Latch, Inc.

Hello, thank you for standing by and welcome to last second quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Sean Hannon, Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon and thank you for joining us today to review Latch's second 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 remarks, we will open up the call for a 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 other 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 reconciliation of these measures to the most directly comparable GAAP financial measure. With that, I'd like to turn the call over to Chief Executive Officer Luke Schoenfelder. Luke?

Thanks so much, Sean. And I'd like to start by thanking all of you for joining us today on our second earnings call as a public company. Latch began trading as LTCH on NASDAQ on June 7th and we're very grateful to our longstanding and new stockholders, employees, customers, and partners for making this possible. We're also very excited to share our results for the second quarter. In Q2, our total bookings grew substantially by 102% year-over-year to 95.8 million, an acceleration from 89% growth in Q1. Our attach rates of non-access LatchOS software modules increased again from 81% just a quarter ago in Q1 to 90% in Q2, which gives us continued confidence that our robust 2021 product roadmap and release schedule will drive high adoption and sustain the lifetime value expansion. Despite unprecedented supply chain constraints and construction delays due to labor and material shortages, we continue delivering for our customers, growing our revenue in Q2 by 227% year-over-year, up to 9 million, a sharp acceleration from 143% year-over-year growth in Q1. Garth, our CFO, will talk in a few moments to Q2 results in detail. As this is only our second earnings call, we'd also like to take a moment to remind everyone about who we are, what we do, our value proposition, market opportunity, and business model. I am one of the co-founders of Latch, and beginning in 2014, we embarked on our journey to make buildings better spaces to live, work, and visit, creating a product company focused on the biggest challenges that we saw in the market. From the beginning, we recognized a powerful opportunity to transform the world's oldest subscription product, renting a space. and the world's largest asset class, real estate. Our flagship product, LatchOS, provides real estate operators, residents, and service providers the capabilities they need to solve the problems they face every day in their spaces. And we provide tailored solutions through our LatchOS modules, smart access, delivery and guest management, smart home, connectivity, and personalization and services. Our average building customer installs Latch and partner devices across new and existing buildings in their portfolio, and then pays Latch between $7 and $12 per apartment per month for the software features that they need. And this range is expected to continue to increase as we solve more customer problems with future products. Typically, our customers prepay for the LatchOS software contract for a period greater than six years, which benefits them in their ability to capitalize the expense while also benefiting us with powerful cash generation. And once installed, Latch app users interact with our app an average of 4.6 times per day. This engagement is something we're super proud of, and we're excited to continue to expand the availability of LatchOS to more users and deepen engagement with each stakeholder that interacts with our products. As we look forward, we want to highlight some of the growth pillars that make us most excited. First, the market for an apartment building operating system is massive, with an estimated 47 million rental homes in the U.S. alone, representing a $54 billion TAM, while Europe adds another $90 billion TAM. Second, LatchOS is defining the full building operating system category by continuing to develop innovative products that are constantly improving and evolving. Our products both enhance revenue generation for our customers as well as reduce their operating expenses, and our robust and modular system architecture also allows us to rapidly innovate on the platform, ensuring that the value that LatchOS delivers to its customers will grow and can adapt to customer needs more rapidly than other products in the market. And third, LatchOS is integrated with the best partners in the market, including Google Nest, Apple, Ecobee, Yardi, Entrata, RealPage, and more. Our focus on the highest levels of user experience, data security, and user privacy provides us the opportunity to partner with the highest quality companies and products, all while pushing our total ecosystem forward. Fourth, this robust platform approach allows us to deliver new products and features to take advantage of the rapidly growing and evolving markets. Because of the strong foundation that LatchOS provides, we can expand deeper into existing customer portfolios with new and existing features, as well as expand into adjacent markets, such as the commercial office market space, which we're entering starting with our pilot deployment sites that include the Empire State Building, Rockefeller Center, and Brookfield Place. And fifth, since our inception in 2014, we've had incredibly strong customer traction, demonstrated by our zero churn rate and high lifetime customer value. both of which were further exemplified in our second quarter financial results, again, which Garth will discuss in more detail shortly. And now, I'd like to turn to a few exciting product and marketing updates, specifically from Q2, that we believe demonstrate our commitment to serving our customers with an ever-evolving set of products and experiences, all while enhancing our broader ecosystem and driving long-term growth. In Q2, we expanded our property management software integrations, adding both Yardi and Entrada to LatchOS. This follows our previous integration of RealPage, resulting in LATOS now integrating with the three largest EPMS providers in the United States. With LATOS's growing roster of EPMS integrations, property managers can save, on average, over four hours of their time for every 100 residents, yielding ongoing net operating income savings for our customers across asset classes and markets. In Q2, we also officially launched our strategic direct sales and deployment efforts, which allow us to provide a unified experience and a single point of contact for customers across fulfillment, installation, support coordination, and third-party vendors. Besides a critically improved customer experience for our key and enterprise accounts, direct sales will drive long-term improvements to hardware and software margins and give us more direct control over the customer relationship for renewals and upsells of existing and future products. This quarter, in addition to other deployments, we took our first full building live successfully with Avalon Bay through this new direct deployment model. We also hired Justina Amakwa as our chief marketing officer, furthering our investment in the expansion of our enterprise customer base and the ways we serve the personalized needs of individual users on our platform. Justina's marketing career has included experience at some of the world's most powerful brands, and her recent roles include Senior Vice President of Brand Marketing at Endeavor and Global Head of Content and Lifestyle Strategy at Apple. Reflecting on our second quarter results, the first theme is that our strong and expanding product offering is driving a very powerful bookings engine that exceeded even our internal expectations for the quarter. Bookings growth specifically accelerated in Q2 to the 102% year-over-year growth I stated earlier, which is a powerful testament to increased product category adoption, demand from our customers, and accelerating sales velocity. Let me take a moment to illustrate our momentum with a couple of Q2 vignettes that reflect how we go to market and how customers find value working with Latch. In Q2, we welcomed another one of the largest owners of apartment buildings in the United States as a new customer with a direct deployment deal including LatchOS Smart Access and Smart Home modules. This customer chose Latch due to LatchOS's high uptime relative to another vendor it had been using. Our industry-leading engagement levels, our automation benefits for their property management teams, and our deep integrations with ePMS platforms. We also signed our second deal with a preeminent Chicago developer for the remainder of their residential portfolio. This customer had already installed Latch in one retrofit and one new building in their portfolio and is currently completing a third building with Latch as we speak. Now, having experienced firsthand the functionality, reliability, and customer demand for Latch, this customer has come back and now signed up the remainder of their portfolio with Latch. We're excited to continue to build out our relationship with this customer with new deployments and products to come. We're also very excited to welcome a large mixed-income housing developer who focuses on the acquisition, redevelopment, and management of affordable housing projects in the Northeast. This customer was initially looking for just a smart access product to reduce their operating expenses, and they chose Latch based on positive feedback regarding tenant experience, functionality, and operating cost reduction from other reputable players in the industry. Now, they've signed up a mix of retrofit and new projects with a variety of LatchOS modules, including smart access, smart home, and latch delivery assistance. Beyond just these examples, the second theme is our durable and sustainable revenue growth, driven by, again, that strong bookings engine. We experienced significant revenue acceleration to 227% year-over-year growth in the second quarter. We delivered this strong growth without an increase in ramp sales capacity and while dealing with the direct and indirect effects of global supply chain shortages and construction delays that are emerging as a result of the global pandemic. We're particularly proud of our engineering and supply chain teams, as these teams have continued to deliver our products and serve our customers despite the direct headwinds caused by these challenges. We're also proud of our direct deployment teams, who despite significant indirect construction material and labor shortages, delivered in Q2, working hand-in-hand with our customers to ensure that they got as many of their spaces up and running with LatchOS as possible. Setting aside our strong Q2 performance, the most powerful driver of our business remains the secular shift towards technology in the real estate industry, which has been woefully underserved by technology companies and which we believe has never been served by a product company approach like ours. A lack of focused innovation for real estate has led to exceptionally low technology penetration rates in what is the world's largest asset class. This historic underutilization of technology is a long-term driver of our business, and we remain steadfast in our focus on delivering the product and experiences our customers and their tenants deserve right now and going forward, layering in richer and more valuable experiences in every space where we operate. I've never been more excited about what we're going to continue to deliver to the market. With that, let me turn the call over to Garth Mitchell, Latch's CFO. Garth.