SmartRent, Inc.

Good afternoon and welcome to the Smart Rent second quarter 2023 earnings call. Please note that this call is being recorded. All lines have been placed on listen-only mode at this time. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, again, press star one. I would now like to turn today's call over to Brian Ruttenberg, Senior Vice President of Investor Relations. Please go ahead.

Hello, and thank you for joining us today. My name is Brian Ruttenberg, Senior 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 second quarter of 2023, as well as discussing guidance for the second half of the year. Before today's market open, we issued an earnings release and filed our 10-Q for the three months ended June 30th, 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'd like to remind everybody that the discussion today may contain forward-looking statements that involve risk 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 SmartRent. Also, during today's call, we will refer to certain non-GAAP financial measures. A discussion of these non-GAAP financial measures, along with the reconciliation to the most directly comparable GAAP measure, is included in today's earnings release. We would also like to highlight that the second quarter earnings deck is available on the investor relations section of the website. And with that, let me turn the call over to Lucas to review our results.

Good morning. Thank you for joining our call. I am pleased to report we had another strong quarter with both revenue and adjusted EBITDA within our guidance range. We grew total revenue by 26% year-over-year to more than 53 million, and we improved adjusted EBITDA to negative 6 million, an increase of over 2 million sequentially from Q1 and more than 13 million from Q2 of 2022. This marks the fifth consecutive quarter of improved adjusted EBITDA, primarily driven by a combination of higher gross margin and tight controls on operating expenses. In the second quarter of 2023, we saw notable improvement of our gross margin to more than 18% versus 2% last year, as both hardware and hosted services gross margin hit record highs in the period. As expected, professional services gross margin decreased compared to last year. While each quarter is impacted by the mix and timing of deployments, we anticipate improvement in professional services gross margin as well as our total gross margin in the second half of 2023. Our operating margin continues to expand as we control overhead expenses and drive toward profitability. We are reiterating our goal of achieving adjusted EBITDA breakeven by year end and cash flow breakeven within the following six months. I'd like to turn now to new announcements and product developments for the quarter. Today we shared that we have a new agreement with ADI Global Distribution to serve as our preferred distribution partner. This agreement strengthens our competitive position, providing enhanced flexibility and ability to scale without impacting our working capital. Additionally, it enables us to convert fixed costs into variable costs while also reducing the financial exposure we have in months with lower volume deployments. If you refer to slide 8 of our quarterly investor presentation, we provide a brief overview of our arrangement, which will provide us with needed hardware on demand while reducing our cash investment and inventory. At the end of Q2 2023, we had over $60 million in inventory, and as a result of this agreement, we expect our cash to increase as we transfer a large portion of our existing inventory to ADI. Our customers will continue to receive products in a timely manner while we remain focused on the innovation and product enhancements that keep us at the forefront of our industry. Last week, we announced a preferred resale agreement with Position Imaging, the leading provider of smart package room solutions. Smart package rooms complement and expand our offerings and address a major pain point for rental housing operators. Using patented technology, the Smart Package Room solution guides couriers through a login process that automatically directs residents to their packages. This solution relieves on-site associates from the time-consuming process of package storage and distribution. Smart Package Room is enhanced by our existing products like Alloy Access and Work Management and solves many of the industry's long-standing package management issues while modernizing the renter experience. During the quarter, we publicly announced the rollout of our community Wi-Fi solution, which we discussed on our last call. SmartRent's community Wi-Fi is different from traditional internet service providers because it integrates seamlessly with property management systems, creates a secure community-wide private network, delivers immediate connectivity to residents through our SmartRent resident app, and provides an additional revenue stream to our customers, all while delivering an enhanced resident experience. Given the many benefits, we view community Wi-Fi as a large addressable market opportunity for our company. On slide nine of the presentation, we provide an example of anticipated community Wi-Fi economics based on the deployment of a 200-unit apartment community. We have robust demand for our solution, and a large percentage of our customers are looking to incorporate our offering. Community Wi-Fi is complex and has long lead deployment time, and we expect to see revenue contribution beginning in 2024 with more significant revenue traction in 2025. The relationships we've built and the insights we gain from our clients are invaluable in informing our strategic areas of focus and product roadmap. The offerings we discussed today, Community Wi-Fi and Smart Package Room, solve for pain points and needs that our clients share with us. I'd also like to provide an update on our channel partner program that we launched last quarter. This program gives us greater ability to expand our influence with small and mid-sized business prospects in the long tail, which we view as a critical revenue driver. Our channel partner network has grown, and we have onboarded and trained partners in 41 states who are actively bringing new opportunities to SmartRent. We are pleased with the groundwork we are laying in 2023 to make this a meaningful revenue vertical in 2024. I will now turn the call over to Hiroshi to review the financials in more detail.