SmartRent Inc

Previous wording

SmartRent is a category leader in the enterprise smart home solutions industry. As of June 30, 2024, we had 771,870 Units Deployed (as defined below) and over 600 customers, including many of the largest multifamily residential owners in the United States. As of that date, we believe our customers owned an aggregate of approximately 7.3 million rental units. This represents approximately 17% of the United States market for institutionally owned multifamily rental units and single-family rental homes. In addition to multifamily residential owners, our customers include some of the leading homebuilders, single-family rental homeowners, and iBuyers in the United States.

Current wording

SmartRent is a category leader in the enterprise smart home solutions industry. As of September 30, 2024, we had 787,038 Units Deployed (as defined below) and over 600 customers, including many of the largest multifamily residential owners in the United States. As of that date, we believe our customers owned an aggregate of approximately 7.3 million rental units. This represents approximately 17% of the United States market for institutionally owned multifamily rental units and single-family rental homes. In addition to multifamily residential owners, our customers include some of the leading homebuilders, single-family rental homeowners, and iBuyers in the United States.

Previous wording

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

Current wording

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

Previous wording

Although the correlation has decreased, New Units Deployed is still an indicator of our ability to acquire new customers and expand our relationships with our current customers. As of June 30, 2024 and 2023, we had an aggregate of 771,870 and 650,324 Units Deployed, respectively. For the three months ended June 30, 2024 and 2023, we had 22,469 and 47,768 New Units Deployed, respectively. For the six months ended June 30, 2024 and 2023, we had 52,179 and 103,128 New Units Deployed, respectively.

Current wording

Although the correlation has decreased, New Units Deployed is still an indicator of our ability to acquire new customers and expand our relationships with our current customers. As of September 30, 2024 and 2023, we had an aggregate of 787,038 and 682,632 Units Deployed, respectively. For the three months ended September 30, 2024 and 2023, we had 15,168 and 32,308 New Units Deployed, respectively. For the nine months ended September 30, 2024 and 2023, we had 67,347 and 135,436 New Units Deployed, respectively.

Previous wording

We define Units Shipped as the aggregate number of Hub Devices that have been shipped to customers during a stated measurement period. Units Shipped is used to assess the trajectory of our growth and is an indicator of our ability to acquire new customers and expand our relationships with our current customers. However, we caution that Units Shipped also includes Hub Devices for upgrades and out of warranty replacements and may not be an indicator of New Units Deployed in future periods. For the three months ended June 30, 2024 and 2023, we had 48,780 and 55,516 Units Shipped, respectively. For the six months ended June 30, 2024 and 2023, we had 100,524 and 114,175 Units Shipped, respectively.

Current wording

We define Units Shipped as the aggregate number of Hub Devices that have been shipped to customers during a stated measurement period. Units Shipped is used to assess the trajectory of our growth and is an indicator of our ability to acquire new customers and expand our relationships with our current customers. However, we caution that Units Shipped also includes Hub Devices for upgrades and out of warranty replacements and may not be an indicator of New Units Deployed in future periods. For the three months ended September 30, 2024 and 2023, we had 44,763 and 62,585 Units Shipped, respectively. For the nine months ended September 30, 2024 and 2023, we had 145,287 and 176,760 Units Shipped, respectively.

Previous wording

We define Units Booked as the aggregate number of Hub Device units subject to binding orders executed during a stated measurement period. We utilize the concept of Units Booked to measure estimated near-term resource demand and the resulting approximate range of post-delivery revenue that we will earn and record. Units Booked represent binding orders only. For the three months ended June 30, 2024 and 2023 there were 37,691 and 19,967 Units Booked, respectively. For the six months ended June 30, 2024 and 2023 there were 83,981 and 85,075 Units Booked, respectively.

Current wording

We define Units Booked as the aggregate number of Hub Device units subject to binding orders executed during a stated measurement period that will result in a New Unit Deployed. We utilize the concept of Units Booked to measure estimated near-term resource demand and the resulting approximate range of post-delivery revenue that we will earn and record. Units Booked represent binding orders only. For the three months ended September 30, 2024 and 2023 there were 17,048 and 46,272 Units Booked, respectively. For the nine months ended September 30, 2024 and 2023 there were 101,029 and 131,347 Units Booked, respectively. For the three and nine months ended September 30, 2024, ARR (as defined below) related to Units Booked was $1,991 and $7,301, respectively.

Previous wording

We define Bookings as the contract value of hardware, professional services, and the first year of ARR for binding orders executed during a stated measurement period. We utilize Bookings to measure revenue expected to be earned in future periods from orders contracted during the current period. For the three months ended June 30, 2024 and 2023, Bookings were $45,511 and $31,539, respectively. For the six months ended June 30, 2024 and 2023, Bookings were $84,272 and $68,844, respectively.

Current wording

We define Bookings as the contract value of hardware, professional services, and the first year of ARR for binding orders executed during a stated measurement period. We utilize Bookings to measure revenue expected to be earned in future periods from orders contracted during the current period. For the three months ended September 30, 2024 and 2023, Bookings were $19,582 and $49,661, respectively. For the nine months ended September 30, 2024 and 2023, Bookings were $103,864 and $118,505, respectively.

Previous wording

We define Annual Recurring Revenue (“ARR”) as the annualized value of our SaaS revenue earned in the current quarter, which we calculate by taking the total amount of SaaS revenue in the current quarter and multiplying that amount by four. We believe that ARR growth demonstrates our ability to acquire new customers and to maintain and expand our relationships with existing customers. More specifically, we monitor our ARR to assess the general health and trajectory of our Hosted Services business. As of June 30, 2024 and 2023, ARR was approximately $51.2 million and $38.8 million, respectively.

Current wording

We define Annual Recurring Revenue (“ARR”) as the annualized value of our SaaS revenue earned in the current quarter, which we calculate by taking the total amount of SaaS revenue in the current quarter and multiplying that amount by four. We believe that ARR growth demonstrates our ability to acquire new customers and to maintain and expand our relationships with existing customers. More specifically, we monitor our ARR to assess the general health and trajectory of our Hosted Services business. As of September 30, 2024 and 2023, ARR was approximately $53.2 million and $43.3 million, respectively.

Previous wording

We define Hardware ARPU as total hardware revenue during a given period divided by the total Units Shipped during the same period. Hardware ARPU is used to evaluate the effectiveness of our hardware pricing and assess our ability to market and sell our hardware offerings. For the three months ended June 30, 2024 and 2023, Hardware ARPU was $506 and $501, respectively. For the six months ended June 30, 2024 and 2023, Hardware ARPU was $535 and $570, respectively.

Current wording

We define Hardware ARPU as total hardware revenue during a given period divided by the total Units Shipped during the same period. Hardware ARPU is used to evaluate the effectiveness of our hardware pricing and assess our ability to market and sell our hardware offerings. For the three months ended September 30, 2024 and 2023, Hardware ARPU was $418 and $569, respectively. For the nine months ended September 30, 2024 and 2023, Hardware ARPU was $499 and $570, respectively.

Previous wording

We define Professional Services ARPU as total professional services revenue during a given period divided by the total New Units Deployed, excluding customer self-installations, during the same period. Professional Services ARPU is used to assess our ability to effectively price our installation services. For the three months ended June 30, 2024 and 2023, Professional Services ARPU was $333 and $265, respectively. For the six months ended June 30, 2024 and 2023, Professional Services ARPU was $281 and $256, respectively.

Current wording

We define Professional Services ARPU as total professional services revenue during a given period divided by the total New Units Deployed, excluding customer self-installations, during the same period. Professional Services ARPU is used to assess our ability to effectively price our installation services. For the three months ended September 30, 2024 and 2023, Professional Services ARPU was $443 and $253, respectively. For the nine months ended September 30, 2024 and 2023, Professional Services ARPU was $310 and $255, respectively.

Previous wording

We define SaaS ARPU as total SaaS revenue during a given period divided by the average aggregate Units Deployed in the same period. Average aggregate Units Deployed is calculated as the Units Deployed as of the current period plus the Units Deployed as of the previous period divided by two. SaaS ARPU is used to evaluate the effectiveness of our SaaS pricing and assess our ability to market and sell our various software solutions. For the three months ended June 30, 2024 and 2023, SaaS ARPU was $5.63 and $5.16, respectively. For the six months ended June 30, 2024 and 2023, SaaS ARPU was $5.53 and $5.20, respectively.

Current wording

We define SaaS ARPU as total SaaS revenue during a given period divided by the average aggregate Units Deployed in the same period. Average aggregate Units Deployed is calculated as the Units Deployed as of the current period plus the Units Deployed as of the previous period divided by two. SaaS ARPU is used to evaluate the effectiveness of our SaaS pricing and assess our ability to market and sell our various software solutions. For the three months ended September 30, 2024 and 2023, SaaS ARPU was $5.70 and $5.41, respectively. For the nine months ended September 30, 2024 and 2023, SaaS ARPU was $5.61 and $5.33, respectively.

Previous wording

We define Units Booked SaaS ARPU as the first year ARR for binding orders executed during the stated measurement period divided by the total Units Booked in the same period. Units Booked SaaS ARPU is used to evaluate the effectiveness of our SaaS pricing and assess our ability to market and sell our various software solutions for orders executed during the period. For the three months ended June 30, 2024 and 2023, Units Booked SaaS ARPU was $8.07 and $8.74, respectively. For the six months ended June 30, 2024 and 2023, Units Booked SaaS ARPU was $7.57 and $6.18, respectively.

Current wording

We define Units Booked SaaS ARPU as the first year ARR for binding orders executed during the stated measurement period divided by the total Units Booked in the same period. Units Booked SaaS ARPU is used to evaluate the effectiveness of our SaaS pricing and assess our ability to market and sell our various software solutions for orders executed during the period.

Previous wording

We define Customer Churn as cancelled deployed units during the measurement period divided by Units Deployed as of the beginning of the measurement period. Cancelled deployed units are the previously deployed units that have been cancelled during the same measurement period in which a customer cancels all product subscriptions. Our Hosted Services growth is driven by our ability to retain our customers and minimize Customer Churn. Our Customer Churn for our Smart Communities Solutions is 0.05% for the three months ended June 30, 2024. We did not experience churn for the three months ended June 30, 2023. Our Customer Churn for our Smart Communities Solutions is 0.05% for the six months ended June 30, 2024 compared to 0.01% for the six months ended June 30, 2023.

Current wording

We define Customer Churn as cancelled deployed units during the measurement period divided by Units Deployed as of the beginning of the measurement period. Cancelled deployed units are the previously deployed units that have been cancelled during the same measurement period in which a customer cancels all product subscriptions. Our Hosted Services growth is driven by our ability to retain our customers and minimize Customer Churn. Our Customer Churn for our Smart Communities Solutions is 0.01% for the three months ended September 30, 2024 and 2023. Our Customer Churn for our Smart Communities Solutions is 0.06% for the nine months ended September 30, 2024 compared to 0.02% for the nine months ended September 30, 2023.

Previous wording

We define Net Revenue Retention as SaaS revenue at the end of the current period related to properties which had SaaS revenue at the end of the same period in the prior year, divided by SaaS revenue at the end of the same period in the prior year for those same properties. Net Revenue Retention includes any reductions in revenue caused by cancellations or downgrades, offset by additions to revenue from price increases on existing products, and additions of new products at existing properties. Net Revenue Retention was 103% as of June 30, 2024.

Current wording

We define Net Revenue Retention as SaaS revenue at the end of the current period related to properties which had SaaS revenue at the end of the same period in the prior year, divided by SaaS revenue at the end of the same period in the prior year for those same properties. Net Revenue Retention includes additions to revenue from price increases on existing products, and additions of new products at existing properties, offset by any reductions in revenue caused by cancellations or downgrades. Net Revenue Retention was 101% as of September 30, 2024.

Previous wording

The income tax expense on the Consolidated Statement of Operations and Comprehensive Loss is primarily related to the federal, state, and foreign taxes offset by a change in the valuation allowance. The Company established a full valuation allowance for net deferred U.S. federal and state tax assets, including net operating loss carryforwards. The Company expects to maintain this valuation allowance until it becomes more likely than not that the benefit of the federal and state deferred tax assets will be realized in future periods if it reports taxable income. The Company believes that it has established an adequate allowance for uncertain tax positions, although it 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.

Current wording

The income tax expense on the Condensed Consolidated Statement of Operations and Comprehensive Loss is primarily related to the federal, state, and foreign taxes offset by a change in the valuation allowance. The Company established a full valuation allowance for net deferred U.S. federal and state tax assets, including net operating loss carryforwards. The Company expects to maintain this valuation allowance until it becomes more likely than not that the benefit of the federal and state deferred tax assets will be realized in future periods if it reports taxable income. The Company believes that it has established an adequate allowance for uncertain tax positions, although it 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.

Previous wording

Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

Current wording

Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

Previous wording

The results of operations presented below should be reviewed together with the consolidated financial statements and notes included elsewhere in this Report. The following table summarizes our historical consolidated results of operations data for the periods presented. The period-to-period comparison of operating results is not necessarily indicative of results for future periods. All dollars are in thousands unless otherwise stated.

Current wording

The results of operations presented below should be reviewed together with the condensed consolidated financial statements and notes included elsewhere in this Report. The following table summarizes our historical consolidated results of operations data for the periods presented. The period-to-period comparison of operating results is not necessarily indicative of results for future periods. All dollars are in thousands unless otherwise stated.

Previous wording

Comparison of the three and six months ended June 30, 2024 and 2023

Current wording

Comparison of the three and nine months ended September 30, 2024 and 2023

Previous wording

Total revenue decreased by $5.0 million, or 9%, to $48.4 million for the three months ended June 30, 2024, from $53.4 million for the three months ended June 30, 2023. The decrease was primarily driven by a $6.1 million decrease in revenue related to our Smart Apartments solution. The decrease in revenue resulted primarily from a 53% decrease in New Units Deployed to 22,469 units for the three months ended June 30, 2024 from 47,768 units for the three months ended June 30, 2023 and a 12% decrease in Units Shipped to 48,780 for the three months ended June 30, 2024 from 55,516 for the three months ended June 30, 2023, partially offset by a 19% increase in the number of cumulative active subscriptions for our Hosted Services during 2024 compared to 2023. Overall decreases in New Units Deployed and Units Shipped are primarily due to our customers' decisions to defer capital expenditures, influenced by the current interest rate environment and broader macroeconomic conditions.

Current wording

Total revenue decreased by $17.6 million, or 30%, to $40.5 million for the three months ended September 30, 2024, from $58.1 million for the three months ended September 30, 2023. The decrease was primarily driven by a $17.4 million decrease in revenue related to our Smart Apartments solution. The decrease in revenue resulted primarily from a 53% decrease in New Units Deployed to 15,168 units for the three months ended September 30, 2024 from 32,308 units for the three months ended September 30, 2023 and a 28% decrease in Units Shipped to 44,763 for the three months ended September 30, 2024 from 62,585 for the three months ended September 30, 2023, partially offset by a 15% increase in the number of cumulative active subscriptions for our Hosted Services during the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Overall decreases in New Units Deployed and Units Shipped are primarily attributable to our customers' decisions to defer capital expenditures, driven by broader macroeconomic conditions. In addition, changes in leadership and the structure of our sales organization have impacted sales and overall volumes.

Previous wording

Total revenue decreased by $19.5 million, or 16%, to $99.0 million for the six months ended June 30, 2024, from $118.5 million for the six months ended June 30, 2023. The decrease was primarily driven by a $21.5 million decrease in revenue related to our Smart Apartments solution. The decrease in revenue resulted primarily from a 49% decrease in New Units Deployed to 52,179 units for the six months ended June 30, 2024 from 103,128 units for the six months ended June 30, 2023 and a 12% decrease in Units Shipped to 100,524 for the six months ended June 30, 2024 from 114,175 for the six months ended June 30, 2023, partially offset by a 19% increase in the number of cumulative active subscriptions for our Hosted Services during 2024 compared to 2023. Overall decreases in New Units Deployed and Units Shipped are primarily due to our customers' decisions to defer capital expenditures, influenced by the current interest rate environment and broader macroeconomic conditions.

Current wording

Total revenue decreased by $37.1 million, or 21%, to $139.5 million for the nine months ended September 30, 2024, from $176.6 million for the nine months ended September 30, 2023. The decrease was primarily driven by a $38.9 million decrease in revenue related to our Smart Apartments solution. The decrease in revenue resulted primarily from a 50% decrease in New Units Deployed to 67,347 units for the nine months ended September 30, 2024 from 135,436 units for the nine months ended September 30, 2023 and a 18% decrease in Units Shipped to 145,287 for the nine months ended September 30, 2024 from 176,760 for the nine months ended September 30, 2023, partially offset by a 15% increase in the number of cumulative active subscriptions for our Hosted Services during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Overall decreases in New Units Deployed and Units Shipped are primarily attributable to our customers' decisions to defer capital expenditures, driven by broader macroeconomic conditions. In addition, changes in leadership and the structure of our sales organization have impacted sales and overall volumes.

Previous wording

Hardware revenue decreased by $3.1 million, or 11%, to $24.7 million for the three months ended June 30, 2024, from $27.8 million for the three months ended June 30, 2023. This decrease in hardware revenue was driven by a decrease in revenue related to our Smart Apartments Solutions and resulted from a 12% decrease in Units Shipped to 48,780 for the three months ended June 30, 2024 from 55,516 for the three months ended June 30, 2023.

Current wording

Hardware revenue decreased by $16.9 million, or 47%, to $18.7 million for the three months ended September 30, 2024, from $35.6 million for the three months ended September 30, 2023. This decrease in hardware revenue was driven by a decrease in revenue related to our Smart Apartments Solutions and primarily resulted from a 28% decrease in Units Shipped to 44,763 for the three months ended September 30, 2024 from 62,585 for the three months ended September 30, 2023.

Previous wording

Hardware revenue decreased by $11.4 million, or 17%, to approximately $53.7 million for the six months ended June 30, 2024, from $65.1 million for the six months ended June 30, 2023. This decrease in hardware revenue was driven by a decrease in revenue related to our Smart Apartments Solutions and resulted from a 12% decrease in Units Shipped to 100,524 for the six months ended June 30, 2024 from 114,175 for the six months ended June 30, 2023, and a Hardware ARPU decrease of 6% to $535 for the 2024 period from $570 for the 2023 period. The Hardware ARPU decrease was primarily attributable to a change in product mix which was more heavily weighted to our Alloy SmartHome hardware. The impact of the decrease in hardware revenue was mitigated by an increase in hardware gross margin, primarily driven by the product mix change in the current period.

Current wording

Hardware revenue decreased by approximately $28.2 million, or 28%, to $72.5 million for the nine months ended September 30, 2024, from $100.7 million for the nine months ended September 30, 2023. This decrease in hardware revenue was driven by a decrease in revenue related to our Smart Apartments Solutions and resulted from a 18% decrease in Units Shipped to 145,287 for the nine months ended September 30, 2024 from 176,760 for the nine months ended September 30, 2023, and a Hardware ARPU decrease of 12% to $499 for the 2024 period from $570 for the 2023 period. The Hardware ARPU decrease was primarily attributable to a change in product mix which was more heavily weighted to our Alloy SmartHome hardware. The impact of the decrease in hardware revenue was mitigated by an increase in hardware gross margin, primarily driven by the product mix change in the current period.

Previous wording

Professional services revenue decreased by approximately $4.3 million, or 42%, to $5.8 million for three months ended June 30, 2024, from $10.1 million for the three months ended June 30, 2023. Of the $4.3 million decrease, $3.6 million was driven by our Smart Apartments solution. New Units Deployed decreased by 53% to 22,469 units for the three months ended June 30, 2024 from 47,768 units for the three months ended June 30, 2023. This was partially offset by an increase in Professional services ARPU of 26% to $333 for the three months ended June 30, 2024 from $265 for the three months ended June 30, 2023.

Current wording

Professional services revenue decreased by $2.7 million, or 45%, to $3.3 million for three months ended September 30, 2024, from $6.0 million for the three months ended September 30, 2023. Of the $2.7 million decrease, $2.6 million was driven by our Smart Apartments Solution. New Units Deployed decreased by 53% to 15,168 units for the three months ended September 30, 2024 from 32,308 units for the three months ended September 30, 2023. This was partially offset by an increase in Professional services ARPU of 75% to $443 for the three months ended September 30, 2024 from $253 for the three months ended September 30, 2023. The increase in ARPU is primarily attributable to professional services that generate revenue but do not result in a New Unit Deployed such as Access Control and WiFi. During the three months ended September 30, 2024, these services generated $1.5 million of revenue, or 45% of total professional services revenue, compared to $0.9 million of revenue, or 15% of total professional services revenue during the three months ended September 30, 2023.

Previous wording

Professional services revenue decreased by $13.5 million, or 59%, to $9.3 million for six months ended June 30, 2024, from $22.8 million for the six months ended June 30, 2023. Of the $13.5 million decrease, $12.6 million was driven by our Smart Apartments solution. New Units Deployed decreased by 49% to 52,179 units for the six months ended June 30, 2024 from 103,128 units for the six months ended June 30, 2023. This was partially offset by an increase in Professional services ARPU of 10% to $281 for the six months ended June 30, 2024 from $256 for the six months ended June 30, 2023.

Current wording

Professional services revenue decreased by $16.2 million, or 56%, to $12.6 million for nine months ended September 30, 2024, from $28.8 million for the nine months ended September 30, 2023. Of the $16.2 million decrease, $15.2 million was driven by our Smart Apartments solution. New Units Deployed decreased by 50% to 67,347 units for the nine months ended September 30, 2024 from 135,436 units for the nine months ended September 30, 2023. This was partially offset by an increase in Professional services ARPU of 22% to $310 for the nine months ended September 30, 2024 from $255 for the nine months ended September 30, 2023.

Previous wording

Hosted Services revenue increased by approximately $2.4 million, or 16%, to $18.0 million for the three months ended June 30, 2024, from $15.6 million for the three months ended June 30, 2023. Of the $18.0 million revenue in 2024, $12.8 million is related to SaaS revenue and $5.2 million is related to hub amortization. Revenue increased from SaaS by $3.1 million and decreased from hub amortization by $0.7 million from the three months ended June 30, 2023 to the three months ended June 30, 2024. The increase of Hosted Services revenue resulted primarily from a 19% increase in the aggregate number of Units Deployed, primarily of our Smart Apartment solution, from 650,324 units at June 30, 2023 to 771,870 units at June 30, 2024 and an increase in SaaS ARPU of 9% to $5.63 for the three months ended June 30, 2024 from $5.16 for the three months ended June 30, 2023.

Current wording

Hosted Services revenue increased by $2.0 million, or 12%, to $18.5 million for the three months ended September 30, 2024, from $16.5 million for the three months ended September 30, 2023. Of the $18.5 million revenue in 2024, $13.3 million is related to SaaS revenue and $5.2 million is related to hub amortization. Revenue increased from SaaS by $2.5 million and decreased from hub amortization by $0.5 million from the three months ended September 30, 2023 to the three months ended September 30, 2024. The increase of Hosted Services revenue resulted primarily from a 15% increase in the aggregate number of Units Deployed, primarily of our Smart Apartment solution, from 682,632 units at September 30, 2023 to 787,038 units at September 30, 2024 and an increase in SaaS ARPU of 5% to $5.70 for the three months ended September 30, 2024 from $5.41 for the three months ended September 30, 2023.

Previous wording

Hosted Services revenue increased by $5.4 million, or 18%, to $36.0 million for the six months ended June 30, 2024, from approximately $30.6 million for the six months ended June 30, 2023. Of the $36.0 million revenue in 2024, $24.7 million is related to SaaS revenue and $11.3 million is related to hub amortization. Revenue increased from hub amortization and SaaS by $0.6 million and $6.0 million, respectively, from the six months ended June 30, 2023 to the six months ended June 30, 2024. The increase of Hosted Services revenue resulted primarily from a 19% increase in the aggregate number of Units Deployed, primarily of our Smart Apartment solution, from 650,324 units at June 30, 2023 to 771,870 units at June 30, 2024 and an increase in SaaS ARPU of 6% to $5.53 for the six months ended June 30, 2024 from $5.20 for the six months ended June 30, 2023.

Current wording

Hosted Services revenue increased by $7.4 million, or 16%, to $54.5 million for the nine months ended September 30, 2024, from approximately $47.1 million for the nine months ended September 30, 2023. Of the $54.5 million revenue in 2024, $38.0 million is related to SaaS revenue and $16.5 million is related to hub amortization. Revenue decreased from hub amortization by $1.1 million and increased from SaaS by $8.5 million from the nine months ended September 30, 2023 to the nine months ended September 30, 2024. The increase of Hosted Services revenue resulted primarily from a 15% increase in the aggregate number of Units Deployed, primarily of our Smart Apartment solution, from 682,632 units at September 30, 2023 to 787,038 units at September 30, 2024 and an increase in SaaS ARPU of 5% to $5.61 for the nine months ended September 30, 2024 from $5.33 for the nine months ended September 30, 2023.

Previous wording

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

Current wording

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

Previous wording

Total cost of revenue decreased by $12.3 million, or 28%, to $31.2 million for the three months ended June 30, 2024, from $43.5 million for the three months ended June 30, 2023. The decrease in cost of revenue resulted primarily from a 53% decrease in New Units Deployed and a 12% decrease in Units Shipped of our Smart Apartment solution hardware devices.

Current wording

Total cost of revenue decreased by $17.5 million, or 39%, to $27.1 million for the three months ended September 30, 2024, from $44.6 million for the three months ended September 30, 2023. The decrease in cost of revenue resulted primarily from a 53% decrease in New Units Deployed and a 28% decrease in Units Shipped of our Smart Apartment solution hardware devices.

Previous wording

Total cost of revenue decreased by $37.2 million, or 37%, to $62.3 million for the six months ended June 30, 2024, from $99.5 million for the six months ended June 30, 2023. The decrease in cost of revenue resulted primarily from a favorable product mix of our hardware devices (more heavily weighted to Alloy SmartHome hardware), a 49% decrease in New Units Deployed and a 12% decrease in Units Shipped of our Smart Apartment solution hardware devices.

Current wording

Total cost of revenue decreased by $54.7 million, or 38%, to $89.4 million for the nine months ended September 30, 2024, from $144.1 million for the nine months ended September 30, 2023. The decrease in cost of revenue resulted primarily from a favorable product mix of our hardware devices (more heavily weighted to Alloy SmartHome hardware), a 50% decrease in New Units Deployed and a 18% decrease in Units Shipped of our Smart Apartment solution hardware devices.

Previous wording

Hardware cost of revenue decreased by $5.7 million, or 26%, to $16.3 million for the three months ended June 30, 2024, from $22.0 million for the three months ended June 30, 2023. This decrease in hardware cost of revenue was primarily attributable to a favorable product mix, resulting in improved hardware gross margin compared to the prior period, and a 12% decrease in Units Shipped.

Current wording

Hardware cost of revenue decreased by approximately $13.8 million, or 50%, to $13.8 million for the three months ended September 30, 2024, from $27.6 million for the three months ended September 30, 2023. This decrease in hardware cost of revenue was primarily attributable to a favorable product mix, resulting in improved hardware gross margin compared to the prior period, and a 28% decrease in Units Shipped.

Previous wording

Hardware cost of revenue decreased by $19.6 million, or 36%, to $35.0 million for the six months ended June 30, 2024, from $54.6 million for the six months ended June 30, 2023. This decrease in hardware cost of revenue was primarily attributable to a favorable product mix, resulting in improved hardware gross margin compared to the prior period, and a 12% decrease in Units Shipped.

Current wording

Hardware cost of revenue decreased by $33.3 million, or 41%, to $48.8 million for the nine months ended September 30, 2024, from $82.1 million for the nine months ended September 30, 2023. This decrease in hardware cost of revenue was primarily attributable to a favorable product mix, resulting in improved hardware gross margin compared to the prior period, and a 18% decrease in Units Shipped.

Previous wording

Professional services cost of revenue decreased by $6.9 million, or 44%, to $8.9 million for the three months ended June 30, 2024, from $15.8 million for the three months ended June 30, 2023. The decrease in professional services cost of revenue is primarily attributable to a decrease of approximately $5.7 million in third-party direct labor costs due to a 53% decrease in New Units Deployed, and a decrease of $0.8 million in personnel-related costs, and related travel. Additionally, we have invested in technology initiatives to allow our teams to be more efficient and furthered our collaboration with third-party partners to augment our professional services resulting in improved professional services gross margin compared to the previous period. We believe we will continue to improve efficiency in future periods.

Current wording

Professional services cost of revenue decreased by $4.3 million, or 39%, to $6.8 million for the three months ended September 30, 2024, from $11.1 million for the three months ended September 30, 2023. The decrease in professional services cost of revenue is primarily attributable to a decrease of approximately $2.6 million in third-party direct labor costs due to a 53% decrease in New Units Deployed, and a decrease of $1.6 million in personnel-related costs, and related travel. Additionally, we have invested in technology initiatives to allow our teams to be more efficient and furthered our collaboration with third-party partners to augment our professional services resulting in improved professional services gross margin compared to the previous period. We believe we will continue to improve efficiency in future periods.

Previous wording

Professional services cost of revenue decreased by $18.1 million, or 54%, to $15.3 million for the six months ended June 30, 2024, from $33.4 million for the six months ended June 30, 2023. The decrease in professional services cost of revenue is primarily attributable to a decrease of approximately $14.6 million in third-party direct labor costs due to a 49% decrease in New Units Deployed, and a decrease of $2.5 million in personnel-related costs, and related travel. Additionally, we have invested in technology initiatives to allow our teams to be more efficient and furthered our collaboration with third-party partners to augment our professional services resulting in improved professional services gross margin compared to the previous period. We believe we will continue to improve efficiency in future periods.

Current wording

Professional services cost of revenue decreased by $22.4 million, or 50%, to $22.2 million for the nine months ended September 30, 2024, from $44.6 million for the nine months ended September 30, 2023. The decrease in professional services cost of revenue is primarily attributable to a decrease of approximately $17.3 million in third-party direct labor costs due to a 50% decrease in New Units Deployed, and a decrease of $4.1 million in personnel-related costs, and related travel. Additionally, we have invested in technology initiatives to allow our teams to be more efficient and furthered our collaboration with third-party partners to augment our professional services resulting in improved professional services gross margin compared to the previous period. We believe we will continue to improve efficiency in future periods.

Previous wording

Hosted Services cost of revenue increased by $0.3 million, or 5%, to $6.0 million for the three months ended June 30, 2024, from $5.7 million for the three months ended June 30, 2023. The increase resulted from a 19% increase in the aggregate number of Units Deployed and the resulting increase in the number of active subscriptions for our software service applications and an increase in personnel-related costs of $0.3 million, partially offset by a $0.4 million decrease in hub amortization. Our Hosted Services gross margin improved when compared to the same period in the prior year primarily driven by economies of scale related to our SaaS products. Additionally, Hosted Services attributable to hub amortization, which has a lower margin than our SaaS products, continues to represent a smaller portion of our Hosted Services cost of revenue.

Current wording

Hosted Services cost of revenue increased by $0.5 million, or 8%, to $6.4 million for the three months ended September 30, 2024, from $5.9 million for the three months ended September 30, 2023. The increase resulted from a 15% increase in the aggregate number of Units Deployed and the resulting increase in the number of active subscriptions for our software service applications partially offset by a $0.4 million decrease in hub amortization.

Previous wording

Hosted Services cost of revenue increased by $0.5 million, or 4%, to $12.0 million for the six months ended June 30, 2024, from $11.5 million for the six months ended June 30, 2023. The increase resulted from a 19% increase in the aggregate number of Units Deployed and the resulting increase in the number of active subscriptions for our software service applications and an increase in personnel-related costs of $0.6 million, partially offset by a $0.8 million decrease in hub amortization. Our Hosted Services gross margin improved when compared to the same period in the prior year primarily driven by economies of scale related to our SaaS products. Additionally, Hosted Services attributable to hub amortization, which has a lower margin than our SaaS products, continues to represent a smaller portion of our Hosted Services cost of revenue.

Current wording

Hosted Services cost of revenue increased by approximately $0.9 million, or 6%, to $18.3 million for the nine months ended September 30, 2024, from $17.4 million for the nine months ended September 30, 2023. The increase resulted from a 15% increase in the aggregate number of Units Deployed and the resulting increase in the number of active subscriptions for our software service applications and an increase in personnel-related costs of $0.6 million, partially offset by a $1.1 million decrease in hub amortization. Our Hosted Services gross margin improved when compared to the same period in the prior year primarily driven by economies of scale related to our SaaS products. Additionally, Hosted Services attributable to hub amortization, which has a lower margin than our SaaS products, continues to represent a smaller portion of our Hosted Services cost of revenue.

Previous wording

Research and development expenses increased by $0.9 million, or 15%, to approximately $7.4 million for the three months ended June 30, 2024, from $6.5 million for the three months ended June 30, 2023, primarily related to the employee retention credits recorded in the three months ended June 30, 2023, which were refundable employment tax credits provided by The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). We believe our research and development costs will increase in absolute dollars as we increase our investment in product development to broaden the capabilities of our solutions and introduce new products and features – in particular, as we enhance our WiFi offering.

Current wording

Research and development expenses increased by $1.1 million, or 5%, to approximately $22.4 million for the nine months ended September 30, 2024, from $21.3 million for the nine months ended September 30, 2023, primarily related to an increase of $1.1 million in personnel-related expenses. The increase was primarily related to the employee retention credits recorded in the nine months ended September 30, 2023, which were refundable employment tax credits provided by The Coronavirus Aid, Relief, and Economic Security Act. These employment tax credits did not recur during the nine months ended September 30, 2024. We believe our research and development costs will increase in absolute dollars as we increase our investment in product development to enhance the capabilities of our solutions and introduce new products and features.

Previous wording

For the six months ended June 30, 2024, general and administrative expenses increased by $6.1 million, or 27%, to $28.7 million, from $22.6 million for the six months ended June 30, 2023, resulting primarily from a $5.3 million legal accrual recorded as of June 30, 2024, in which the Company agreed to settle a dispute with a supplier by returning $5.0 million of inventory and paying a portion of the supplier’s costs and fees, and a $2.3 million impairment of an investment in a non-affiliate, partially offset by a decrease of $2.5 million of personnel-related expenses.

Current wording

For the nine months ended September 30, 2024, general and administrative expenses increased by $9.0 million, or 26%, to $42.8 million, from $33.9 million for the nine months ended September 30, 2023, resulting primarily from a $9.7 million increase in third-party consultants. This was largely driven by a $5.3 million legal accrual recorded as of June 30, 2024, in which the Company agreed to settle a dispute with a supplier by returning $5.0 million of inventory and paying a portion of the supplier’s costs and fees. Additionally, we incurred $2.8 million of severance and related expenses attributable to the departure of our former CEO.

Previous wording

Interest income, net increased by $0.5 million to $2.3 million for the three months ended June 30, 2024, from $1.8 million for the three months ended June 30, 2023. The increase in net interest income for both periods is primarily attributable to interest earned on interest-bearing cash balances.

Current wording

Interest income, net decreased by $0.2 million to $2.0 million for the three months ended September 30, 2024, from $2.2 million for the three months ended September 30, 2023. The decrease in net interest income for both periods is primarily attributable to interest earned on interest-bearing cash balances.

Previous wording

Interest income, net increased by $0.9 million to $4.7 million for the six months ended June 30, 2024, from $3.8 million for the six months ended June 30, 2023. The increase in net interest income for both periods is primarily attributable to interest earned on interest-bearing cash balances.

Current wording

Interest income, net increased by approximately $0.6 million to $6.7 million for the nine months ended September 30, 2024, from $6.1 million for the nine months ended September 30, 2023. The increase in net interest income for both periods is primarily attributable to interest earned on interest-bearing cash balances.

Previous wording

To supplement the consolidated financial statements, which are prepared and presented in accordance with GAAP, we present EBITDA and Adjusted EBITDA, described below, as non-GAAP measures. We believe the presentation of both GAAP and non-GAAP financial measures provides investors with increased transparency into financial measures used by our management team and improves investors’ understanding of our underlying operating performance and their ability to analyze our ongoing operating trends.

Current wording

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we present EBITDA and Adjusted EBITDA, described below, as non-GAAP measures. We believe the presentation of both GAAP and non-GAAP financial measures provides investors with increased transparency into financial measures used by our management team and improves investors’ understanding of our underlying operating performance and their ability to analyze our ongoing operating trends.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $187.4 million, which were held for working capital and general corporate purposes. Our cash equivalents are comprised primarily of money market funds. To date, our principal sources of liquidity have been the net proceeds received as a result of the Business Combination, and payments collected from sales to our customers.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $163.4 million, which were held for working capital and general corporate purposes. Our cash equivalents are comprised primarily of money market funds. To date, our principal sources of liquidity have been the net proceeds received as a result of the Business Combination, and payments collected from sales to our customers.