Latch, Inc.

Ladies and gentlemen, thank you for standing by. And welcome to the last first quarter 2021 financial results conference call. At this time, all participants are on a listen-only mode. After this week's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the star then the one key on your touchtone telephone. If you recall all the resistance, please press star then zero. I would now like to hand the conference over to your speaker host today, Mark Griffin. Please go ahead.

Thank you, operator. Good afternoon, and thank you for joining us today to review Latch's first quarter 2021 financial results. With me on the call today are Luke Schoenfelder, Chief Executive Officer, Co-Founder and Chairman of the Board of Directors, and Garth Mitchell, Chief Financial Officer. After prepared marks, we will open up the call for question and answer session. During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance, but rather subject to a variety of risks and uncertainties. Our actual results could differ materially from these expectations reflected in any forward-looking statements. Forward-looking statements made today speak only to our expectations as of today, and we undertake no obligation to publicly update or revise them. For discussion of material risks and other important factors that could affect our actual results, please refer to the risk factors section in our SEC filings available on the SEC's EDGAR system and our website, as well as the risks and other important factors discussed in today's results. Additionally, non-GAAP financial measures will be discussed on this conference call. Please refer to the tables in our earnings release and the investor relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I'd like to turn the call over to Chief Executive Officer Luke Schoenfelder. Luke?

Thanks, Mark. And I'd like to start by thanking all of you for joining us today on our first earnings call as a public company. Latch recently closed our SPAC transaction with TS Innovation Acquisitions Corp., and we are now a listed public company with our common stock and warrants trading on NASDAQ. We are excited about becoming a public company and credit this important milestone to our team members, our customers, and our partners for making this possible. I've never been more confident in the business we're building and know that this moment will drive continued growth, benefiting our customers, employees, and shareholders. We're also pleased to share our results for the first quarter. In Q1, our total bookings grew 89% year-over-year to $71.7 million, and our revenue grew 143% year-over-year to $6.6 million. This growth reflects robust market demand for our products and shows early signs of post-pandemic recovery. In addition, our attach rates of non-access LatchOS software modules grew to 81% in Q1, up from 44% in Q4 of 20, giving us confidence that our robust 2021 product roadmap and release schedule will drive high adoption and sustained average revenue per home unit growth throughout the year. Garth, our CFO, will talk to Q1 results in more detail shortly. As this is our first earnings call, we thought it would be helpful to provide a brief overview of Latch's history, value proposition, market opportunity, and business model, in addition to providing details on the drivers behind recent performance. I co-founded Latch in 2014 with Brian Jones, Dhruva Rajendra, and Thomas Meyerhofer with the mission of making buildings better spaces to live, work, and visit. Together, we built an executive team with decades of experience at some of the world's best companies, including Apple, Salesforce, and IDEO. At our core, we're a product company, and more than half of our employees work in R&D roles today. In the beginning, we started by solving the access problem at apartment buildings. We created products that work for each door in an apartment building, from building entrances to apartment doors, elevators, parking garages, gyms, and just about everything in between. Once installed, users can use their smartphone, NFC card, door code, or Apple Watch to unlock each door and share access right from their phone. These products help define the smart access category for multifamily buildings and serve as the foundation for our early growth. From there, we expanded to delivery and guest management, making sure that our products enabled more efficient and seamless deliveries and guest reception through our Latch Intercom, Latch Camera, and Latch Delivery Assistant products. The pandemic accelerated growth in e-commerce, making package delivery management an important and costly pain point for building operators. We worked with partners like UPS to increase operational efficiency while also providing a better experience for residents and buildings, too. After that, we saw an opportunity to extend the enterprise device management capabilities that we use to manage our own devices to also manage third-party products, and we built relationships with companies like Google Nest, Honeywell, Ecobee, and others. Now, LatchOS manages each of these third-party devices for building managers, and the Latch app enables residents to control each of their devices from our app. From there, we saw the need to bring enterprise connectivity solutions to apartment buildings, and we built LTE into our Latch Intercom and Latch Hub to enable us to bring connectivity right to the edge, which means our products don't require infrastructure, wiring, or full-building Wi-Fi in order to function. With this foundation of products in place, we've created a resident experience where the average Latch app user interacts with our app 4.6 times per day, setting the stage for the introduction of new experiences over time. This has the effect of expanding our market opportunity to encompass resident spending. In keeping with our focus on helping people create better spaces to live, work, and visit, you can expect to see a suite of services and experiences sold directly to the residents of Latch buildings as we believe we can make their entire rental experience easier and more efficient. And we can do all this via the incredible engagement we get for free via our own app. That's the power of the integrated full building experience LatchOS delivers. Our average building customer today installs Latch and partner devices across the whole building, pays Latch between $7 and $12 per apartment per month for the features that they need, and then onboard their staff and residents. Our building customers sign a LatchOS software contract to provide the capabilities that they need at their building, and such contracts have an average length of more than six years. After only a few years in the market, Latch consistently delivers strong sales and growth as we continue to drive ever broader market adoption of our products. In fact, more than one in 10 new apartments in the US are now built with Latch. In addition, seven of the 10 National Multifamily Housing Council top developers are currently Latch customers. There is compelling opportunity for further growth supported by four important pillars. First, the market for an apartment building operating system is massive. Second, LatchOS is defining the full building operating system category. Third, there is significant white space for rapid growth. And fourth, since our inception in 2014, we have demonstrated strong customer traction and unit economics, which Garth, our CFO, will discuss shortly. Starting with the massive market opportunity, there are an estimated 47 million rental homes in the United States alone, which last conserved through our LatchOS ecosystem. U.S. residential rental owners and operators alone represent an approximately $54 billion total annual market for the previously described LATCHOS modules. In Europe, there are an estimated 93 million apartments, which add an incremental $90 billion annual market opportunity. That's a total addressable market of $144 billion. In May, we announced the expansion of LatchOS, our full building operating SaaS platform, into the commercial office space with the launch of LatchOS for commercial office and Latch Visitor Express, two products specifically tailored to commercial office buildings, which will further the company's addressable market. We define the full building operating system category. Our LatchOS software platform combines our own devices, partner devices, and services to create a complete system for each building and stakeholder. To get started, building owners and operators choose the LatchOS capabilities that they need, select the devices they'd like to install at their building, and we handle the rest. It's taken us seven years to develop this ecosystem, and we're excited by the capabilities that we provide to our customers, residents, and service providers. The way we sell our products is also unique, as we have direct relationships with our customers and become, essentially, the trusted technology advisor for many of our customers. While traditionally it has taken a number of disparate, largely disconnected vendors to replicate the capabilities of LashOS, we're able to consolidate all those capabilities into a single system. Our product roadmap is directly informed by this collaboration with our customers as we evolve to meet their needs and provide a singular experience that makes life better for everyone at a building. With an installation timeline that can range from 6 to 18 months, depending on the construction schedule, we typically improve our products and add new features between the time of the initial sale and the time of install. Just like a smartphone or a smart car, we believe our products will only improve as time goes on, as our software updates keep adapting to our customers' needs throughout their multi-year software contracts. Building owners and operators buy LatchOS because it helps drive net operating income through increased revenue and reduced expenses. We estimate that building owners and operators using the LatchOS system may see revenue increases of up to $200 to $500 per apartment per year due to premium positioning, lower turnover, faster leasing times, increased rent, fees, and other ancillary monetization opportunities. Moreover, we estimate that building owners and operators using the LATCH OS system makes the operational expenses reduced by up to $100 to $300 per apartment per year due to decreasing lockout incident responses and increasing efficiencies in resident onboarding and offboarding, delivery management, and more. And LATCH has significant white space for rapid growth. and we'll be strategic about how we approach these new opportunities. As we look to the near term for Latch, there are several key growth drivers in North America. We are focused on growing the number of units on our LatchOS platform by increasing sales with new customers and expanding within our existing customer portfolios. We're also determined to expand average revenue per home unit by adding and expanding our LatchOS modules for enterprise customers and capturing additional digital services spending from residents. One of the key benefits of going public is that it's given us the resources to expand into new markets and verticals faster. Our partnership with Fishman Spire will be essential in our announced expansion into the commercial office market, and we're excited to work with other existing customers and partners to expand our business into Europe as well. So to close out, I'd like to walk through some exciting product updates. The last C2, the company's new smart access device launched during the quarter, booked over 20,000 units in sales and was a contributing driver of Total Booking's outperformance. The Latch C2 is competitively positioned to address the retrofit market due to its low cost, long battery life, and limited infrastructure needs. Latch deployed NFC unlock functionality on Android across its product portfolio, building on the company's industry-leading variety of unlock options. This initiative served to amplify the value of Latch's full technology stack of hardware, firmware, and software, adding new features that contribute immediate value to both building owners and residents while simultaneously deepening technology integrations with Google. Latch deepened its status as a trusted technology partner with Avalon Bay by developing a self-service touring experience that allows prospective residents to visit Conso Twinbrook, its newest development concept, in a safe, contactless manner. In May, Latch announced the expansion of its full-building enterprise SaaS platform into the commercial office space with the launch of LatchOS for commercial office, Latch Visitor Express, and LatchID, three product offerings specifically tailored to commercial office buildings, which should greatly expand the company's addressable markets. Latch has always been a product company, and we're committed more than ever to continuing to deliver for each stakeholder in our ecosystem. We have a strong foundation of products and services, deep customer relationships, and a team that is dedicated to pushing the Latch experience forward in every way that we can. As we continue to add to the depth and breadth of LatchOS, continue to innovate with new products, and continue expanding to new markets, Latch's next chapter is going to be something really special. We hope you'll follow our journey. With that, let me turn it over to the call to Garth Mitchell, our CFO. Garth?