Thank you for standing by. My name is Van, and I will be your conference operator today. At this time, I would like to welcome everyone to the SmartRent Quarter One 2025 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Kristen Lee, Chief Legal Officer. Please go ahead.

Hello, and thank you for joining us today. My name is Kristen Lee, Chief Legal Officer for SmartRent. I'm joined today by our Interim Chief Executive Officer, John Dorman; and Daryl Stemm, Chief Financial Officer. Before the market opened today, we issued an earnings release and filed our 10-Q with the SEC, both of which will be available on the Investor Relations section of our website, smartrent.com. Before I turn the call over to John, I would like to remind everyone that the discussion today may contain certain forward-looking statements that involve risks and uncertainties. Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q. We undertake no obligation to provide updates regarding forward-looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial position in SmartRent. Also during today's call, we will refer to certain non-GAAP financial measures. A discussion of these non-GAAP financial measures, along with a reconciliation to the most directly comparable GAAP measure is included in today's earnings release. We would also like to highlight that a fourth quarter and full year earnings presentation will be available on the Investor Relations section of our website. And with that, I will turn the call over to John.

Good morning, and thank you for joining SmartRent's first quarter 2025 earnings call. We appreciate your continued engagement as we execute a focused plan designed to position SmartRent for long-term sustainable growth and value creation. I've been a Board member for over three years, Chairman of the Board for the past year and now Interim CEO. Given this unique position, I thought it would be helpful to use my time this morning to give investors some perspective on the evolution of SmartRent, our plan to drive the company toward meaningful and sustainable long-term value creation and where we are in executing that plan. The SmartRent story really isn't all that complicated and I hope to make it a little clearer this morning. SmartRent was founded with a unique vision to deploy IoT technology to transform property operations and resident experiences. Because SmartRent was built on the foundation of experience from the multifamily and single-family rental operating businesses, the company's solutions were built with a very deep understanding of the needs and challenges of our customers. Three key and distinct elements differentiated our initial solutions drove our early success and still largely distinguish our platform today. Number one, integrating IoT hardware devices through an enterprise scale software platform to fully deliver and maximize the ROI potential for property owners while enhancing the resident experience. Number two, designing the software platform to fully and seamlessly integrate with existing systems and third-party hardware devices rather than constraining solutions to our own branded hardware. And number three, delivering solutions with the unique expertise to deploy them in a retrofit environment rather than limiting them to new build or major renovations. This focus addresses the needs of the largest portion of the addressable market. The power and clear differentiation of these core products launched SmartRent…

Thank you, John and good morning, everyone. We appreciate you joining our call today to discuss our first quarter 2025 results. I'll now walk through the financials and provide some additional context on how we're balancing execution, margin management and strategic investment across the business. Total revenue for the first quarter was $41.3 million, down 18% when compared to the same period in the prior year. Hardware revenue was $18.8 million, down 35% year-over-year, which is a continued reflection of our strategic decision to reduce reliance on hardware sales as we focus on expanding our annual recurring revenue. SaaS revenue grew 17% year-over-year to $14 million, supported by improved ARPU, expanded platform utility and continued strength in customer retention. In terms of unit economics, SaaS ARPU increased to $5.69, up 5% from the prior year and up slightly on a sequential basis. Units booked SaaS ARPU reached $10.28, which was a 44% increase year-over-year. We believe these trends validate the value proposition of our platform and our strategy of placing the customer at the center of how we deploy, engage and grow revenue. Gross margin in Q1 was 32.8% compared to 38.5% in the prior year. This compression of roughly 570 basis points was expected and driven primarily by lower hardware volume and a shift in customer and product mix as we move away from bulk hardware sales. SaaS gross margin remained strong at 70.7% and we continue to believe SaaS margins can expand over time with scale and further infrastructure optimization. Operating expenses were $29.9 million including a $5 million legal accrual compared to $29.6 million in prior year. Net losses increased to $40.2 million compared to $7.7 million in the same period prior year, primarily due to a non-cash goodwill impairment charge of $24.9 million. During the quarter,…

[Operator Instructions] Your first question comes from the line of Ryan Tomasello from KBW. Please go ahead. Q – Ryan Tomasello: Thanks for taking my question. Starting on the restructuring actions, do the $10 million of savings you called out represent the full benefit that you ultimately expect to realize there? Or are you expecting to drive more efficiencies, on top of that? And then how much of that $10 million is run rating through your adjusted EBITDA in 1Q results? And if not the full benefit, when should we expect that to flow through?

Hi, Ryan, this is Daryl. The $10 million annualized savings are actions that we've taken, but we took them in April. So you're not seeing any adjustments for severance or any of the onetime charges related to these actions in the Q1 result. From a cash flow perspective, it will be relatively neutral in Q2, as we just noted. We'll start to see a little bit of the benefit on adjusted EBITDA during Q2, but you won't see the full effect until Q3. Q – Ryan Tomasello: Okay. Thanks. And then in terms of the sales organization build-out that you've been executing, do you feel like you're in a good spot to support scalability? Or do you think there's still more to go in terms of hiring needs? And on the broader operational changes you highlighted, can you just put a finer point around what those entail in areas like customer success and I guess technology operations that you called out in your prepared remarks?

Thanks, Ryan. First on the sales build-out, we think we've completed the initial wave of build-out of the organization. But as you know, new salespeople take time to ramp up. So there's a little bit of a lag effect there. But we've done the initial build-out of the sales organization. We're still adding some talent in the customer success organization, but a great deal of that shift has come from the operational reorganization where we've -- as I mentioned in the script, we've concluded the overly siloed and we've broken down those silos and we've collapsed, a lot of the customer-facing operations into the customer success organization giving us more scale in the customer success organization, and making a lot of our operational touch points with our customers much more customer centered. So we're quite excited about both. It is a continuing effort. We're not declaring victory or anything close to that, but we've made enough changes at this point that we're confident that we're going to start seeing the results, as we move forward. Q – Ryan Tomasello: And then, I'll squeeze in one final one. Just considering the ongoing CEO search, how much of the broader organizational and strategy changes are you kind of hitting pause on and reserving for the time, when the new CEO onboards and can take their own kind of fresh look, at how to evolve the strategy going forward? Thanks.

We're really not -- we're not hitting pause on anything right now. This is a different phase than the previous search phase, when we didn't have an opportunity for somebody to step in as interim CEO largely, because of me being a logical one and constraints on my own availability at that point in time. So we did have more things on hold during that period, while the Board was coming to a greater understanding of the business through the search process. But over that period of time, over the past nine months I and the Board have become very deeply engaged with the company on both strategy and execution and that allowed us even with the recent quick turnover to really start using that as a catalyst to accelerate our change and execute some of these organizational changes and cost cuts. And the strategy is pretty well-evolved, is mapping out our plan for returning to growth and profitability. And our engagement on that with our finalist candidates is deepening up to the point where we're really confident that the handoff is going to be a smooth one without having to pause anything. Q – Ryan Tomasello: Great. Thanks for taking the questions.

[Operator Instructions] Our next question comes from the line of Yi Fu Lee from Cantor Fitzgerald. Please go ahead.

Thank you for taking our question. I just want to follow-up on the CEO change from the last caller -- the last analyst. Why -- like John -- why the quick change again? And what are the qualities? You say you're in the final stages in finalizing the CEO search. What are the qualities you are looking to seek for?

I think as to the first part of your question, I believe we answered that to the extent we could when we made the announcement, but I'll repeat that that quick change had nothing to do with misalignment of strategy, nothing to do with being [indiscernible], nothing to do with the current financial performance. It was initiated by the Board as was evident in our disclosures about the transition arrangements with the -- CEO. And it was just one of those tough decisions the Board has to make. But as I hope we conveyed on the call this morning, it really wasn't a significant event in terms of affecting our execution of our plan. And also as I believe we implied at the time we made that announcement we were -- because we were just coming off a very robust search process, we were engaged enough with multiple candidates that we've been able to move very, very quickly. As I said in my comments this morning, we do expect to be making an announcement in coming weeks not months. And so we're moving ahead full speed with that. As to what the qualities are we're looking for, they remain the same. We want a CEO who has proven track record of executing operationally in a recurring revenue business at scale. One of the problems that we faced when we launched this path of the CEO transition were related to not having matured the organization fast enough and we're addressing all of those, but we're looking to bring in a CEO who has very strong proven ability of operating and executing a high recurring revenue business at scale.

Thank you for that. And the follow-up it could be Daryl or you John. You guys have a great NRR and very low churn in the business. I'll ask them both at the same time right? Daryl you mentioned about you're trying to minimize the tariff impact. Can you explain how SmartRent is able to do so considering the situation is so fluid? And like with the hire of Natalie and the build-out of the go-to-market team and you talked about there's still more work to be done in terms of hiring for customer success. When do you believe that the fruits of this, I guess, the build-out of the go-to-market team will inflect more positively in terms of the timeline? And that's it for me. Thank you.

Yes. Thank you for the question. Why don't I start by addressing the tariffs and then hand it back over to John to address the sales worry. The tariffs are nothing new. SmartRent has historically sourced the vast majority of its hardware devices from overseas and there's nothing new about that. So, there's been obviously significant developments recently. We believe from a kind of maximum exposure standpoint that we have potentially about a $2 million exposure in the back half of this year related to tariffs. That's subject to a couple of things that one would be the simple changing of the tariffs yet again. But also we began addressing the potential for tariff increases by changing where we do our own manufacturing of our own devices. Also with regards to third-party sourced devices that come from overseas because of the lack of clarity, most of our suppliers have not committed to a particular path like passing along the cost to SmartRent. That may or may not happen in the future. And then the last point that points to potential mitigation is we are evaluating, changing some of our own manufacturing locations again for lower tariff nations.

And regarding the timing of evidence of the build-out of the go-to-market function, I wouldn't be specific on pinpointing a quarter when that's going to be compellingly evident for a number of factors. First of all, as you understand, new people and sales take time to ramp up. We also had build, which we have done our demand creation, lead generation organization and that's early days. We're also facing some macro factors still in the capital investment cycle of the multifamily market and as well as just the broader economic uncertainty right now. And then our products, as we've discussed many times before, have a long sales cycle that is tied in with the capital investment cycle of our major customers. So given all those factors, there remains some degree of uncertainty as to the timing for this year. What I would characterize is that 2025 will be a year that is primarily foundation building with some expectation of growth. We're going to continue showing strong growth in our SaaS revenue. But with that foundation building, we expect to be able to show evidence of proof points along the way that will lead to more sustainable growth as we enter 2026.

I guess what are those proof points, like, John is it like SaaS revenue as a percent -- I know it's like one-third right now. Obviously Daryl could chime in on this right? What are the proof points that will make the Board and yourself and the management team be more positive throughout the year?

The principal one would be the beginning of a sustainable path of acceleration in bookings.

Okay. Thank you very much.

Since there are no further questions, I will now turn the call back over to Interim CEO, John Dorman for closing remarks.

Thank you and thanks to all of you for joining us today. As we wrap up, I will leave you with a clear message. We believe SmartRent is a very compelling long-term opportunity for value creation. This is a company with unmatched scale real product differentiation in a massive addressable market that's still largely untapped. We have over 800,000 units deployed, net retention rates north of 100% and recurring SaaS revenue that grew 17% year-over-year while we were in the midst of fixing execution challenges. We faced some near-term execution challenges but the fundamentals haven't changed. In fact they've gotten stronger. We streamlined the business, realigned leadership and refocused the organization around a disciplined SaaS strategy that prioritizes platform superiority and customer success. The work we've done over the past nine months is not just about fixing what wasn't working. It's about laying the foundation for something much bigger. The SmartRent of tomorrow is more focused, more efficient and more ambitious. So for those watching us closely here's what I'll say. We believe the opportunity ahead of us is significant. We're executing with urgency and clarity, and we believe the value creation potential from here is real durable and meaningful. Thanks again for your time, your engagement and your continued support.