Good evening and welcome to the SmartRent Inc. First Quarter 2022 Earnings Call. at this time, all participants are in listen-only mode. A question-and-answer session will follow management's presentation. As a reminder this conference call is being recorded. I would now like to turn the call over to your host Evelyn Infurna, Senior Vice President of Investor Relations. Thank you, Evelyn, you may begin.

Thank you. Hello everyone and thank you for joining us today. Lucas Haldeman Chairman and CEO; and Hiroshi Okamoto, our recently appointed Chief Financial Officer are with me and will be taking you through our results for the first quarter of 2022 as well as guidance for the second quarter. After today's market close, we issued an earnings release and filed our 10-Q from March 31st, 2022, both of which are available on our Investor Relations section of our website smartrent.com. Before I turn the call over to Lucas, I'd like to remind everyone that the discussion today may contain statements related to our business that may be considered forward-looking, including statements concerning our plans to execute on our growth strategy, our ability to maintain existing and acquire new customers, the benefits of strategic acquisitions including our acquisition of SightPlan, expected financial results, product portfolio, enhancements, expansion plans and opportunities, expectations regarding key operational metrics, and other statements regarding our plans and prospects. Forward-looking statements are often identified with words such as we expect, we anticipate, we believe, or similar expressions. These statements reflect our view only as of today May 11th, 2022 and should not be considered our views as of any subsequent date. We do not undertake any obligation to update or revise any forward-looking statements. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our most recent annual report on Form 10-K filed with the SEC on March 24th, 2022 along with our quarterly report on Form 10-Q and earnings release and current report on Form 8-K filed with the SEC today. All of which are publicly available on the Investor Relations section of our website at smartrent.com and on the SEC's website at sec.gov. Finally, during today's call, we will refer to certain non-GAAP financial measures. A discussion of these non-GAAP financial measures along with a reconciliation to the most directly comparable GAAP measure is included in today's earnings release. And with that, let me turn the call over to Lucas to review our results Lucas?

Thank you, Evelyn and thank you to the investors and analysts on the call for your continued support and interest in SmartRent. We are excited to share our first quarter results and our outlook for the second quarter. SmartRent started 2022 with strong tailwinds from the groundwork laid in 2021. We had an extremely productive quarter focused on execution and expansion of our market share. This focus translated to record revenue of $37.4 million, above our guidance and record units booked indicating continued momentum into the second quarter. We also deployed over 51,000 units, ahead of the top end of our units deployed guidance and expanded our customer base by 80% year-over-year to 290 customers. In addition, we made the strategic step of acquiring SightPlan, a leader in multifamily workflow management software. Our powerful combination, sets SmartRent even further apart from other real estate enterprise platforms and we anticipate that the level of demand we are experiencing, which exceeds our expectations already, will only continue to build. We believe our progress in the first quarter has positioned SmartRent for another strong year. We now have over 390,000 total units deployed on our platform, up 108% from the first quarter of 2021. Our 290 customers own or control 5.1 million units, a 76% increase from a year ago and our 760,000 committed units are up 26% year-over-year. Using our key performance metrics as a guide, units booked and bookings provide an assessment of the health and trajectory of our business on a unit and dollar value basis. For the first quarter, our sales team delivered 101% growth in units booked, setting a company record of over 91,000 units compared to 46,000 units a year ago. Our units booked typically convert to live units deployed in the subsequent quarter. The dollar value…

Thank you, Lucas and thank you all for joining today. I am excited to be on the SmartRent team and look forward to meeting our investors and analysts over the coming weeks and months. Now let's turn to our financials. SmartRent's strong execution in the first quarter resulted in a number of financial and operational records. Total revenue for the first quarter increased 95% to $37.4 million, as compared to $19.2 million in the first quarter of 2021. This growth in revenue reflects the increased volume of our deployments of our smart home hardware devices and the growth in the number of recurring software subscriptions, which included a full quarter of contribution from iQuue and the contribution from SightPlan for nine days in March. Notably, we experienced a 205% increase year-over-year in the SaaS revenue to $4.1 million, of which $3.5 million was attributable to SmartRent, with contributions of $500,000 from iQuue and $200,000 from SightPlan. We expect SaaS revenue to grow significantly in Q2 both from organic growth, driven primarily by the deployment of new units and from a full quarter of contribution from SightPlan's operations. As Lucas noted earlier, we believe that SightPlan will contribute approximately $10 million of SaaS revenue to our operation in 2022. Posted services ARPU in the first quarter increased 27% to $7.79 per unit per month as compared to $6.15 in the first quarter of 2021. The improvement in hosted service ARPU was driven primarily by an expanding customer base opting for more of our products, the upselling of legacy customers, the contributions from iQuue and SightPlan and improved pricing for our SaaS subscriptions. SaaS ARR, which we define as the annualized value of our recurring SaaS revenue for the current quarter was $16.3 million as compared to $5.3 million in the first…

Thank you Hiroshi. SmartRent continues to make steady gains in expanding its footprint. Our first quarter new customer deployments went smoothly and we expect to see a seasonal acceleration in our deployments for the next two quarters supply chain headwinds notwithstanding. We are continuing to increase on-hand inventory of our core smart home devices, reflected in the increase on our balance sheet and took possession of our expanded 65000 square foot warehouse in April. We are seeing improved access to component parts for Alloy Access. That should improve the availability of Alloy Access devices later in the year, which will allow us to work through on-hold deployments that include, this highly set after smart access control. We continued to work closely with our suppliers to facilitate access to components and devices necessary to keep our deployments on schedule. With that said, the situation remains fluid. We're carefully navigating and proactively responding to rapidly changing conditions. Despite supply chain headwinds, we are pleased with our competitive positioning and excited about our ability to continue to scale our operations and increase our market share. As I shared earlier, the demand we are seeing for our real estate enterprise platform continues to build and exceed our expectations. However, limits on access to the full set of hardware products remain a governor on the pace of our deployments. Before moving on to our outlook for the second quarter I'd like to spend a few minutes discussing our margins for the first quarter. Our hardware margin was adversely impacted by the customer mix as well as by the swapping of Alloy and Fusion Hub that we discussed in our year-end call. In addition to the Hub swap units deployed in the first quarter were heavily weighted towards legacy customers with preferential pricing. We anticipate a…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from Rod Hall of Goldman Sachs. Please go ahead.

Yes. This is Max Cameron [ph] on for Rod. Thank you for taking our questions. First question would be on deployed units. I'm just wondering if you could elaborate on what helped you exceed the high end of the guidance for Q1? And is it more of a factor of the timing of deployments for your new customers, or did you see better than expected demand in the quarter? And then how should we think about this be in regard to your reiterated deployed unit guidance in fiscal year 2022? And then I have a follow-up. Thank you.

Okay. Max it's Lucas. Thanks for the question. Yes, we were able to get a little additional supply in Q1 than we originally anticipated. That's how we came in at the top end. So again kind of like last quarter just reiterating it that the demand is -- remains incredibly strong. And what we're finding is supply headwinds. So the plus and minus isn't really around customers or demand that's there. It's can we get it in. And we're able to get more hardware than we originally anticipated.

Got it. And that better than expected supply in Q1 that is incorporated, I guess, in your 2022 guidance, or do you think it's -- this guidance would be more on the conservative end given those recent supply trends you're seeing?

No. I think -- Max, I think, we gave a broad range in guidance because of that that we have a delta there of low and high beat because of the supply chain. So we feel good about reiterating our guidance. It's still a fluid situation. And I know I've seen some of the other reports and other analysts everyone is kind of dealing with choppy water still in supply chain. So I think we're all feeling cautiously optimistic, but still every day is a dog fight.

Got it. Yes. Thanks for confirming Lucas. And then one more question. I believe your adjusted EBITDA guidance for the year implies about minus $20 million for the remainder of the year at the midpoint of your guidance. And you talked about this on the call, but wondering if you could walk us through just one more time how you plan on get there? Do you get there throughout the year, especially with those negative gross margins and professional services and higher operating expenses? I guess, what factors should we consider for you to end up at the high end of the range versus the low end of the range for your adjusted EBITDA? Thank you.

Yes. I think a lot of it really comes down to -- you're going to see -- we're moving into our high season of Q2 and Q3 for higher deployments and that's really where we're going to see that. Also, we talked about this last quarter, we put some new pricing in effect, and you'll start to see that come in the second half of 2022, and so that's why we feel confident with that guidance.

Got it. Thank you so much.

Thanks, Max.

Our next question is from Tom White of D.A. Davidson. Please go ahead.

Great. Thanks guys. Good evening. Two I could. One just in the prepared remarks Lucas, your comments about SaaS ARPU for bookings and the difference there overall versus kind of new customers. Is that still mostly impact of most of the result of newer customers kind of being longer tail where you guys have some pricing pressure? Is there something different there? And then I was hoping you could get an update on your ambitions kind of in the commercial space and whether you guys might look to kind of how you might look to kind of leverage channel partners to kind of go after that market? Any color there would be helpful. Thanks.

Yes. On the first side, yes, you're right, Tom, on the expanded ARPU, it really is that long-tail customer that that is not subject to large bulk pricing and large legacy commitments. So you're that's why we're sharing that metric is to try to give some of that clarity on this new sales team that we've invested Evelyn is becoming productive not only in new deals but in higher ARPU deals. And in terms of commercial expansion, it's something we're always looking at. I think you're right to say it would likely be more through a channel partner. But today we're really focused on the 5.1 million multifamily units that are -- that's just our current customers own and operate. So we feel like the organic growth is there for us to go harvest and that's really the primary focus.

Good. Thanks for color. And nice execution this quarter guys.

Thanks Tom.

Our next question is from Ryan Tomasello of KBW. Please go ahead.

Hi, everyone. Thanks for taking the questions. Really nice to see the ARPU above $7 for the new customers and appreciate that disclosure. I guess just following up on the other questions you already received. Is it possible to quantify how large those typical discounts are for like legacy customers and larger clients? And you alluded to the new pricing that you put in place maybe you can quantify the level of uplift that you're expecting there and if that's both on the software and hardware piece of the business? And then finally any color on your sense of these larger legacy clients' appetite to attach additional services really drive stronger ARPU beyond just the pricing discounts over time? Thanks.

Yeah. Thanks Ryan. I'll start with the last part and work my way backwards to your questions. I mean in terms of larger legacy customers adding products we have incredible demand amongst the larger legacy customers. We're still fighting supply chain around Alloy Access. And so a lot of that is actually on hold. So if there's a perfect supply ratio, you would actually already see that expansion happening. But certainly every legacy -- large legacy customer have -- is taking at least one additional product that we've brought to market if not more. And so I think we're seeing a really positive trend there. It won't flow into the financials until we can actually go deploy. And so that's sort of why you're seeing some of that delta there. And then in terms of the overall ARPU 744 versus 417, I think by disclosing those two numbers without going into detail of specific contracts you can see the variance. And the price increase that we put into place is both on the software, hardware and professional services so across the board. And really the price increase on professional services wasn't just an increase but really reworking from a one-size-fits-all to really lots of options for our customers. So seven different tiers of installation, all have better margin characteristics for us. So in some cases you'll see our customers won't have an increase in the cost of deployment. It will stay flatter and maybe even go down, but we won't be incurring as much cost either. So I think we're really excited about that. But again it will take time for that to flow in really into the second half of 2022 before we see that really flowing through.

Got it. And I guess on the profitability front, is there a framework that you could provide for bridging the path to cash flow breakeven maybe that level of ARR or maybe unit count -- live unit count that would drive that? And is there any visibility you have today that you would be willing to discuss your -- that time line sometime maybe next year in terms of a breakeven point for adjusted EBITDA?

Yeah. I mean we definitely are reiterating where we feel that we're on track to cross into EBITDA -- adjusted EBITDA positive in 2023. We're not providing detailed guidance on that, but we feel that we're on track. And it's certainly a combination of expanding SaaS revenue along with just increasing the unit counts and the hardware and professional services revenue that comes along with that.

And just to clarify when you say across the EBITDA breakeven in 2023, do you mean on a full year basis or intra-year on a certain quarter?

Yeah, it's a good question. So I want to make sure we're really clear in communicating that it's intra year. We're not anticipating a full year adjusted EBITDA positive year for 2023 but that we will move into an intra year adjusted EBITDA positive in 2023.

Great. Thanks for clarifying.

Yeah. Thanks Ryan.

Our next question is from Sidney Ho of Deutsche Bank. Please go ahead.

Great. Thanks for taking my question. A couple of them. On the first one, if you guys can reaffirm the revenue guidance of $220 million to $250 million for the year, but there are a lot of changes at the macro level. I know we talk about supply constraints. But there's inflation, there's consumer spending, a lot of different things happening. I understand there's a lot of moving parts in the revenue guidance. But curious from your perspective anything has changed since your original guide in March in terms of number of units you're thinking you can deploy the product mix, then maybe demand trajectory or even ARPU expectations compared to just 1.5 months ago?

No. I mean Sidney thanks for the question and good to talk to you. We did just report rather late on our Q4 and our full year. So no we're -- nothing's really changed since that point. When we laid out the revised unit count for the full year of 2022, we took into account the supply chain headwinds that we are experiencing. And so we feel like we factored that in. And in terms of demand, the only thing happening with demand is it's continuing to increase. And I think especially as we see inflation kicking in and we see a tighter labor market those are actually -- those are catalysts for our business. Those are positive indicators for our business in terms of helping our customers, reduce cost and reduce complexity. And so if anything we're seeing demand growing and again we're fighting the supply chain headwinds. And that's where we feel good about the guidance that we've issued and we feel like we're on track.

Okay. That's helpful. Maybe a follow-up to that is despite all the supply chain issues in the past, so it's still going on the one area that you guys seem to be consistently delivering is the booking unit than the number you just spoke. And how do you think about bookings this year compared to what you think in the past? I know in the -- this may be an old document, but in the S-1 you guys talked about growing booking units 150% year-over-year in 2022. Is that still the right way to think about it? And are there seasonality for unit books we should be thinking about as we go through the rest of the year?

Yeah. It's a good question. We don't see a lot of seasonality. We see a little bit of seasonality in terms of we set budgets in late Q3 early Q4 typically in multifamily. And so sometimes we'll see a bump there. But really what you're seeing is the demand is so great at sort of muting any seasonality that we'd be seeing. So we still feel like this is the highest demand we've ever seen for this product in the existence of this company. And all of the macro indicators remain incredibly positive. But yeah, I mean I think bookings -- you're right Sidney bookings is a good number to sort of key in and that goes to demand. We're seeing incredibly strong bookings. We're seeing incredibly strong new customers coming to the platform. Those to me are all the really positive long-term indicators. And as we sort of work our way through the near-term supply chain constraints that's what we're going to be harvesting in the future.

Okay. Great. Thank you.

Our next question is from Erik Woodring of Morgan Stanley. Please go ahead.

This is Patrick on for Erik. Kind of going off the last comment you made in regards to new customers, you did add 41 new customers in the first quarter, which was strong similar to 4Q, but kind of by our math, new committed units fell to 69,000 from 107,000 in 4Q. So the question here is, are you seeing any hesitation from property owners to commit to new units with rates rising and the macro getting more challenging?

No, we're not seeing any of that. And remember the Committed Units you also have to factor in when we install that unit it comes out of -- out of committed and becomes revenue producing. And so if you think about that you got to factor that in as well. So no, we're really happy with where we've been and where we continue to see strong demand. We've had no one -- not a single customer backing off on slowing down or hitting pots, I haven't seen it at all.

That's good to know. And then kind of on another subject here. For your comments, you obviously have some new members of the executive team adding CFO and CMO. Could you just maybe talk about what drove you to choose each leader and some of the top priorities for them over the next 12 months or so?

Yeah. I mean I think it's great to have the full executive team built out and be through that. We definitely spent a good amount of time finding what we thought was the perfect CFO. I couldn't be happier to have Hiroshi joining the team for a variety of reasons. And I think we'll see a continued focus on the pricing and the pricing strategy going forward over the next 12 months. And Robyn on the Chief Marketing Officer side, this is the first time as a company we've had a Chief Marketing Officer. And so I think you'll see us be much more active in the marketplace and more promotional.

Great. Thank you and congrats on the quarter.

Thanks Patrick.

[Operator Instructions] Our next question is from Ben Sherlund of Cantor Fitzgerald. Please go ahead.

Hey guys. Thanks for taking my questions. So how should we think about the pace of fulfilling the backlog once inventory comes back? Are there any bottlenecks to deployment other than getting hardware in stock? Is there any sense, you can offer on kind of the mix of bookings that are ready to go once inventory is here versus targeting an appointment down the road?

Yes. Hi Ben, thanks for the question. So, I mean I want to make sure we're clear on this too which is -- we have a good supply of a lot of our hardware that we're able to fulfill a lot of new customer contracts. It's sort of on the margin, where we're having trouble was specific SKUs or specific products and especially around as we've talked about before around access control and around some of the semi-custom lock sets. And so, a lot of the new bookings that are coming in aren't actually subject to supply chain headwinds. We're able to go ahead and fulfill them and feel really good about that. Typically, our bookings number that we share lags about a quarter to deployment. And that's still true. Sometimes earlier in the year, you may see that, it's a little bit longer than a quarter, but certainly at first quarter we're looking at those deployments in Q2 and maybe some into Q3. And I think the other great thing is, we still -- well no one is excited to be delayed because of supply chain issues. It is just a delay. We've had no one say they're not going to move forward or they're going to go to a different supplier. And so, to me that's overall really positive.

Okay. Yes. And sorry I guess I was meaning kind of the 761,000 Committed Units rather than the bookings. Is there a large percentage of them that you think, if you have the specific SKUs in stock. You could just go in there and fulfill them relatively quickly, or is that going to be kind of a more evenly spread-out kind of longer process to fulfill those?

Yes. Thanks for the clarification. It's a more evenly spread out. The committed units of the rolling forecast over the next two years and just so because of that definition, it's always sort of going to be a rolling look at it. And in terms of sort of the other part of your question just to answer, say let's say we waived our magic wand and we had no supply constraints, so we had a warehouse full, we wouldn't then be able to just double or triple our monthly installs. We have a high touch, white glove installation experience and we're -- that's part of why you see the pressure on professional services margin as we're growing that as quickly as we can and growing it ahead of the demand that we're seeing come in, but that is another constraint on the business. So we're able to grow every month. We can grow nicely, but we couldn't do three or four times the number of units we did in one month the next month if we add all the hardware that we needed.

Okay. Great. Yes. That's really helpful. And then maybe one more, is there any color you can provide on some of the plans to roll out some of these resident experiences just payments or marketplaces or moving services that I know you previously mentioned in 2021. And maybe what would it take to see meaningful incremental revenue from some of these initiatives?

Yes those are underway. It's not something we're ready to report on or talk about. But I think if you look also at the acquisition of SightPlan it was a clear move in that direction out of just the IoT world and into the more of the complete resident experience and moving down that chain. So I think those are all in the works and continue to be long-term growth drivers. And again it's sort of -- I love thinking about that and I love the opportunity that it brings over time. Our marketplace is live. You mentioned the marketplace so we do have the live marketplace already that will continue to expand and continue to contribute. But really our focus is just continuing to go after these 5.1 million units that our current customers own and deploy. And it is land and expand. We feel like if we can land on the current products we have we'll be able to upsell those over time as we bring new products to market.

Okay. Great. Thanks for the color guys. Thanks, Ben.

Thanks, Ben.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to hand the call back to Lucas Haldeman. Please go-ahead sir.

Thanks, Irene and thank you all for joining us today. Really appreciate your time, your continued support. Look forward to speaking soon. Have a great night.

That concludes today's conference. Thank you for joining us. You may now disconnect your lines. Goodbye.