SmartRent, Inc.

Please stand by. We're about to begin. Good afternoon, ladies and gentlemen. Welcome to the SmartRent first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad, and if you would like to withdraw your question, simply press star 1 again. And now at this time, I would like to turn the call over to Annalise Lassiter, Vice President of Investor Relations. Please go ahead, Ms. Lassiter.

Thank you, Operator. Hello, everyone, and thank you for joining us today. My name is Annalise Lassiter, Vice President of Investor Relations for SmartRent. I'm joined today by Lucas Haldeman, Chairman and CEO, and Hiroshi Okamoto, Chief Financial Officer. They will be taking you through our results for the first quarter of 2023, as well as discussing guidance for the second quarter and full year 2023. After today's market close, we issued an earnings release and filed our 10Q for the three months ended March 31st, 2023, both of which are available on the investor relations section of our website, smartrent.com. Before I turn the call over to Lucas, I would like to remind everyone that the discussion today may contain 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 our quarterly report on Form 10-Q. We undertake no obligation to provide updates with regard to the forward-looking statements made during this call. and we recommend that all investors review these reports thoroughly before taking a financial position in Smart Rent. 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 first quarter earnings deck is available on the Investor Relations section of our website. And with that, let me turn the call over to Lucas to review our results.

Good afternoon, and thank you for joining our call. I am pleased to report we had an exceptionally strong first quarter. We grew top-line revenue by 74% and improved adjusted EBITDA by 63% compared to Q1 of 2022. Total revenue was a record $65 million for Q1, and adjusted EBITDA was negative $8.5 million. This marks our fourth consecutive quarter of improved adjusted EBITDA, driven by a combination of higher gross margin and tight controls on operating expenses. We generated over $9 million in gross profit as gross margin improved to 14% compared to negative 13% in Q1 of 22. Professional services in particular improved significantly quarter over quarter by 43 percentage points from negative 81% to negative 38% due to better labor utilization rates, steady deployment volumes, and new initiatives, including the adoption of new technology tools and enhancements. While each quarter is impacted by the mix of customers and products sold during the quarter, and growth will not be linear, we expect to see continued improvement in margins. We are the leading edge provider in our industry, with over 600,000 units deployed, more than all of our competitors combined. consolidation in the industry has led to a more favorable competitive environment, giving us the opportunity to focus this year on optimizing our solutions and managing expenses while meaningfully growing revenue year over year. We believe we can be profitable and grow, ultimately preserving our capital for the future when we are ready to deploy it on further innovation and potential growth opportunities. The ROI our platform delivers to customers provides an ongoing incentive to roll out our solutions as property owners seek to optimize business operations and maintain profits in a more challenging macro environment. We are confident about our business plan and have multiple levers that we can pull to reach profitability. Our business is evolving to a more diverse platform. Beyond our smart home solutions, our core product set has expanded to include multiple new SaaS solutions geared to efficiently managing property operations. As we welcome new clients to SmartRent, we sell a full suite of products, both hardware and software, working seamlessly together that solve the challenges operators face while at the same time making residents' lives easier. Importantly, the untapped potential within our current customer base is significant and represents over 6 million units of opportunity, and we believe our customers are committed for the long term. We have completed several multi-year, full portfolio rollouts with institutional clients, and our pipeline is dense with revenue opportunities within our current customer base. Additionally, we have significant upsell and cross-sell opportunities. Our earliest enterprise customers who installed our smart home package are now ready for self-guided tours, a high-margin product that represents pure SaaS growth when paired with SmartRent's IoT platform. We're also starting to realize more revenue in cross-selling work management and answer automation to our existing customers, two additional pure SaaS solutions that facilitate smoother property operations for site teams. To realize the potential with our existing customer base, we made a strategic decision to bolster our account management function. This team is fully dedicated to building relationships with clients in order to upsell and cross-sell our platform, and they participate in our incentive compensation program. We are highly motivated to stay close to our customers in order to grow revenue, and this also helps to inform our product and innovation plans and maintain our industry-leading position. As you are likely aware, SmartRoom is both a SaaS company and a hardware company. The powerful combination of our hardware and software products is what has allowed us to scale, and we view hardware manufacturing as a fundamental aspect of our business model. The hardware we develop from the ground up is intentionally designed to augment our SaaS offerings and provide enhanced value for our customers and their residents. By manufacturing hardware, we pick up additional margin compared to what we would realize as a reseller of third-party hardware. have full control of components we rely on from suppliers, are able to integrate with our clients' existing property management systems, and can conduct more efficient and reliable installations, which we manage with both in-house staff and external partners. For example, last month we began to roll out our patent-pending next-generation hub from our hardware brand, Alloy Smart Home. The new hub has a better hardware margin due to optimization in our design and functionality and lower tariff rates. It's also easier to install, saving us time and money, and we believe it will improve professional services margin in the long run. Additionally, we're developing a channel partner program, which will give us a much greater ability to expand our influence with SMV prospects in the long tail. Channel partners have traditionally been focused on other verticals within the commercial real estate industry, such as office and retail. The macroeconomic shift creates a strong business case for channel partner expansion in the multifamily. And because we are the only provider of smart home and property operations solutions at scale, we're an attractive partner for companies looking to diversify revenue. While this is an appealing vertical to pursue, this will require time to build the infrastructure needed to support the effort. It's also important to note that the majority of channel partner business is new construction, which means a longer sales cycle. We anticipate this to be a meaningful contributor to revenue in 2024. Before I turn the call over to Hiroshi, I'm pleased to share that later this year we are going to market with an expanded community Wi-Fi solution. Community Wi-Fi is an essential amenity for residents, and with our solution, we believe owners and operators can realize significant revenue in the range of $30 to $50 in NOI per month per unit. The evolution of our Community Wi-Fi offering is a great example of how our relationships with our customers inform our product roadmap. There is significant demand in the industry for this solution from owners, operators, and residents, and we have already completed multiple site walks with customers interested in adding this amenity. The reason we believe our customers will choose Smart Rents Community Wi-Fi is because it is tailor-made for the multifamily space, integrating seamlessly with property management systems and installed by our nationwide White Glove service team. I will now turn the call over to Hiroshi to review the financials in more detail.