an interim quantitative impairment test which resulted in an indication of impairment. The fair value of the reporting unit used in this impairment test was determined using the combination of an income approach and market-based approach. The mix between the two approaches requires significant judgement, however, the Company engaged a third-party valuation specialist to assist with its assessment. As a result of this test, the Company recorded a goodwill impairment charge of $ 24,929 during the year ended December 31, 2025. The Company conducted its annual goodwill impairment test as of September 30, 2025. As part of its annual assessment, the Company performed a market capitalization reconciliation, along with other procedures, which indicated that the fair value of the reporting unit sufficiently exceeded the carrying value. As a result, the Company concluded there were no indications of impairment and therefore no further impairment charge was recorded during the three months ended December 31, 2025. There was no such charge recorded during the year ended December 31, 2024. December 31, 2025 December 31, 2024 Balance at beginning of period $ 117,268 $ 117,268 Impairment charge ( 24,929 ) - Balance at end of period $ 92,339 $ 117,268 The significant assumptions used in determining the fair value of the reporting unit under the income approach primarily relate to revenue growth rate, forecasted EBITDA and the selected discount rate used in the discounted cash flow model. The significant assumptions used in the market-based approach primarily relate to the forecasted EBITDA margin, the selected control premium, and selected revenue and EBITDA multiples, which require significant judgement. 67 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) To the extent that inputs and assumptions used in the analysis change, such as an increased discount rate, updated cash flow projections, or decreases to Guideline companies’ multiples, additional impairment charges may be recorded in the future. In addition, a further decrease in the Company’s common stock share price and market capitalization could be an indicator of a decrease in the fair value of the Company’s equity. Intangible Assets The Company recorded intangible assets with finite lives, including customer relationships and developed technology, as a result of acquisitions made in prior years. Intangible assets are amortized on a straight-line basis based on their estimated useful lives. The estimated useful life of these intangible assets are as follows. Estimated useful life (in years) Trade name 5 Customer relationships 10 - 13 Developed technology 1 - 7 Property and Equipment, net Property and equipment is stated at cost, net of accumulated depreciation and amortization. Costs of improvements that extend the economic life or improve service potential are capitalized. Expenditures for routine maintenance and repairs are charged to expense as incurred. Repairs and maintenance expense for the years ended December 31, 2025, 2024 and 2023 was $ 41 , $ 21 and $ 26 , respectively, and is included in general and administrative expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss. 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. Estimated useful life (in years) Computer hardware and software 5 Furniture and fixtures 7 Warehouse equipment 15 Leasehold improvements Shorter of the estimated useful life or lease term Impairment of Long-Lived Assets The Company reviews long-lived assets, including property and equipment, intangible assets and operating lease right of use assets for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of these assets, or asset groups, is measured by comparing the carrying amounts of such assets or asset groups to the future undiscounted cash flows that such assets or asset groups are expected to generate. 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. 68 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) Leases 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. If the arrangement is identified as a lease, classification is determined at the commencement of the arrangement. Operating lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The Company estimates its incremental borrowing rate to discount future lease payments. The incremental borrowing rate reflects the interest rate that the Company would expect to pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment over a similar term. Operating lease right-of-use (“ROU”) assets are based on the corresponding lease liability adjusted for any lease payments made at or before commencement, initial direct costs and lease incentives. Certain leases also include options to renew or terminate the lease at the election of the Company. The Company evaluates these options at lease inception and on an ongoing basis. 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. Variable lease costs are expensed as incurred. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component for all classes of assets. Lease payments for short-term leases with a term of twelve months or less are expensed on a straight-line basis over the lease term. Operating leases are included in other long-term assets, accrued expenses and other current liabilities, and other long-term liabilities. Warranty Allowance The Company provides its customers with limited-service warranties associated with product replacement and related services. The warranty typically lasts one year following the installation of the product. The estimated warranty costs, which are expensed at the time of sale and included in hardware cost of revenue, are based on the results of product testing, industry and historical trends and warranty claim rates incurred and are adjusted for identified current or anticipated future trends as appropriate. Actual warranty claim costs could differ from these estimates. For the years ended December 31, 2025, 2024 and 2023, warranty expense included in cost of hardware revenue was $ 291 , $ 261 and $ 2,142 , respectively. As of December 31, 2025, and December 31, 2024, the Company’s warranty allowance was $ 423 and $ 1,077 , respectively, and is recorded in other current liabilities on the Consolidated Balance Sheets. As of December 31, 2025 December 31, 2024 Warranty reserve beginning balance $ 1,077 $ 2,215 Non-recurring warranty items incurred ( 500 ) 291 Warranty accrual (reversal) for completed projects 509 ( 134 ) Warranty settlements ( 663 ) ( 1,295 ) Warranty reserve ending balance $ 423 $ 1,077 Fair Value of Financial Instruments Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities subject to on-going fair value measurement are categorized and disclosed into one of three categories depending on observable or unobservable inputs employed in the measurement. These two types of inputs have created the following fair value hierarchy. Level 1: Quoted prices in active markets that are accessible at the measurement date for assets and liabilities. Level 2: Observable prices that are based on inputs not quoted in active markets but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. 69 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. The Company recognizes transfers between levels of the hierarchy based on the fair values of the respective financial measurements at the end of the reporting period in which the transfer occurred. There were no transfers between levels of the fair value hierarchy during the years ended December 31, 2025 or 2024. 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. Revenue Recognition The Company derives its revenue primarily from sales of systems that consist of hardware devices, professional services and Hosted Services to assist property owners and property managers with visibility and control over assets, while providing all-in-one home control offerings for residents. Revenue is recorded when control of these products and services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those products and services. The Company may enter into contracts that contain multiple distinct performance obligations. The transaction price for a typical arrangement includes the price for: smart home hardware devices, professional services, and a subscription for use of the Company's software (“Hosted Services”). Included in these contracts are Hub Devices, which integrate the Company’s enterprise software with third party smart 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. When distinct Hub Devices are included in a contract, the Hosted Services performance obligation is comprised of only the Company’s software. We do not expect to deploy any more non-distinct Hub Devices. The Company considers delivery for each of the hardware, professional services and Hosted Services to be separate performance obligations. The hardware performance obligation includes the delivery of smart home hardware and distinct Hub Devices. The professional services performance obligation includes the services to install the hardware. The Hosted Services performance obligation provides a subscription that allows the customer access to software during the contracted-use term when the promised service is provided to the customer. 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 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. Payments re ceived from customers in advance of revenue recognition are reported as deferred revenue. The Company has elected the following practical expedients following the adoption of ASC 606: • Shipping and handling costs: the Company elected to account for shipping and handling activities that occur after the customer has obtained control of a good as fulfillment activities (i.e., an expense) rather than as a promised service and are recorded as hardware cost of revenue. Amounts billed for shipping and handling fees are recorded as revenue. • Sales tax collected from customers: the Company elected to exclude from the measurement of transaction price all taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer. • Measurement of the transaction price: the Company applies the practical expedient that allows for inclusion of the future auto-renewals in the initial measurement of the transaction price. 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. • Significant financing component: the Company elected not to adjust the promised amount of consideration for the effects of a significant financing component when the period between the transfer of promised goods or services and when the customer pays for the goods or services will be one year or less. 70 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) Timing of Revenue Recognition is as follows. • Hardware Revenue Hardware revenue results from the direct sale to customers of hardware smart home devices, which devices generally consist of a distinct Hub Device, door locks, thermostats, sensors, and light switches. These hardware devices provide features that function independently without subscription to the Company's software, and the performance obligation for hardware revenue is considered satisfied, and revenue is recognized at a point in time when the hardware device is shipped to the customer. The Company generally provides a one-year warranty period on hardware devices that are delivered and installed. The cost of the warranty is recorded as a component of cost of hardware revenue. • Professional Services Revenue Professional services revenue results from installing smart home hardware devices, which does not result in significant customization of the product and is generally performed over a period from two to four weeks. Installations can be performed by the Company's employees, contracted out to a third-party with the Company's employees managing the engagement, or the customer can perform the installation themselves. The Company’s professional services contracts are generally arranged on a fixed price basis, and revenue is recognized over the period in which the installations are completed. • Hosted Services Revenue Hosted Services revenue primarily consists of 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. Customers are granted continuous access to the services over the contractual period. Accordingly, fees collected for subscription services are recognized on a straight-line basis over the contract term beginning on the date the subscription service is made available to the customer. Variable consideration is immaterial. Also included in Hosted Services revenue are non-distinct Hub Devices. The Company considers those devices and hosting services subscription a single performance obligation and therefore defers the recognition of revenue for those devices upon shipment to the customer. The revenue is then amortized over its average service life. When a non-distinct Hub Device is included in a contract that does not require a long-term service commitment, the customer obtains a material right to renew the service because purchasing a new device is not required upon renewal. If a contract contains a material right, proceeds are allocated to the material right and recognized over the period of benefit, which is generally four years . Cost of Revenue Cost of revenue consists primarily of direct costs of products and services together with the indirect cost of estimated warranty expense and customer care and support over the life of the service arrangement. • Hardware Cost of hardware revenue consists primarily of direct costs of products, such as the distinct Hub Device, hardware devices, supplies purchased from third-party providers, and shipping costs, together with indirect costs related to warehouse facilities (including depreciation and amortization of capitalized assets and right-of-use assets), infrastructure costs, personnel-related costs associated with the procurement and distribution of products and warranty expenses together with the indirect cost of customer care and support. • Professional Services Cost of professional services revenue consists primarily of direct costs related to personnel-related expenses for installation and supervision of installation services, general contractor expenses and travel expenses associated with the installation of products and indirect costs that are also primarily personnel-related expenses in connection with training of and ongoing support for customers and residents. 71 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) • Hosted Services Cost of Hosted Services revenue consists primarily of the amortization of the direct costs of non-distinct Hub Devices, consistent with the revenue recognition period noted above in "Hosted Services Revenue", and infrastructure costs associated with providing software applications together with the indirect cost of customer care and support over the life of the service arrangement. Deferred Cost of Revenue 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. The grant date fair value is also utilized with respect to RSUs which vest based on performance and time based service conditions. For RSUs with a performance condition which vest based on a liquidity event, as well as a time-based service condition, no compensation expense is recognized until the performance condition has been satisfied. Subsequent to the liquidity event, compensation expense is recognized to the extent the requisite service period has been completed and compensation expense thereafter is recognized on an accelerated attribution method. Under the accelerated attribution method, compensation expense is recognized over the remaining requisite service period for each service condition tranche as though each tranche is, in substance, a separate award. 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, which generally ranges from three to five years depending on the type of application. 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, 2025, 2024 and 2023, the Company capitalized $ 5,629 , $ 5,270 and $ 3,919 , respectively, of research and development costs in other long-term assets on the Consolidated Balance Sheets. As of December 31, 2025, the Company had capitalized $ 17,963 of research and development costs, including $ 16,900 of capitalized software costs, in other long-term assets on the Consolidated Balance Sheets, of which $ 11,529 remains to be amortized. As of December 31, 2024, the Company had capitalized $ 12,334 of research and development costs, including $ 12,068 of capitalized software costs, in other long-term assets on the Consolidated Balance Sheets, of which $ 9,543 remained to be amortized. Advertising Advertising costs are expensed as incurred and recorded as a component of sales and marketing expense. The Company incurred $ 743 , $ 650 and $ 423 of advertising expenses for the years ended December 31, 2025, 2024 and 2023, respectively. 72 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) Segments The Company has one operating segment and one reportable segment. Its chief operating decision maker ("CODM") is the Company’s President and Chief Executive Officer , with the exception of the period from July 29, 2024 to February 24, 2025 when a management committee comprised of certain of the Company’s executives acted as the CODM while the Company was in a transition period between Chief Executive Officers. 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. Refer to Note 13 - Segment Reporting for more information on the Company's operating and reportable segments. Recent Accounting Guidance Recent Accounting Guidance Not Yet Adopted In November 2024, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses and in January 2025, the FASB issued ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified the effective date of ASU 2024-03. ASU 2024-03 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 July 2025, the FASB issued ASU No. 2025-05 (“ASU 2025-05”), Financial Instruments–Credit Losses. The guidance provides an optional practical expedient when applying the guidance related to the estimation of expected credit losses for current accounts receivable and current contract assets resulting from transactions arising from contracts with customers. The amendments in ASU 2025-05 are effective for fiscal years beginning after December 15, 2025, and interim reporting periods, with early adoption permitted. We are evaluating the impact of the standard on the consolidated financial statements. 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 September 2025, the FASB issued ASU No. 2025-06 (“ASU 2025-06”), Intangibles–Goodwill and Other–Internal-Use Software. The guidance modernizes and clarifies the threshold for when an entity is required to start capitalizing software costs and is based on when (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in ASU 2025-06 are effective for fiscal years beginning after December 15, 2027, and interim reporting periods, with early adoption permitted. We are evaluating the impact of the standard on the consolidated financial statement disclosures. In December 2025, the FASB issued ASU 2025-12, Codification Improvements ("ASU 2025-12"). The guidance addresses suggestions received from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to U.S. GAAP. The update represents changes to the Codification that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply. ASU 2025-12 is effective for fiscal years beginning after December 15, 2026 and interim periods within those fiscal years. Entities are required to apply the amendments to ASC 260 retrospectively. All other amendments may be applied prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the effect that the updated standard will have on the consolidated financial statement disclosures. 73 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements ("ASU 2025-11"). The guidance is intended to improve the navigability of guidance in ASC 270, Interim Reporting, and clarify when it applies. The amendments also provide additional guidance on what disclosures should be provided in interim reporting periods. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, and permits prospective or full retrospective adoption. The Company is currently evaluating the effect that the updated standard will have on the consolidated financial statement disclosures. Recently Adopted Accounting Guidance In December 2023, the FASB issued ASU No. 2023-09 - Income Taxes (Topics 740): Improvements to Income Tax Disclosures. This ASU requires the expansion of disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods after December 15, 2024. The Company has completed its assessment of ASU 2023-09 and has adopted the standard prospectively, which has resulted in an expanded income tax disclosures with no impact on the Company’s consolidated financial statements. NOTE 3. FAIR VALUE MEASUREMENTS AND FAIR VALUE OF INSTRUMENTS The following tables display the carrying values and fair values of financial instruments. As of December 31, 2025 December 31, 2024 Assets on the Consolidated Balance Sheets Carrying Value Unrealized Losses Fair Value Carrying Value Unrealized Losses Fair Value Cash and cash equivalents Level 1 $ 104,550 $ - $ 104,550 $ 142,482 $ - $ 142,482 Total $ 104,550 $ - $ 104,550 $ 142,482 $ - $ 142,482 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, 2025 December 31, 2024 Liabilities on the Consolidated Balance Sheets Carrying Value Fair Value Carrying Value Fair Value Acquisition earnout payment Level 3 $ - $ - $ 1,760 $ 1,760 Total liabilities $ - $ - $ 1,760 $ 1,760 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 years ended December 31, 2025 and 2024 are as follows. As of December 31, 2025 December 31, 2024 Balance at beginning of period $ 1,760 $ 4,250 Payment of earnout in connection with the iQuue acquisition ( 1,466 ) ( 1,530 ) Change in fair value of earnout ( 294 ) ( 960 ) Balance at end of period $ - $ 1,760 74 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) The fair value of the earnout payment is measured on a recurring basis at each reporting date. During the year ended December 31, 2025, the Company recorded a $ 294 decrease in the fair value of the earnout. The final earnout payment of $ 1,466 was made in July 2025. 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. The Company recorded these adjustments in general and administrative expense on the Condensed Consolidated Statement of Operations and Comprehensive Loss. The following table sets forth the weighted-average assumptions used to estimate the fair value of the earnout payment as of December 31, 2024. No such estimate was made as of December 31, 2025 as the earnout amount was finalized as of June 30, 2025 and was paid in July 2025. As of December 31, 2024 Discount Rate 12.30 % Volatility 40.00 % NOTE 4. REVENUE AND DEFERRED REVENUE Disaggregation of Revenue In the following tables, revenue is disaggregated by primary geographical market, type of revenue, and SmartRent Solution. For the years ended December 31, 2025 2024 2023 Revenue by geography United States $ 152,165 $ 173,207 $ 235,553 International 161 1,678 1,285 Total revenue $ 152,326 $ 174,885 $ 236,838 For the years ended December 31, 2025 2024 2023 Revenue by type Hardware $ 57,973 $ 82,844 $ 137,201 Professional services 21,133 $ 18,803 35,473 Hosted services 73,220 $ 73,238 64,164 Total revenue $ 152,326 $ 174,885 $ 236,838 For the years ended December 31, 2025 2024 2023 (dollars in thousands) SmartRent Solutions Hardware Professional Services Hosted Services Total 2025 Hardware Professional Services Hosted Services Total 2024 Hardware Professional Services Hosted Services Total 2023 Smart Communities Solutions Smart Apartments $ 52,833 $ 18,207 $ 56,473 $ 127,513 $ 74,754 $ 13,095 $ 57,335 $ 145,184 $ 130,894 $ 30,546 $ 49,696 $ 211,135 Access Control 3,485 1,685 2,267 7,437 3,791 2,378 1,722 7,891 3,607 3,527 912 8,047 Community WiFi 71 451 770 1,292 287 1,041 701 2,029 395 996 688 2,078 Other 1,584 790 3,051 5,425 4,012 2,289 2,100 8,401 2,305 404 1,534 4,243 Smart Operations Solutions - - 10,659 10,659 - - 11,380 11,380 - - 11,334 11,334 Total Revenue $ 57,973 $ 21,133 $ 73,220 $ 152,326 $ 82,844 $ 18,803 $ 73,238 $ 174,885 $ 137,201 $ 35,473 $ 64,164 236,838 75 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) Remaining Performance Obligations Advance payments received from customers are recorded as deferred revenue and are recognized upon the completion of related performance obligations over the period of service. Advance payments for non-distinct Hub Devices were recorded as deferred revenue and recognized over their average in-service life. Advance payments received from customers for subscription services are recorded as deferred revenue and recognized over the term of the subscription. A summary of the change in deferred revenue is as follows. For the years ended December 31, 2025 2024 Deferred revenue balance as of January 1 $ 87,659 $ 123,160 Revenue recognized from balance of deferred revenue at the beginning of the period ( 42,631 ) ( 54,624 ) Revenue deferred during the period 17,014 32,862 Revenue recognized from revenue originated and deferred during the period ( 6,108 ) ( 13,739 ) Deferred revenue balance as of December 31 $ 55,934 $ 87,659 As of December 31, 2025, the Company expects to rec ognize 61 % of its total deferred revenue within the next 12 months , 19 % of its total deferred revenue between 13 and 36 months , 17 % between 37 and 60 months , and the remainder is expected to be recognized beyond five years . 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, 2025 and 2024 are $ 11,783 and $ 15,155 , respectively, of prepaid fees related to contracts with termination for convenience provisions which are refundable at the request of the customer. Based on the Company's historical experience, customers do not typically exercise their termination for convenience rights. Deferred cost of revenue includes all direct costs includ ed in cost of revenue that have been deferred to future periods. NOTE 5. OTHER BALANCE SHEET INFORMATION Inventory consisted of the following. As of December 31, 2025 December 31, 2024 Finished Goods $ 26,359 $ 34,876 Raw Materials 311 385 Total inventory $ 26,670 $ 35,261 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. During the years ended December 31, 2025, 2024 and 2023, the Company recorded write-downs of $ 4,165 , $ 2,900 and $ 2,837 respectively. As of December 31, 2025 and 2024, the Company's inventory reserve balance was $ 4,307 and $ 5,949 , respectively . The Company evaluates inventory levels for excess and obsolete products based on its assessment of future demand and market conditions. Prepaid expenses and other current assets consisted of the following. As of December 31, 2025 December 31, 2024 Prepaid expenses $ 5,856 $ 7,867 Other current assets 333 4,014 Total prepaid expenses and other current assets $ 6,189 $ 11,881 76 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 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. See Note 12. "Commitments and Contingencies" - Lease Commitments. Property and equipment, net consisted of the following. As of December 31, 2025 December 31, 2024 Leasehold improvements $ 5,202 $ 2,185 Computer hardware 2,332 2,469 Warehouse and other equipment 950 815 Furniture and fixtures 322 153 Property and equipment 8,806 5,622 Less: Accumulated depreciation ( 3,685 ) ( 3,171 ) Total property and equipment, net $ 5,121 $ 2,451 Depreciation and amortization expense on all property, plant and equipment was $ 913, $ 718 and $ 837 during the years ended December 31, 2025, 2024 and 2023, respectively. Intangible assets, net consisted of the following. As of December 31, 2025 December 31, 2024 Gross Accumulated Amortization Net Gross Accumulated Amortization Net Customer relationships $ 22,990 $ ( 8,446 ) $ 14,544 $ 22,990 $ ( 6,223 ) $ 16,767 Developed technology 10,600 ( 5,854 ) 4,746 10,600 ( 4,383 ) 6,217 Trade name 900 ( 689 ) 211 900 ( 509 ) 391 Total intangible assets, net $ 34,490 $ ( 14,989 ) $ 19,501 $ 34,490 $ ( 11,115 ) $ 23,375 Amortization expense on all intangible assets was $ 3,874 for the years ended December 31, 2025 , 2024 and 2023. Total future amortization for finite-lived intangible assets is estimated as follows. Amortization Expense 2026 $ 3,873 2027 3,734 2028 3,693 2029 2,554 2030 2,222 Thereafter 3,425 Total $ 19,501 Other long-term assets consisted of the following. As of December 31, 2025 December 31, 2024 Capitalized software costs, net $ 10,846 $ 9,463 Operating lease - ROU asset, net 2,810 3,808 Other long-term assets 2,309 3,088 Total other long-term assets $ 15,965 $ 16,359 Amortization expense for capitalized software costs was $ 3,449 , $ 1,760 and $ 778 for the years ended December 31, 2025, 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. See Note 12. "Commitments and Contingencies" - Lease Commitments. 77 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 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 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 , the full value of the asset, in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive Loss. Accrued expenses and other current liabilities consisted of the following. As of December 31, 2025 December 31, 2024 Accrued expenses $ 3,383 $ 13,052 Accrued compensation costs 7,778 8,249 Warranty allowance 423 1,077 Accrued acquisition consideration - 1,760 Other 2,456 3,107 Total accrued expenses and other current liabilities $ 14,040 $ 27,245 Other long-term liabilities consisted of the following. As of December 31, 2025 December 31, 2024 Lease liability, noncurrent $ 5,792 $ 7,021 Other long-term liabilities 8 100 Total other long-term liabilities $ 5,800 $ 7,121 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. See Note 12. "Commitments and Contingencies" - Lease Commitments. 78 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) NOTE 6. DEBT Term Loan and Revolving Line of Credit Facility In December 2021, the Company entered into a $ 75,000 Senior Revolving Facility with a five-year term (the "Senior Revolving Facility"). The Senior Revolving Facility includes a letter of credit sub-facility in the aggregate availability of $ 10,000 as a sublimit of the Senior Revolving Facility, and a swingline sub-facility in the aggregate availability of $ 10,000 as a sublimit of the Senior Revolving Facility. Proceeds from the Senior Revolving Facility are to be used for general corporate purposes. Amounts borrowed under the Senior Revolving Facility may be repaid and, prior to the Senior Revolving Facility maturity date, reborrowed. The Senior Revolving Facility terminates on the Senior Revolving Facility maturity date in December 2026 , when the principal amount of all advances, the unpaid interest thereon, and all other obligations relating to the Senior Revolving Facility shall be immediately due and payable. The Company has yet to draw on the Senior Revolving Facility as of December 31, 2025. The Company accounted for the cancellation of its previous revolving facility and the issuance of the Senior Revolving Facility as an exchange with the same creditor. As a result, all costs related to entering into the Senior Revolving Facility that are allowed to be deferred are recorded as a deferred asset and included in other assets on the Consolidated Balance Sheets. These costs totaled $ 688 and will be amortized ratably over the five-year term of the Senior Revolving Facility. For the years ended December 31, 2025, 2024 and 2023, the Company recorded $ 140 , $ 146 and $ 136 , respectively, of amortization expense in connection with these costs, as a component of interest expense on the Consolidated Statements of Operations and Comprehensive Loss. Interest rates for draws upon the Senior Revolving Facility are determined by whether the Company elects a secured overnight financing rate loan (“SOFR Loan”) or alternate base rate loan (”ABR Loan”). For SOFR Loans, the interest rate is based upon the forward-looking term rate based on SOFR as published by the CME Group Benchmark Administration Limited (CBA) plus 0.10 %, subject to a floor of 0.00 %, plus an applicable margin. For ABR Loans, the interest rate is based upon the highest of (i) the Prime Rate, (ii) the Federal Funds Effective Rate plus 0.50 %, or (iii) 3.25 %, plus an applicable margin. As of December 31, 2025, the applicable margins for SOFR Loans and ABR Loans under the Senior Revolving Facility were 1.75 % and ( 0.50 %) , respectively. In addition to paying interest on the outstanding principal balance under the Senior Revolving Facility, the Company is required to pay a facility fee to the lender in respect of the unused commitments thereunder. The facility fee rate is based on the daily unused amount of the Senior Revolving Facility and is one fourth of one percent ( 0.25 %) per annum based on the unused facility amount. During the years ended December 31, 2025, 2024 and 2023, the facility fee totaled $ 186 , $ 181 and $ 188 , respectively. The Senior Revolving Facility contains certain customary affirmative and negative covenants and events of default. Such covenants will, among other things, restrict, subject to certain exceptions, the Company’s ability to (i) engage in certain mergers or consolidations, (ii) sell, lease or transfer all or substantially all of the Company’s assets, (iii) engage in certain transactions with affiliates, (iv) make changes in the nature of the Company’s business and its subsidiaries, and (v) incur additional indebtedness that is secured on a pari passu basis with the Senior Revolving Facility. The Senior Revolving Facility also requires the Company, on a consolidated basis with its subsidiaries, to maintain a minimum cash balance. If the minimum cash balance is not maintained, the Company is required to maintain a minimum liquidity ratio. As of December 31, 2025, the Company did not maintain the minimum cash balance, but exceeded the minimum liquidity ratio. If an event of default occurs, the lender is entitled to take various actions, including the acceleration of amounts due under the Senior Revolving Facility and all actions permitted to be taken by a secured creditor. As of December 31, 2025, and through the date these consolidated financial statements were issued, the Company believes it was in compliance with all financial covenants. The Senior Revolving Facility is collateralized by first priority or equivalent security interests in substantially all the property, rights, and assets of the Company. As of December 31, 2025 and December 31, 2024, there was no outstanding principal amount under the Senior Revolving Facility. NOTE 7. CONVERTIBLE PREFERRED STOCK AND EQUITY Preferred Stock The Company is authorized to issue 50,000 shares of $ 0.0001 par value preferred stock. As of December 31, 2025, there are no preferred stock issued or outstanding. 79 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) Warrants As of December 31, 2025 , 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 . There was no contra-revenue recorded related to these warrants during the years ended December 31, 2025, 2024 and 2023. 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, 2025, the Company repurchased and subsequently retired 5,084 shares of our Class A common stock under the stock repurchase program at an average price of $ 0.96 per share for a total of $ 4,886 . 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, 2025, approximately $ 16,751 remained available for stock repurchases pursuant to our stock repurchase program. 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 . 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. NOTE 8. STOCK-BASED COMPENSATION 2018 Stock Plan The Company's board of directors adopted, and its stockholders approved, the SmartRent.com, Inc. 2018 Stock Plan (the “2018 Stock Plan”), effective March 2018. The purpose of the 2018 Stock Plan was to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. 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. All options are subject to certain provisions that may impact these vesting schedules. Amendment to the 2018 Stock Plan In April 2021, the board of directors executed a unanimous written consent to provide an additional incentive to certain employees of the Company by amending the 2018 Stock Plan to allow for the issuance of RSUs and granted a total of 1,533 RSUs to certain employees which vest over four years . The estimated fair value for each RSU issue d was approximately $ 21.55 per share and the total stock-based compensation expense to be amortized over the vesting period is $ 33,033 . Effective upon the Business Combination in August 2021, the 2018 Stock Plan was replaced by the 2021 Plan. The 2018 Stock Plan continues to govern the terms and conditions of the outstanding awards previously granted thereunder. No new awards will be granted out of the 2018 Stock Plan. 2021 Equity Incentive Plan 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. 80 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 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 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, 2025 and 2024, and the shares available for future issuances as of December 31, 2025 and 2024. Shares Available for Future Issuance Shares available as of December 31, 2023 8,310 Additions to the plan 8,900 Stock options forfeited 3,152 Stock options issued ( 2,527 ) RSUs forfeited 643 RSUs settled for taxes 1,263 RSUs issued ( 2,885 ) Shares available as of December 31, 2024 16,856 Stock options forfeited 1,095 RSUs forfeited 3,768 RSUs settled for taxes 552 RSUs issued ( 11,397 ) Shares available as of December 31, 2025 10,874 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, 2025 and 2024. Options Outstanding Number of Options Weighted- Average Exercise Price ($ per share) Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value December 31, 2023 9,158 $ 1.21 6.81 $ 18,112 Granted 2,527 $ 3.36 Exercised ( 4,543 ) $ 0.56 Forfeited ( 2,977 ) $ 3.08 December 31, 2024 4,165 $ 1.90 6.74 $ 2,445 Forfeited ( 1,093 ) $ 3.18 December 31, 2025 3,072 $ 1.45 3.25 $ 2,961 Exercisable options as of December 31, 2025 2,424 $ 1.02 2.06 $ 2,961 81 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) During the years ended December 31, 2025, 2024 and 2023 stock-based compensation expense of $ 570 , $ 1,829 and $ 1,654 , respectively, was recognized in connection with the outstanding options. As of December 31, 2025, there is $ 909 of unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 1.8 years. The table below summarizes the activity related to RSUs, pursuant to the 2018 Stock Plan and 2021 Plan, for the years ended December 31, 2025 and 2024. Restricted Stock Units Number of Restricted Stock Units Weighted Average Grant Date Fair Value (per share) December 31, 2023 4,461 $ 4.24 Granted 4,314 $ 2.43 Vested or distributed ( 2,261 ) $ 4.87 Forfeited ( 1,204 ) $ 3.44 December 31, 2024 5,310 $ 2.69 Granted 13,406 $ 1.20 Vested or distributed ( 3,112 ) $ 2.29 Forfeited ( 5,558 ) $ 1.55 December 31, 2025 10,046 $ 1.51 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. In June 2025, the Company granted RSU awards under the 2021 Plan to Frank Martell, the Company's President and Chief Executive Officer. Mr. Martell’s grant consisted of time-based RSUs covering 1,800 shares of the Company's Class A common stock. The RSUs will vest in four substantially equal quarterly installments, such that 100 % of the RSUs subject to the grant will be vested as of June 30, 2026 , subject to the terms of Mr. Martell’s award agreement. During the years ended December 31, 2025, 2024 and 2023, stock-based compensation expense of $ 8,179 , $ 10,154 and $ 11,273 , respectively, was recognized in connection with the vesting of all RSUs. As of December 31, 2025, there is $ 10,902 of unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted-average period of 2.3 years. 2025 Inducement Equity Incentive Plan 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. The Inducement Plan provides for the grant of equity-based awards, including options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. Such equity-based awards may be granted under the Inducement Plan only to employees of the Company, so long as the following requirements are met: (i) the employee was not previously an employee or director, or the employee is to become employed by the Participating Company Group (as defined in the Inducement Plan) following a bona fide period of non-employment (within the meaning of the Inducement Listing Rule), and (ii) the grant of the award or awards is an inducement material to the employee’s entering into employment with the Participating Company Group in accordance with the Inducement Listing Rule. 82 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) In March 2025, the Company granted inducement awards under the Inducement Plan to Michael Shane Paladin, the Company's then President and Chief Executive Officer, as inducement awards in connection with the Start Date. Mr. Paladin’s grant consisted of time-based RSUs covering 1,791 shares of the Company's Class A common stock and performance stock units ("PSUs") covering a target of 2,320 shares of the Company's Class A common stock. The RSUs vest at a rate of one-third of the RSUs annually on each anniversary of the Start Date, subject in each case to Mr. Paladin’s continued employment through the applicable vesting date. In April 2025, the Company announced the departure of Mr. Paladin effective as of the End Date. As of the End Date, no shares had vested and all inducement awards granted were forfeited and returned to the Inducement Plan. The table below summarizes the activity pursuant to the Inducement Plan, for the year ended December 31, 2025 and the shares available for future issuances as of December 31, 2025. Shares Available for Future Issuance Shares available as of December 31, 2024 - Additions to the plan 6,500 RSUs issued (1) ( 6,650 ) RSUs forfeited 6,431 Shares available as of December 31, 2025 6,281 (1) RSUs issued exceeds the total plan size as forfeited shares were re-issued during the year ended December 31, 2025. Employee Stock Purchase Plan 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, 2025, 2024 and 2023, stock-based compensation expense of $ 30 , $ 88 and $ 235 , respectively, was recognized in connection with the ESPP. The table below summarizes the activity related to the ESPP for the years ended December 31, 2025 and 2024. Shares Available December 31, 2023 5,402 Annual additions to the plan 2,000 Shares purchased ( 293 ) December 31, 2024 7,109 Annual additions to the plan 1,920 Shares purchased ( 268 ) December 31, 2025 8,761 83 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) Stock-Based Compensation During the years ended December 31, 2024 and 2023, there were options granted covering 2,527 and 3,299 shares, respectively. During the year ended December 31, 2025 there were no options granted. 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, 2025, 2024 and 2023. For the years ended December 31, 2025 (1) 2024 2023 Risk free interest - 4.09 % 3.55 % - 4.32 % Dividend yield - 0.00 % 0.00 % Expected volatility - 75.00 % 75.00 % Expected life (years) - 6.25 6.08 - 6.25 (1) 2025 assumptions are not applicable as no options were granted during the year ended December 31, 2025. The Company recorded stock-based compensation expense as follows. For the years ended December 31, 2025 2024 2023 Cost of revenue $ 571 $ 1,111 $ 1,026 Research and development 3,006 3,961 3,664 Sales and marketing 566 700 635 General and administrative 4,636 6,299 7,946 Total $ 8,779 $ 12,071 $ 13,271 During the year ended December 31, 2023 $ 109 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 recorded in connection with this acquisition during the years ended December 31, 2025 and 2024. 84 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) NOTE 9. INCOME TAXES The Company's components of income tax (benefit) expense consisted of the following. Years Ended December 31, Income tax provision 2025 2024 2023 Federal $ - $ ( 24 ) $ ( 80 ) Foreign ( 40 ) 68 28 State and local 153 182 117 Current provision 113 226 65 Federal ( 72 ) 41 ( 173 ) Foreign - - - State and local - - - Deferred (benefit) provision ( 72 ) 41 ( 173 ) Income tax (benefit) expense $ 41 $ 267 $ ( 108 ) The following tables present a reconciliation of the Company’s effective tax rates for the periods indicated. Year Ended December 31, 2025 Rate reconciliation Amount Percent U.S. statutory rate $ ( 12,708 ) 21.0 % State and local income taxes, net of federal income tax effect (1 ) ( 2,934 ) 4.8 % Foreign rate effect Other foreign jurisdictions 3 0.0 % Effect of changes in tax laws or rates enacted in the current period - 0.0 % Effect of cross-border Laws Other - 0.0 % Change in valuation allowance 15,181 ( 25.1 %) Nontaxable or nondeductible items Stock compensation 681 ( 1.1 %) Other permanent adjustments 8 0.0 % Other adjustments ( 190 ) 0.3 % Effective tax rate $ 41 ( 0.1 %) (1) State taxes in California and Arizona made up the majority (greater than 50 percent) of the tax effect in this category. For the Years Ended December 31, Rate reconciliation 2024 2023 U.S. statutory rate 21.0 % 21.0 % State rate net of fed benefit 7.5 % 2.7 % Change in valuation allowance ( 27.9 %) ( 28.3 %) Stock compensation 0.2 % 0.0 % Permanent adjustments ( 1.4 %) ( 1.3 %) Deferred adjustments 1.2 % 4.4 % Other ( 1.4 %) 1.7 % Effective tax rate ( 0.8 %) 0.2 % 85 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) The components of the income tax payments (net of refunds received) as of December 31 follow. Year Ended December 31, 2025 Federal $ - State Louisiana 8,700 New York 33,725 North Carolina 19,232 South Carolina 16,845 Texas 78,991 Other 9,300 Foreign Croatia - Other - Total income tax payments (net of refunds received) $ 166,793 Tax effects of temporary differences can give rise to significant portions of deferred tax assets and deferred tax liabilities. The components of deferred income tax assets and liabilities are as follows. As of December 31, Tax effects of temporary differences 2025 2024 Attributes Deferred tax asset Federal NOLs $ 52,863 $ 46,547 State NOLs 13,911 12,400 Deferred revenue 13,481 11,217 Capitalized R&D 7,763 12,138 Other deferred tax assets 15,329 9,138 Total deferred tax assets 103,347 91,440 Less: Valuation allowance ( 95,793 ) ( 80,612 ) Total net deferred tax asset $ 7,554 $ 10,828 IRC 481(a) Adjustment ( 146 ) ( 603 ) Deferred costs of revenue ( 956 ) ( 2,987 ) Intangibles ( 4,531 ) ( 5,308 ) Other deferred tax liabilities ( 1,947 ) ( 2,027 ) Total deferred tax liabilities ( 7,580 ) ( 10,925 ) Net deferred tax liability $ ( 26 ) $ ( 97 ) The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. As a result of historical cumulative losses, Management determined that, based on all available evidence, there was substantial uncertainty as to whether it will recover recorded net federal and state deferred taxes in future periods. Therefore, a valuation allowance equal to the amount of the net federal and state deferred tax assets was provided at December 31, 2025 and 2024. The net valuation allowance increased by $ 15,226 from $ 80,612 to $ 95,793 in 2025. As of December 31, 2025, the Company has gross NOLs of $ 252,280 and $ 245,468 for federal and state income tax return purposes, respectively. Federal NOLs can be carried forward indefinitely, while State NOLs will expire between 2032 and 2045 . The Company also has $ 145 of R&D credits available that expire in 2039 . 86 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 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. The Company has not completed a formal Section 382 study; however, given its cumulative losses and valuation allowance position, management does not expect any potential limitation to have a material impact on the Company’s income tax provision. A formal analysis would be performed when taxable income is generated in future periods and the utilization of these attribute become probable. 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. The Company files income tax returns in the U.S. federal and various state jurisdictions, as well as in Croatia and India. The Company is subject to U.S. federal and state income tax examinations by authorities for all tax years beginning in 2018, due to the accumulated net operating losses that are carried forward. Similarly, SightPlan Holdings, Inc. is subject to U.S. federal and state income tax examination by authorities for all tax years beginning in 2012. The Company is subject to Croatian income tax examinations for all tax years beginning in 2019. The Company is subject to Indian income tax examinations for all tax years beginning in 2023. The Company evaluates uncertain tax positions which requires significant judgments. 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. A summary of changes in the Company's gross unrecognized tax benefits for the years ended December 31, 2025 and 2024 is as follows. As of December 31, 2025 2024 Unrecognized tax benefits - January 1 $ 1,212 $ 3,817 Gross increases - tax positions in prior period - - Gross decreases - tax positions in prior period - ( 2,605 ) Gross increases - tax positions in current period - - Settlement - - Lapse of statute of limitations - - Unrecognized tax benefits - December 31 $ 1,212 $ 1,212 Unrecognized tax benefits - December 31 (tax-effected) $ 339 $ 339 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, 2025. NOTE 10. NET LOSS PER SHARE The following potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because inclusion of the shares on an as-converted basis would have been anti-dilutive. For the years ended December 31, 2025 2024 2023 Common stock options and restricted stock units 13,117 9,475 13,618 Common stock warrants - - 3,664 Total 13,117 9,475 17,282 87 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) NOTE 11. RELATED-PARTY TRANSACTIONS A member of the Board served on the board of directors of a SmartRent customer until June 2024. There was no related party relationship beyond June 30, 2024. For the years ended December 31, 2024 and 2023, the Company earned revenue from this customer of $ 1,298 and $ 3,738 , respectively. All business dea lings 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. NOTE 12. COMMITMENTS AND CONTINGENCIES Purchase Commitments The Company sometimes enters into long-term purchase commitments for certain goods and services. In October 2025 the Company entered into an agreement with a supplier to purchase minimum volumes of certain goods and services through December 2030. Future minimum annual payments in connection with the purchase commitment as of December 31, 2025 are as follows. Annual Minimum Payments 2026 $ 5,171 2027 5,978 2028 6,900 2029 7,950 2030 9,050 Total purchase commitment $ 35,049 In the event of certain deteriorating business conditions during fiscal year 2028, and upon providing sixty days written notice to the supplier prior to January 1, 2029, the Company shall have the option to request for a reduction of its minimum payments for the fiscal years of 2029 and 2030 respectively, including an extension of the commitment term by one additional fiscal year , 2031. Lease Commitments From time to time, the Company enters into lease agreements with third parties for purposes of obtaining office and warehouse space. These leases are accounted for as operating leases and have remaining lease terms of 1.33 years to 6.75 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. 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 years ended December 31, 2025 or 2023. Lease agreements entered into by the Company do not specify an implicit borrowing rate, however the Company utilizes 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. The Company’s weighted average discount rate was 6.07 % at December 31, 2024. The weighted-average lease term was 5.9 years, 6.5 years and 2.4 years at December 31, 2025, 2024 and 2023, respectively. During the years ended December 31, 2025 , 2024 and 2023, the Company had no finance leases. 88 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) During the years ended December 31, 2025, 2024 and 2023 the Company incurred rent and other related occupancy expenses of $ 1,672 , $ 2,159 and $ 1,374 , respectively. Included in these amounts are $ 360 , $ 225 and $ 147 , respectively, of variable rent expense which is comprised primarily of the Company’s proportionate share of operating expenses, properly classified as lease cost due to the Company’s election to not separate lease and non-lease components. Rent costs are recorded to cost of revenue and general and administrative expenses on the Company’s Consolidated Statement of Operations. Annual base rental commitments associated with these leases, excluding operating expense reimbursements, month-to-month lease payments and other related fees and expenses during the remaining lease terms are as follows. Operating Leases 2026 $ 1,620 2027 1,311 2028 1,163 2029 1,182 2030 and thereafter 3,250 Total lease payments 8,526 Imputed interest ( 1,506 ) Total lease liability 7,020 Less: Lease liability, current portion 1,228 Lease liability, noncurrent $ 5,792 The Company had $ 3,058 and $ 3,808 of ROU assets, net of related amortization , related to its lease liabilities at December 31, 2025 and December 31, 2024, 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. The current portion of the Company's lease liability is included in other current liabilities on the Consolidated Balance Sheets. Cash paid for amounts included in the measurement of operating lease liabilities was $ 887 , $ 1,572 and $ 1,674 for the years ended December 31, 2025, 2024 and 2023, respectively. Legal Matters The Company is subject to various legal proceedings and claims that arise in the ordinary course of its business. Liabilities are accrued when it is believed that it is both probable that a liability has been incurred and that the Company can reasonably estimate the amount of the potential loss. The Company does not believe that the outcome of these proceedings or matters will have a material effect on the consolidated financial statements. 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 asserted claims for purported actions relating to FWAA’s August 24, 2021 merger with legacy SmartRent.com, Inc. Beginning in February 2025, the parties participated in a mediation, which ultimately led to all the parties’ agreement to settle the 2024 Class Action for $ 11,375 . In August 2025, the parties executed a Stipulation and Agreement of Settlement, Compromise and Release, which the Court approved in November 2025. Legal expenses and settlement costs incurred by the Company during the years ended December 31, 2025 and 2024 were $ 4,905 and $ 2,230 , respectively, in connection with the 2024 Class Action. These legal expenses were recorded 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. 89 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 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; recission; breach of contract; and related equitable claims. In February 2025, the parties participated in a mediation, which ultimately led to the parties' agreement to settle the matter. The final settlement agreement was signed in March 2025, and the case was dismissed with prejudice. 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. 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. The Court approved the settlement and dismissed the case on December 31, 2024. 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 Condensed Consolidated Statements of Operations and Comprehensive Loss and accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets. The settlement amount was paid in full in January 2025. In December 2025, the San Francisco Tenants Union and three residents filed claims against the Company and several multifamily property owners in the Superior Court of the State of California in the County of San Francisco for alleged violations of Article 1 Section 1 of the California Constitution for alleged violation of tenant privacy rights, for common law intrusion upon seclusion and for violation of the San Francisco Rent Ordinance for purportedly interfering with tenants privacy rights arising out of the use of the Company’s SmartHome products and services (the "Complaint"). The Complaint seeks declaratory relief that the conduct described in the Complaint constitutes an invasion of the right to privacy and injunctive relief prohibiting the Company and owners from violating tenants’ privacy rights. The Complaint also seeks unspecified damages. The Company disputes the plaintiffs’ claims and intends to vigorously defend against those claims. 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. The Company evaluates any such outstanding matters based on management’s best judgment after consultation with counsel. 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 recorded. NOTE 13. 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 President and Chief Executive Officer , 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 $ 10,080 and $ 8,023 of assets outside the United States on December 31, 2025, and December 31, 2024, respectively. 90 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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, 2025 2024 2023 Revenue Hardware $ 57,973 $ 82,844 137,201 Professional Services 21,133 18,803 35,473 Deferred hub amortization 15,396 21,600 23,096 SaaS 57,824 51,638 41,068 Total revenue 152,326 174,885 236,838 Cost of revenue Hardware 52,829 58,833 108,780 Professional Services 26,167 31,160 55,495 Deferred hub amortization 8,146 11,168 12,602 SaaS 15,315 13,386 10,432 Total cost of revenue 102,457 114,547 187,309 Gross profit 49,869 60,338 49,529 Operating expenses Operating expenses excluding stock compensation and depreciation and amortization 75,783 87,666 75,179 Stock compensation 8,208 9,654 12,245 Depreciation and amortization 4,925 4,790 5,264 Total operating expenses 88,916 102,110 92,688 Impairment charge 24,929 - - Loss from operations ( 63,976 ) ( 41,772 ) ( 43,159 ) Other segment items (1) 3,418 8,129 8,572 Net loss $ ( 60,558 ) $ ( 33,643 ) $ ( 34,587 ) (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. NOTE 14. SUBSEQUENT EVENTS In connection with the preparation of the accompanying consolidated financial statements, the Company has evaluated events and transactions occurring after December 31, 2025 and through March 4, 2026, 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 2026, issuable shares of the Company’s Class A Common Stock under the ESPP increased by 1,892 shares. 91 SMARTRENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) In January 2026, the Board of Directors or an authorized committee thereof approved the issuance of 6,024 RSUs to certain employees under the 2021 Incentive Stock Plan. In January 2026, the Board of Directors or an authorized committee thereof approved the issuance of 1,119 PSUs at target to certain employees under the 2021 Incentive Stock Plan. In January 2026, the Board of Directors approved the issuance of 465 RSUs to certain employees under the Inducement Plan. In January and February 2026, 2,572 shares of the Company's Class A Common Stock were issued to certain employees related to vested RSUs, exercised options and ESPP purchases. 92 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.