SmartRent, Inc.

Good evening, everyone. Thank you for joining us to discuss Smart Rents results for the quarter end of June 30th, 2021. Joining me on the conference call today are Smart Rents Chief Executive Officer Lucas Haldeman and John Walter, Smart Rents Chief Financial Officer. I would like to begin by reminding everyone that the discussion today may contain forward-looking statements, including with regard to the company's future performance and prospects. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual outcomes or results to differ materially from those indicated by any such statements. We describe some of these risks and uncertainties in the sections entitled Risk Factors in the final proxy statement filed with the SEC on August 6th, pursuant to Rule 424B3 in connection with our recent business combination. A copy of the final proxy statement is available on the SEC's website at sec.gov. Smart rent undertakes no obligation to update or publicly revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In today's remarks, we will also refer to certain non-GAAP financial measures. Reconciliation of these non-GAAP substantial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings release, which can be found on the investor relations section of our website. I will now turn the call over to Lucas to review our results. Lucas?

Thank you, Evelyn. Welcome, everyone, to Smart Rent's first earning call as a public company. We are very excited to have completed our business combination with 5thWall. Our merger, which closed just last week, provided us with approximately $450 million of cash to accelerate our growth strategy, including the pursuit of strategic acquisitions that will complement our organic growth engine and expand our reach as a category leader in the enterprise smart home solutions industry. Before we continue, I want to acknowledge and thank our partners, including Fifth Wall, our directors, and our preexisting and new shareholders for their support and capital. We are excited about our prospects and look forward to sharing our growth story with you. Before discussing our results, I wanted to provide an overview of our company strategy and business model. I will also be sharing some recent business developments as well as our progress on some key performance metrics. John Wolter, our Chief Financial Officer, will then discuss our financial results in more detail. SmartRent was founded in 2017 in response to our experience as both technologists and frustrated real estate operators. As a former chief technology officer of Colony Starwood Homes, now part of Invitation Homes, my team and I saw firsthand that there was a void of integrated, technology-driven solutions that could address and solve operational challenges for real estate owners. Our owner-operator background influenced our decision to develop and design a fully integrated, hardware-agnostic smart home software platform. SmartRent's IoT operating system enables property owners, operators, and developers to decrease the complexities of property management, lower costs, mitigate risk, and increase revenue, all while helping them achieve their sustainability goals. We provide solutions that not only enhance economic value for our customers, but also elevate the resident or user experience. SmartRent has over 211,000 residential units installed across the country, which we believe to be more than all of our enterprise smart home competitors combined. We have pursued a land and expand strategy focused on penetrating the portfolios of the largest institutional residential property owners and managers to accelerate our scale and market share. In fact, 15 of the 20 largest residential owners, as ranked by National Multihousing Council, are SmartRent customers. Further, many of our largest customers also became investors in our company after implementing our smart home platform. In addition to multifamily residential owners, our customers include some of the leading home builders, single-family rental owners, and iBuyers in the United States. We believe that we are the preferred partner to large institutional landlords because our comprehensive service offers to make the entire apartment community smart. Our open architecture approach provides customized solutions that can be delivered via Wi-Fi, cellular data, or Bluetooth as required by our customers. Our flexible approach maximizes our total addressable market since we can deploy our systems to both retrofit and new construction. Today, retrofit comprises greater than 90% of our revenue and provides us with a shorter lead time for booking to revenue generation as compared to new build. Our emphasis on the retrofit market is a key differentiator in the industry and mitigates revenue disruption related to macroeconomic risk factors that can impact the delivery of new builds, such as dislocation in the financial markets, rising interest rates, labor shortages, and construction delays. Our value proposition is attractive to all owner-operators, from Class A new construction to workforce housing, as our product offering helps increase revenue reduce operating costs, and expand operating margins for our customers, which in turn increases the value of their properties and their portfolios. We also offer predictive tools to help avoid material damage and unplanned capital expense. Our robust range of products and solutions can all be managed from one interface and include smart device options for apartments and homes, access control for buildings, common areas, rental units, asset protection and monitoring, parking management, self-guided tours, and community and resident Wi-Fi. With a key focus on data security and strict user privacy, our systems generate actionable data that allows property owners and managers to make informed decisions and impact property performance and resident satisfaction. In addition, our smart home operating platform enhances our customers' ability to measure, monitor, and reduce energy consumption, which has a direct and positive contribution to our customers' sustainability initiatives. Our go-to-market strategy is another key point of differentiation. Customer connectivity and best-in-class service is crucial to our success. We have a professional services team of approximately 200 employees deployed in 31 states across the country. We use a direct sales approach and deploy in-house teams to manage installations and training. Upon completion, our installations are backed by an award-winning customer support team that is available 24 hours a day, seven days a week, 365 days a year to both our customers and their residents. The multitude of customer touchpoints throughout the planning and installation process and our culture of accountability ensure strong customer satisfaction. We are focused on constantly innovating and enhancing our service offering with the goal of remaining the enterprise smart home technology partner of choice. Adoption of our smart home platform is an additive capital investment for property owners and managers with subscription agreements typically ranging from five to seven years. This makes our customer base sticky and provides visibility into our revenue stream. We have a growing base of predictable recurring revenue through our pipeline of committed units. Remarkably, we have not experienced any customer churn, meaning that no customer has removed and installed Smart Hub, and we believe we have an opportunity to generate up to $1.8 billion in annual revenue over time from our existing customer base alone. The record revenue we generated in the second quarter is indicative of our current customer satisfaction and continued strong demand for our operating system from new clients. Our growing customer base, which collectively control approximately 3.5 million units in our combined portfolios, has given us the confidence to invest in scaling our workforce. We're attracting highly talented professionals from Apple, Google, Amazon, and Comcast. In many cases, experienced software engineers, sales representatives, and field technicians are seeking out SmartRent as a potential employer. We have the personnel required to deliver planned units throughout the remainder of the year, and our ability to attract top talent remains critical as we continue to appropriately staff to meet our growing demand. We recently launched several new complementary products. Among them is Alloy Access Solo, a single-door access control solution that can be retrofitted on nearly any door or perimeter gate using Wi-Fi or cellular connectivity. We also launched Smart Intercom, our proprietary in-house intercom offering that can be installed on any building entry point, such as lobby doors or perimeter gates. Smart Intercom provides smart rent-enabled properties an additional layer of security and accessibility to the broader apartment community. Earlier this year, we also deployed our complimentary alloy parking solution, which helps keep properties safe by limiting unauthorized parking and allowing residents to readily access their designated parking spaces. These launches demonstrate our commitment to providing relevant and timely solutions for our customers that can also encourage the adoption of more of our services. Our go-to-market strategy of creating beachheads with larger owner-operators and leveraging their portfolios to grow our business is working well. SmartRent is fast becoming the industry standard solution. Our organic growth from existing customers as they roll out smart rent solutions across their portfolios and their influence or impact is instrumental to accelerate our penetration of the next tier of landlords and residential and facilitating our penetration of other real estate asset classes like student housing. We're making progress in building out the team. In the second quarter, we entered into agreements with 21 new customers that collectively represent ownership of approximately 539,000 units. Year-to-date, we've added 40 new customers, bringing our total number of customers to 182. For the second quarter, our committed units grew to over 606,000. As a reminder, we define committed units as the aggregate number of smart hub units that are subject to binding purchase orders from customers, together with units that existing customers who are parties to a smart rent master services agreement have informed us on a non-binding basis that they intend to order in the future for deployment within the next two years. Total booked units, which represent the aggregate number of smart hubs associated with binding orders executed during the period, increased 302% over the prior year period to 38,000. Units deployed, which represents the aggregate number of smart hubs installed, including customer self-installations in the second quarter, rose 243% over last year to approximately 24,000. As previously communicated on our first quarter call, units deployed were down on a sequential quarter basis from 32,000 in the first quarter, reflecting previously disclosed delays related to supply chain bottlenecks. While we believe we have addressed these supply chain issues, we continue to operate in a very fluid environment. Units deployed year-to-date increased to approximately 56,000, up 126% over the same period last year. This level of deployments is in line with our expectations, and we remain on track to achieve our 161,000 deployed unit forecast for 2021. Our aggregate number of units deployed as of June 30th, 2021 was 211,425, up 119% from the prior year. With our business combination now complete, we're looking forward to accelerating our units deployed for the remainder of the year, and are actively pursuing strategic acquisitions that will further enhance our comprehensive and differentiated product offering. We're extremely excited about what lies ahead for SmartRent. We believe we are very well positioned to create value for our customers and our shareholders in the months and years ahead. With that, I will now turn the call over to John to review our financial results. John?

Thanks, Lucas. I am pleased to share our progress with you this evening. and I'm particularly pleased with our results for the second quarter. Smart rent increased total revenue for the second quarter to $21.7 million and year-to-date to $40.8 million, representing a growth of 274% and 83%, respectively. This revenue growth was driven by the increase in the volume of installations of our smart home hardware devices and the 159% improvement in annual recurring revenue for the quarter. Total deferred revenue, which reflects the growth in our business and provides visibility into our future revenue, was approximately $74.5 million at the end of the second quarter, growing from $64 million at the end of the first quarter and by 133% from $31.9 million a year ago. As of June 30, 2021, we expect to recognize 47% of total deferred revenue within the next 12 months, 28% of total deferred revenue between 13 and 36 months, and 24% between 37 and 60 months. Deferred revenue expected to be recognized beyond five years is immaterial. Annual recurring revenue, or ARR, which we define as the annualized value of our recurring SAS revenue earned in the current quarter, was $7 million for the second quarter of 2021, up 31% on a sequential basis, and up 159% compared to the second quarter of last year. It is important to note that our ARR does not contemplate revenue that could be attributed to committed units, which represents additional upside. Operating expenses in the quarter totaled $10.3 million, 29% from $8 million in the prior year period, reflecting expenses related to the expansion of our sales, marketing, and R&D teams as we position the company for continued growth. Additionally, and although not included in the operating expenses, we have expanded our field installation, quality assurance, and customer care teams to support our current and anticipated growth and to execute on the conversion of our total units booked into deployed units that will generate additional recurring revenue. The company continues to invest for growth and has increased total headcount by approximately 93 percent since the end of June 2020 and by approximately 36 percent since the end of March 2021. Adjusted EBITDA was a $9.3 million loss in the second quarter driven by previously communicated lower deployments as a result of supply chain delays and increased operating expenses largely related to new hires to support our anticipated growth. Net loss for the second quarter was $10.1 million as compared to a net loss of $10.4 million in the same period a year ago. With respect to our outlook, we are seeing continued momentum in our business in the third quarter to date, and we believe we are on track to achieve our total revenue forecast for 2021 of $119 million. and approximately 161,000 units deployed. We continue to believe that we will achieve EBITDA-positive operations by the end of 2022. SmartRent is well positioned to continue to expand its market position and now has the capital to further strengthen and enhance its breadth of product offerings through select strategic acquisition opportunities. We believe we have the go-to solution for IoT as it relates to real estate and look forward to keeping you apprised of our progress as we move ahead. We will now open the call for questions. Operator, please go ahead.