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What changed in SmartRent, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SmartRent, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+483 added−403 removedSource: 10-K (2024-03-05) vs 10-K (2023-03-08)

Top changes in SmartRent, Inc.'s 2023 10-K

483 paragraphs added · 403 removed · 336 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

63 edited+22 added−14 removed32 unchanged
Biggest changeGovernment Regulation We and our partners are subject to various federal, state, and local regulations related to access control products, such as state and local building and fire codes, the Americans with Disabilities Act of 1990, as amended, and requirements for certifications by Underwriters Laboratories, a global independent safety science company, and the Federal Communications Commission.
Biggest changeGovernment Regulation We and our partners are subject to various federal, state, and local regulations related to access control products, such as state and local building and fire codes, the Americans with Disabilities Act of 1990, as amended, and requirements for certifications by Underwriters Laboratories, a global independent safety science company, and the Federal Communications Commission. 8 We, our customers, and our partners may be subject to numerous federal and state laws and regulations, including data breach notification laws, data privacy and security laws, and consumer protection laws and regulations (including Section 5 of the Federal Trade Commission Act of 1914 (the "FTC Act") that govern the collection, use, disclosure, and protection of personal information).
We believe SmartRent is the category leader in the enterprise smart home solutions industry. We define Units Deployed as the aggregate number of Hub Devices that have been installed (including customer self-installations) as of a stated measurement date.
We believe SmartRent is a category leader in the enterprise smart home solutions industry. We define Units Deployed as the aggregate number of Hub Devices that have been installed (including customer self-installations) as of a stated measurement date.
Work Management provides real-time tracking of assets, enabling owners to effectively manage the state of their assets and make informed decisions by giving on-site teams an easy way to scan assets and make updates from anywhere in the community. Advanced reporting capabilities allow for filtering and easy exporting of data into third-party tools for deeper analysis.
Work Management provides real-time tracking of assets, enabling owners to effectively manage the state of their assets and make informed decisions by giving on-site teams an easy way to scan assets and make updates from anywhere in the community. Advanced reporting capabilities allow for filtering and exporting of data into third-party tools for deeper analysis.
Other regulations that may apply to us, for example, depending upon the circumstances, include the General Data Protection Regulation (GDPR) in the European Union, Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA), and the Tenant Data Privacy Act (TPDA) in New York. 6 Corporate History We were originally incorporated in Delaware on November 23, 2020 as Fifth Wall Acquisition Corp.
Other regulations that may apply to us, for example, depending upon the circumstances, include the General Data Protection Regulation (GDPR) in the European Union, Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA), and the Tenant Data Privacy Act (TPDA) in New York. Corporate History We were originally incorporated in Delaware on November 23, 2020 as Fifth Wall Acquisition Corp.
We believe our primary competitors are other software companies, which have historically provided singular, point solutions to new development properties and used third-party installation services, and hardware companies, many of which have closed architectures. We believe these companies fail to provide a comprehensive solution that meets the enterprise management and security requirements of owners, operators, and residents.
We believe our primary competitors are software companies, which have historically provided singular, point solutions to new development properties and used third-party installation services, and hardware companies, many of which have closed architectures. We believe these companies fail to provide a comprehensive solution that meets the enterprise management and security requirements of owners, operators, and residents.
We protect our intellectual property rights through a combination of trademarks, trade dress, domain name registrations, and trade secrets, as well as through contractual restrictions and reliance on federal, state, and common law. We enter into confidentiality and proprietary rights agreements with employees, consultants, contractors, and business partners, which include invention assignment provisions for our employees and contractors.
We protect our intellectual property rights through a combination of trademarks, trade dress, domain name registrations, trade secrets, and a patent, as well as through contractual restrictions and reliance on federal, state, and common law. We enter into confidentiality and proprietary rights agreements with employees, consultants, contractors, and business partners, which include invention assignment provisions for our employees and contractors.
SmartRent Manager is a proprietary, web-based software that owners and operators use to administer and configure community settings related to SmartRent solutions. SmartRent Manager software integrates with many popular property management, customer relationship management, and other third-party software products, which enables owners and operators to manage all resident, prospect, access, and other actionable data from one platform.
SmartRent Manager is a web-based software that owners and operators use to administer and configure community settings related to SmartRent solutions. SmartRent Manager software integrates with many popular property management, customer relationship management, and other third-party software products, which enables owners and operators to manage all resident, prospect, access, and other actionable data from one platform.
We believe that our customers realize several benefits from implementing our solutions, including: • Operating Efficiency. We estimate that our customers can recognize cost savings on utilities through the utilization of our solutions, including our connected smart thermostats, smart lights, and leak sensors, as well as through more efficient management of vacant rental units. • Incremental Revenue Generation.
We believe that our customers realize several benefits from implementing our solutions, including: • Operating Efficiency. We believe that our customers can recognize cost savings on utilities through the utilization of our solutions, including our connected smart thermostats, smart lights, and leak sensors, as well as through more efficient management of vacant rental units. • Incremental Revenue Generation.
We have an open architecture that can integrate with many property management systems, including, among others, Yardi, Entrata, RealPage, and Engrain. • Professional Services. We provide in-house professional services with employees in our implementation, installation, support, and warehouse departments, which allows us to maintain consistent quality and service across markets.
We have an open architecture that can integrate with many property management systems, including, among others, Yardi, Entrata, RealPage, and Engrain. • Professional Services. We provide in-house professional services with employees in our implementation, installation, and support departments which allows us to maintain consistent quality and service across markets.
Deeply integrated with major property management systems and SmartRent’s extensive product suite, Access Control automates labor-intensive manual processes to enhance operational efficiencies of common area access and community security.
Integrated with major property management systems and SmartRent’s extensive product suite, Access Control automates labor-intensive manual processes to enhance operational efficiencies of common area access and community security.
We estimate that owners and operators can decrease their leasing and re-leasing costs by streamlining the processes associated with touring, resident onboarding and offboarding, and customer servicing. For example, our self-guided-tour solution allows prospective residents to tour a property 24 hours a day, seven days a week, without assistance from property management staff.
We believe that owners and operators can decrease their leasing and re-leasing costs by streamlining the processes associated with touring, resident onboarding and offboarding, and customer servicing. For example, our self-guided-tour solution allows prospective residents to tour a property 24 hours a day, seven days a week, without assistance from property management staff.
In addition, we expect our solutions will help to eliminate or reduce rekeying and lockout expenses and other property management redundancies. • Asset Protection. We estimate that customers utilizing our asset protection solutions, including our connected leak sensors and thermostats, may be able to realize a decrease of approximately 70% to 90% in water damage expenses and lower insurance costs.
In addition, we expect our solutions will help to eliminate or reduce rekeying and lockout expenses and other property management redundancies. • Asset Protection. We believe that customers utilizing our asset protection solutions, including our connected leak sensors and thermostats, may be able to realize a decrease of approximately 70% to 90% in water damage expenses and lower insurance costs.
Where possible we utilize multiple sourcing methods to mitigate the risk of disruption from a single supplier. However, we also rely on a number of single source and limited source suppliers for components of our solution. Replacing any single source or limited source suppliers could require the expenditure of significant resources and time to source these products.
Where possible we utilize multiple sourcing methods to mitigate the risk of disruption from a single supplier. However, we also rely on a number of single source and limited source suppliers for components of our solutions. Replacing any single source or limited source suppliers could require the expenditure of significant resources and time to source these products.
As of December 31, 2022, we have not experienced any work stoppages and consider our relationship with our employees to be in good standing. None of our domestic or international employees are subject to a collective bargaining agreement or represented by a labor union.
As of December 31, 2023, we have not experienced any work stoppages and consider our relationship with our employees to be in good standing. None of our domestic or international employees are subject to a collective bargaining agreement or represented by a labor union.
We use an open-architecture, brand-agnostic approach that allows owners, operators, and residents to manage their smart home systems through a single connected interface. Our solutions include smart apartments and homes, access control for buildings, common areas, and rental units, asset protection and monitoring, parking management, self-guided tours, and community and resident Wi-Fi.
We use an open-architecture, brand-agnostic approach that allows owners, operators, and residents to manage their smart home systems through a single connected interface. Our solutions include smart apartments and homes, access control for buildings, common areas, and rental units, asset protection and monitoring, self-guided tours, parking management, and community and resident WiFi.
While several of the top multifamily residential owners are current SmartRent customers, we believe that we have only begun to take advantage of the full market opportunity in residential and commercial real estate sectors and in domestic and international markets.
While several of the largest multifamily residential owners are current SmartRent customers, we believe that we have only begun to take advantage of the full market opportunity in residential and commercial real estate sectors and in domestic and international markets.
Information contained on or accessible through the websites listed above is not incorporated by reference nor otherwise included in this report, and any references to these websites are intended to be inactive textual references only. 7
Information contained on or accessible through the websites listed above is not incorporated by reference nor otherwise included in this report, and any references to these websites are intended to be inactive textual references only. 9
Communities can create “Vacant Mode” automations to increase efficiencies, such as work orders for unit turns and activating energy-saving mode. SmartRent Manager Mobile, a native mobile application, allows owners and operators to remotely manage work orders and control access, including resident move-ins and outs. Access Control.
Communities can create “Vacant Mode” automations to increase efficiencies, such as work orders for unit turns and activating energy-saving mode. SmartRent Manager Mobile, a native mobile application, allows owners and operators to remotely manage work orders and control access, including resident move-ins and outs. 4 o Resident App.
We offer (i) thermostats for all types of HVAC systems with programmable options, including forced air, radiant and heat pump, (ii) leak, parking, contact and motion sensors used to proactively monitor and protect properties, (iii) smart plugs to add automation to lights, fans, or other small appliances, (iv) smart switches and dimmers to upgrade lighting in apartments and homes, and (v) a selection of readers, panels, and boards, including as part of our Alloy Access solution.
We partner with third-parties to offer (i) thermostats for all types of HVAC systems with programmable options, including forced air, radiant and heat pump, (ii) leak, parking, contact and motion sensors used to proactively monitor and protect properties, (iii) smart plugs to add automation to lights, fans, or other small appliances, (iv) smart switches and dimmers to upgrade lighting in apartments and homes, and (v) a selection of readers, panels, and boards, including as part of our Access Control solution.
When a resident moves out, the automated move-out feature immediately locks the apartment door, resets interior thermostats to the “Vacant Mode” temperature, and revokes resident access to their unit, common areas, and the SmartRent app — all with the click of a button.
When a resident moves out, the automated move-out feature immediately locks the apartment door, resets interior thermostats to the “Vacant Mode” temperature, and revokes resident access to their unit, common areas, Community WiFi, parking, and the SmartRent app — all with the click of a button.
We expect this dynamic will drive demand for smart home technology as additional owners and operators evolve to meet this growing demand for integrated smart home solutions. 1 Fragmented Technology Offerings While demand for smart home technology has increased, the residential technology market remains fragmented, with offerings generally consisting of isolated point solutions and closed-architecture devices that do not integrate with one another.
We expect this dynamic will drive demand for smart home technology as additional owners and operators evolve to meet this growing demand for integrated smart home solutions. Fragmented Technology Offerings The residential technology market remains fragmented, with offerings generally consisting of isolated point solutions and closed-architecture devices that do not integrate with one another.
We offer a holistic integrated solution that includes enterprise software, hardware, and resident applications. • Hardware Agnostic. O ur solutions are compatible with a wide variety of other smart devices including, among others, Google Home, Amazon Alexa, Google Assistant, Honeywell thermostats, and Yale smart locks. • Open Architecture.
We offer a holistic integrated solution that includes enterprise software, hardware, and resident applications. • Hardware Agnostic. Our solutions are compatible with a wide variety of other smart devices including, among others, Google Home, Amazon Alexa, Google Assistant, Honeywell thermostats, and Yale smart locks. 3 • Open Architecture.
We estimate that multifamily rental owners may be able to increase rental rates (depending on the rental market and solutions offered) due to the differentiated resident experience and strong demand for smart communities. Additionally, we believe our solutions can increase resident retention, accelerate leasing and re-leasing activities, and provide ancillary monetization opportunities. • Cost Reduction.
We believe that rental owners may be able to increase, or maintain higher, rental rates (depending on the rental market and solutions offered) due to the differentiated resident experience and strong 2 demand for smart communities. Additionally, we believe our solutions can increase resident retention, accelerate leasing and re-leasing activities, and provide ancillary monetization opportunities. • Cost Reduction.
Residents can also create service requests within the app, which automatically generates a work order within the client’s integrated property management system, allowing maintenance to fix the issue quickly. Residents can control who enters their home by creating and sharing access codes with visitors.
Residents can also create service requests within the app, which automatically generates a work order, allowing maintenance to fix the issue quickly. Residents can control who enters their home by creating and sharing access codes with visitors.
The application integrates seamlessly with major property management systems to provide an up-to-date and personalized experience. Answer Automation. Answer Automation is a personalized call automation platform that reduces costs and improves on-site team efficiency through the automation of leasing and resident call handling.
The application integrates with major property management systems to provide an up-to-date and personalized experience. • Answer Automation. Answer Automation reduces costs and improves on-site team efficiency through the automation of leasing and resident call handling.
Self-Guided Tours is a white-labeled, stand-alone solution that allows prospective renters and buyers to search available rental units, homes, or model inventory, and tour at a time most convenient for them without the need for site teams or management to be present.
Self-Guided Tours allows prospective renters and buyers to search available rental units, homes, or model inventory, and tour at a time most convenient for them without the need for site teams or management to be present.
As of December 31, 2022, we had approximately 701 total employees worldwide, all of which are full-time employees. We also engage consultants and contractors to supplement our permanent workforce. A majority of our employees are engaged in engineering, software and product development, sales, and related functions.
Human Capital Management Our employees are critical to our success. As of December 31, 2023, we had 526 total employees worldwide, all of which are full-time employees. We also engage consultants and contractors to supplement our permanent workforce. A majority of our employees are engaged in engineering, software and product development, sales, and related functions.
SmartRent Solutions and Products A SmartRent connected community is a “curb to couch” concept where an entire property utilizes a variety of proprietary and third-party smart devices and features that can be remotely managed to provide efficiency, automation, asset protection, and ancillary revenue opportunities. 2 SmartRent Solutions Our fully integrated, hardware-agnostic solutions include the following: SmartRent Manager .
SmartRent Solutions and Products A SmartRent connected community is a “curb to couch” concept where an entire property utilizes a variety of our solutions and products, along with third-party smart devices and features that can be remotely managed to provide efficiency, automation, asset protection, and ancillary revenue opportunities.
This solution allows residents to create temporary access codes for deliveries, services, or guest access while also offering remote access for residents and site teams at various entry points (e.g., amenity doors, gates, pools, and elevators) without the need for fobs or separate keys. The system features monitoring systems for visitor logs and real-time door lock activity alerts.
This solution allows residents to create temporary access codes for deliveries, services, or guest access while also offering remote access for residents and site teams at various entry points (e.g., amenity doors, gates, pools, and elevators) without the need for fobs or separate keys.
We partner with Ring to offer a selection of compatible video-enabled doorbells. Our integration with Ring allows users to add devices to their SmartRent application for a more robust control system, including live view and notifications. • Indoor and Outdoor Cameras.
Our integration with Ring allows users to add devices to their SmartRent application for a more robust control system, including live view and notifications. • Indoor and Outdoor Cameras. We also partner with Ring to offer a selection of indoor and outdoor cameras that can be added to any property.
We expect competition to intensify in the future as the market for smart home technology in the residential real estate industry continues to mature. Our Competitive Strengths We believe we have developed the most scalable and operator-friendly smart home operating system in the industry based on our platform’s unique combination of attributes: • Integrated Solution.
We expect competition to intensify in the future as the market for smart home technology in the residential real estate industry continues to mature. Our Competitive Strengths We have developed a scalable and operator-friendly smart home operating system that provides a comprehensive solution for the industry: • Integrated Solution.
Our employees have opportunities to get involved in resource groups (e.g., Women’s Empowerment and PRISM) and give back to the community. We engage with our employees to gather insight, feedback, and data about their workplace experiences, and manager effectiveness. This data informs and supports our action plans, with the goal of enhancing workplace satisfaction and overall employee well-being and effectiveness.
Our employees have opportunities to get involved in resource groups (e.g., Women’s Empowerment, People of Color, and PRISM) and give back to the community. We engage with our employees to gather insight, feedback, and data about their workplace experiences, and manager effectiveness.
The application enables teams to build accurate budgets with real-time cost-tracking capabilities based on pre-established standard costs. Insightful reporting provides data using customized filters, allowing teams to easily analyze, export, and share findings to make informed decisions. SmartRent Hardware We offer a variety of in-rental unit devices that elevate the resident experience and provide multiple benefits to owners and operators.
Insightful reporting provides data using customized filters, allowing teams to easily analyze, export, and share findings to make informed decisions. SmartRent Hardware We offer a variety of in-rental unit devices that elevate the resident experience and provide multiple benefits to owners and operators.
Furthermore, we believe there is an attractive opportunity to expand our smart home solutions into other markets globally. SaaS Model We enter into binding, recurring revenue contracts with customers typically ranging from one month to ten years; our average recurring revenue contract term is 2.6 years. In 2022, approximately 38% of our customers prepaid their software contracts.
Furthermore, we believe there is an attractive opportunity to expand our smart home solutions into other markets globally. SaaS Model We enter into binding, recurring revenue contracts with customers ranging from one month to eight years; the majority of our recurring revenue contracts range from one month to one year and our average recurring revenue contract term is 1.6 years.
Our platform lowers operating costs, increases revenues, mitigates operational friction and protects assets for owners and operators, while providing a differentiated, elevated living experience for residents. Through a central connected device ("Hub Device"), we integrate our proprietary enterprise software with third-party smart devices and other technology interfaces.
Our platform can lower operating costs, increase revenues, mitigate operational friction and protect assets for owners and operators, while providing a differentiated, elevated living experience for residents. Through a central connected device ("Hub Device"), we enable the integration of our platform with third-party smart devices and other technology interfaces.
Our Industry, Competition and Market Opportunity Increasing Demand for Smart Home Technology We believe that network effects are driving demand for smart home technology and increasing the penetration of smart home technology in both the multifamily residential and single-family rental home sectors.
Our Industry, Competition and Market Opportunity Demand for Smart Home Technology We believe that network effects are driving demand for smart home technology and increasing the penetration of smart home technology in both the multifamily residential and single-family rental home sectors. Many residents now view smart home technology as a necessity, although relatively few communities currently offer it to residents.
In addition, Call Masking, which masks the team member’s phone number so that it appears to the call recipient as the community’s phone number, allows team members to easily communicate with residents and prospective residents without exposing their personal information. Advanced reporting capabilities help site teams make informed decisions and bring attention to the most frequent call areas. Audit Management.
In addition, Call Masking, which masks the team member’s phone number so that it appears to the call recipient as the community’s phone number, allows team members to easily communicate with residents and prospective residents without exposing their personal information.
Intellectual Property We regard our intellectual property rights as critical to our success generally, with our trademarks, service marks, and domain names being especially critical to the continued development and awareness of our brands and marketing efforts.
The company will continue to utilize ADI as a strategic partner to procure inventory and meet the fulfillment needs of our customers. Intellectual Property We regard our intellectual property rights as critical to our success generally, with our trademarks, service marks, and domain names being especially critical to the continued development and awareness of our brands and marketing efforts.
Our selection of Z-Wave or Bluetooth-enabled smart locks and lock boxes offer customers options for keyless entry and simplified guest access. With various keyless entry options, including deadbolts, interconnected locks, lever locks, and patio locks, these products can be customized to meet each property’s needs. • Smart Thermostats, Sensors, Plugs, Switches, Dimmers, and Readers.
With various keyless entry options, including deadbolts, interconnected locks, lever locks, and patio locks, these products can be customized to meet each property’s needs. • Smart Thermostats, Sensors, Plugs, Switches, Dimmers, and Readers.
We also provide 100% employer paid medical, dental, and vision for employees and their dependents, life insurance, flexible time off, paid parental leave, and a 401(k) plan with a company match. 5 Research and Development Our near-term product roadmap includes new leasing solutions (including an online application for the leasing process and other applications for lease signing and customer relationship management), resident experience solutions (including applications for marketplaces, amenity reservations, rent payments, and work orders), home IoT solutions (including hubless systems, smart appliances, and video and security systems), and building IoT solutions (including energy, water, and air metering).
Research and Development Our near-term product roadmap includes new leasing solutions (including an online application for the leasing process and other applications for lease signing and customer relationship management), resident experience solutions (including applications for marketplaces, amenity reservations, rent payments, and work orders), home IoT solutions (including hubless systems, smart appliances, and video and security systems), and building IoT solutions (including energy, water, and air metering).
In addition to multifamily residential owners, our customers include some of the leading homebuilders, single-family rental homeowners, and iBuyers in the U.S.
This represents approximately 16% of the U.S. market for institutionally owned multifamily rental units and single-family rental homes. In addition to multifamily residential owners, our customers include some of the largest homebuilders, single-family rental homeowners, and iBuyers in the U.S.
With our smart home operating system, residents can remotely control and manage their smart home devices and home settings through a single application. In addition, because our software is hardware agnostic, customers can choose from a wide variety of device manufacturers and use their favorite devices together in one fully integrated smart home operating system.
In addition, because our software is hardware agnostic, customers can choose from a wide variety of device manufacturers and use their favorite devices together in one fully integrated smart home operating system. 6 The Hub Devices are a vital aspect of our smart home operating system that elevates the living experience for residents.
We also reduce waste through predictive maintenance tools and building software integrations. In this way, our solutions are a key tool in reducing water usage and energy consumption across entire portfolios of real estate assets. Human Capital Management Our employees are critical to our success.
Our platform drives these benefits through a variety of connected devices, including smart thermostats, leak sensors, smart appliances and smart lighting. We also reduce waste through predictive maintenance tools and building software integrations. In this way, our solutions are a key tool in reducing water usage and energy consumption across entire portfolios of real estate assets.
We also partner with Ring to offer a selection of indoor and outdoor cameras that can be added to any property. With battery-operated and plug-in options available, customers have flexibility to select the cameras that are appropriate for each property. • Smart Locks and Lock Boxes.
With battery-operated and plug-in options available, customers have flexibility to select the cameras that are appropriate for each property. • Smart Locks and Lock Boxes. We partner with third-parties to offer a selection of Z-Wave or Bluetooth-enabled smart locks and lock boxes offer customers options for keyless entry and simplified guest access.
While Hub Devices have built-in cellular connectivity, in markets where cell coverage is not available or poor, communities can add Community WiFi to help maintain a consistent connection.
A network of strategically placed access points ensures seamless coverage, reliable connectivity and a device-dedicated WiFi network to power Hubs and other in-home smart devices. While Hubs have built-in cellular connectivity, in markets where cell coverage is not available or poor, communities can add Community WiFi to help maintain a consistent connection.
In addition to competitive base pay, we have an annual bonus program for employees at all levels and a comprehensive variable compensation program specific to our revenue organization. Both the bonus and variable compensation plans are tied directly to individual and company performance.
Our total rewards program enables us to retain talent, reward high-performing employees at all levels and incentivize and motivate exceptional performance. In addition to competitive base pay, we have an annual bonus program for employees at all levels and a comprehensive variable compensation program specific to our revenue organization.
The Hub Devices are a vital aspect of our smart home operating system that elevates the living experience for residents. Our Hub Devices use reliable and secure Z-Wave communication for remote control of connected devices and allow users to remotely manage multiple device settings from one application.
Our Hub Devices use reliable and secure Z-Wave communication for remote control of connected devices and allow users to remotely manage multiple device settings from one application. Certain Hub Devices combine a thermostat and touchscreen panel that allows users to control all of their devices from one location.
As of December 31, 2022, we had 547,196 Units Deployed, 851,815 Committed Units, and 501 customers, including many of the top multifamily residential owners in the United States (the "U.S."). Our customers own or operate an aggregate of approximately 6.7 million units. This represents approximately 15% of the U.S. market for institutionally owned multifamily rental units and single-family rental homes.
As of December 31, 2023, we had 719,691 Units Deployed and 593 customers, including many of the largest multifamily residential owners in the United States (the "U.S."). As of December 31, 2023, our customers own or operate an aggregate of approximately 7.0 million rental units.
Self-Guided Tours integrates with many popular property management and customer relationship management systems, and other third-party software products, which enables owners and operators to manage all prospect and other actionable data from one platform. Community WiFi. Community WiFi provides communities with a private, device-dedicated WiFi network to power Hub Devices and other in-home smart devices.
Self-Guided Tours integrates with many popular property management and customer relationship management systems, and other third-party software products, which enables owners and operators to manage all prospect and other actionable data from one platform. • Parking Management. Parking Management alleviates resident and guest parking issues faced by multifamily residential properties.
Through work order and service request automations, the platform provides a simplified overview of on-site tasks and allows for easy scheduling of team members. In addition, the application offers a mobile interface, allowing owners and operators to accomplish more on the go with access to the application available both online and offline.
In addition, the application offers a mobile interface, allowing owners and operators to accomplish more on the go with access to the application available both online and offline.
Access Control is a community-wide, cloud-based access control system that protects building entry, common areas, and amenity spaces for multifamily residential properties through the use of control panels, smart access locks, and intercoms.
Powered by the Resident App, the best-in-class smart home experience streamlines daily interactions with staff and delivers the modern living experience residents expect. • Access Control. Access Control is a community-wide, cloud-based access control system that protects building entry, common areas, and amenity spaces for multifamily residential properties using control panels, smart access locks, and intercoms.
Further, the California Privacy Rights Act (the "CPRA"), which was recently voted into law by California residents, imposes additional data protection obligations on covered companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data.
The CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. Further, the California Privacy Rights Act (the "CPRA") imposes additional data protection obligations on covered companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data.
With an intuitive design and customization options, Audit Management replaces outdated, manual processes with a modern, user-friendly platform. Inspection Management. Inspection Management automates the property inspection process so that teams can quickly access property and unit conditions, plan for capital improvement expenses, and monitor the performance of a portfolio.
Inspection Management automates the property inspection process so that teams can quickly access property and unit conditions, plan for capital improvement expenses, and monitor the performance of a portfolio. The mobile platform is available on iOS and Android and is accessible both online and offline.
We believe that our customer base is inherently sticky given the barriers to entry associated with rolling out an integrated enterprise solution across a portfolio of rental units. Seasonality Our business and related operating results have been, and we believe that they will continue to be, impacted by seasonal factors throughout the year.
In 2023, approximately 29% of our customers prepaid their software contracts. We believe that our customer base is inherently sticky given the barriers to entry associated with rolling out an integrated enterprise solution across a portfolio of rental units.
Audit Management allows for the quick and reliable determination of a community’s financial accuracy through a consolidated review of the rent roll, deposits, resident lease files, and more. The platform captures community demographics to minimize risks and evaluate whether residents can meet pro forma rents and satisfy lender requirements by comparing the current rent roll to resident lease files.
The platform captures community demographics to minimize risks and evaluate whether residents can meet pro forma rents and satisfy lender requirements by comparing the current rent roll to resident lease files. Users can build and edit templates on the fly to include custom forms and fields, streamlining the audit process and increasing efficiency for teams.
The mobile platform is available on iOS and Android and is accessible both online and offline. Inspection Management streamlines inspections with customizable fields and forms and simplifies documentation with team coordination, allowing for easy scheduling and assigning of tasks to team members, vendors, and contractors.
Inspection Management streamlines inspections with customizable fields and forms and simplifies documentation with team coordination, allowing for easy scheduling and assigning of tasks to team members, vendors, and contractors. The application enables teams to build accurate budgets with real-time cost-tracking capabilities based on pre-established standard costs.
We are able to install our Community WiFi system in any property type, including new construction or retrofitting existing structures, and perform site surveys to customize the equipment best suited to each property. Resident App.
Community WiFi can be installed in any property type, including new construction or retrofitting existing structures, and perform site surveys to customize the equipment best suited to each property and provide full technical support 24 hours a day, 365 days a year. • Self-Guided Tours.
The platform automatically routes calls to the right team members with up to ten levels of escalation based on a predetermined set of business rules. Answer Automation’s integrations with major property management systems enable our platform to immediately recognize resident calls via Caller ID so site teams can deliver a personalized experience.
Answer Automation also allows residents to easily create work orders that are automatically assigned, improving response times and increasing satisfaction. Answer Automation’s integrations with major property management systems enable our platform to immediately recognize resident calls via Caller ID so site teams can deliver a personalized experience.
The structure of our compensation programs endeavors to give employees peace of mind when it comes to health and financial benefits so that they can focus on doing their best work. Our total rewards program enables us to retain talent, reward high-performing employees at all levels and incentivize and motivate exceptional performance.
Employee growth and development comes from receiving real-time, informal feedback, a formal performance review, career path transparency, and ongoing role-specific training. 7 The structure of our compensation programs endeavors to give employees peace of mind when it comes to health and financial benefits so that they can focus on doing their best work.
In addition, users can download the companion mobile application to remotely control their devices, such as manage their home temperature and grant access for guests and deliveries. 4 We also partner with several manufacturers to offer a range of compatible hardware options for any property, including: • Video Doorbells.
Using the touchscreen device, users can, among other things, review settings, change the temperature, and lock or unlock doors. In addition, users can download the companion mobile application to remotely control their devices, such as manage their home temperature and grant access for guests and deliveries.
Parking Management is available to communities as a stand-alone product or as part of our fully integrated smart home operating system. Work Management. Work Management is a solution that enables on-site teams to manage tasks, respond quickly to inquiries, and engage in preventative maintenance all from a mobile device.
Work Management enables on-site teams to manage tasks, respond quickly to inquiries, and engage in preventative maintenance all from a mobile device. Through work order and service request automations, the platform provides a simplified overview of on-site tasks and allows for easy scheduling of team members.
Users can build and edit templates on the fly to include custom forms and fields, streamlining the audit process and increasing efficiency for teams. Real-time variance tracking and reporting helps teams easily identify and correct common data entry errors, as well as analyze and share results.
Real-time variance tracking and reporting helps teams easily identify and correct common data entry errors, as well as analyze and share results. With an intuitive design and customization options, Audit Management replaces outdated, manual processes with a modern, user-friendly platform. • Inspection Management.
We typically experience greater demand for deployments in the Spring and Summer, and lower demand in late Fall and Winter.
Seasonality Our business and related operating results have been, and we believe that they will continue to be, impacted by seasonal factors throughout the year. We typically experience greater demand for deployments in the Spring and Summer and lower demand in late Fall and Winter primarily due to inclement weather conditions in the Fall and Winter months.
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We define Committed Units as the aggregate number of Hub Device (i) units that are subject to binding orders from customers together with (ii) units that existing customers who are parties to a SmartRent master services agreement have informed us (on a non-binding basis) that they intend to order in the future for deployment within two years of the measurement date.
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SmartRent Solutions Our fully integrated, hardware-agnostic offerings, organized as Smart Communities Solutions and Smart Operations Solutions , include the following: Smart Communities Solutions. Smart Communities Solutions is a collection of interconnected hardware and software designed to enhance the functionality and integration of community environments. Through advanced technology, these solutions facilitate seamless connections among residents, site teams, and owners.
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Many residents now view smart home technology as a necessity, although relatively few communities currently offer it to residents.
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The hardware and software components work together to streamline community management, increase convenience for residents, and provide operational flexibility for site teams and owners. This unified platform raises the standard of living and working by optimizing daily operations for greater efficiency and responsiveness to the diverse needs of all users.
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Entrata, a developer of property management software, estimates that more than 75% of residents would pay more for an apartment equipped with smart home technology, and Schlage, a smart lock provider, estimates millennials would be willing to pay 20% more on average per month for rental units equipped with smart home technology.
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Offerings organized under the Smart Communities Solutions umbrella include Smart Apartments, Access Control, Community WiFi, Self-Guided Tours, Parking Management and Package Management. • Smart Apartment s. Smart Apartments is a solution that connects all the smart devices in a community to a single dashboard.
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Access Control can be implemented in new construction or retrofitted in existing properties. Asset Protection. Asset Protection solutions help ensure the longevity of communities by reducing the risk of damage through high-precision leak sensors and smart thermostats.
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It encompasses physical hardware components such as smart locks, thermostats, Hub Devices, and sensors, that enhance the convenience and efficiency of community living. The platform utilizes a hardware-agnostic approach, allowing for seamless integration with leading third-party hardware providers such as Yale, Honeywell, Salto, and more.
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Community Manager software and integrated flood, temperature, and humidity sensors can be configured to notify owners and operators at the first sign of an issue, automatically generate a work order into the property management system, and dispatch a technician to solve the issue, allowing management to act quickly and avoid damages and costly repairs.
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Additionally, hardware solutions such as hubs and sensors are manufactured in-house under the Alloy SmartHome brand. These devices are managed and controlled through two primary software platforms: SmartRent Manager for owners, operators, and site teams, and the Resident App for residents. o SmartRent Manager.
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Flood sensors can be placed under or near any appliance that may be susceptible to water damage, such as sump pumps, toilets, washing machines, dishwashers, water heaters, and sinks. Asset Protection solutions provide owners and operators the ability to detect abnormal humidity levels and extreme temperature changes, which help protect floors from warping and prevent mold from forming. Self-Guided Tours.
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The system features monitoring systems for visitor logs and real-time door lock activity alerts that can be managed remotely, providing flexibility and a safer community. Access Control can be implemented in new construction or retrofitted in existing properties. • Community WiFi. Community WiFi delivers secure, wireless, high-speed internet across an entire property.
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With a Community WiFi system, owners, operators, and residents will have access to a dedicated and secure network, as well as a private connection that provides a stronger and more reliable signal for Hub Devices and other devices.
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With a Community WiFi system, owners, operators, and residents will have access to a dedicated and secure network. Residents can set up Community WiFi in seconds through their Resident App, without the need for a technician. Upon move-out, access is automatically deactivated.
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Powered by the Resident App, the best-in-class smart home experience streamlines daily interactions with staff and delivers the modern living experience residents expect. 3 Parking Management. Parking Management is a smart parking system designed to alleviate the resident and guest parking issues faced by multifamily residential properties.
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Parking Management is available to communities as a stand-alone product or as part of our fully integrated smart home operating system. • Package Management. We've entered into a preferred reseller partnership with Position Imaging to offer Smart Package Room Ò which transforms package visibility, reduces labor demands, optimizes storage space and enhances resident satisfaction.
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Certain Hub Devices combine a thermostat and touchscreen panel that allows users to control all of their devices from one location. Using the touchscreen device, users can, among other things, review settings, change the temperature, and lock or unlock doors.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, these suppliers, manufacturers, and partners may experience delay, disruption, or lapse in the quality of their operations, including due to the COVID-19 pandemic, which would subject us to risks, including the following: • inability to satisfy demand for our products; • reduced control over delivery timing and product reliability; • reduced ability to monitor the manufacturing process and components used in our products; • limited ability to develop comprehensive manufacturing specifications that take into account any materials or components shortages or substitutions; • variance in the manufacturing capability of our third-party manufacturers; • price increases; • failure of a significant supplier, manufacturer, or partner to perform its obligations to us for technical, market, or other reasons; • insolvency, bankruptcy or liquidation of a significant supplier, manufacturer, or partner; • difficulties in establishing additional supplier, manufacturer, or partner relationships if we experience difficulties with our existing suppliers, manufacturers, or partners; • shortages of materials or components; • disagreements with suppliers, manufacturers, or logistics partners as to quality control, leading to a surplus of ineffective products; • misappropriation of our intellectual property; • exposure to natural catastrophes, political unrest, terrorism, labor disputes, and economic instability resulting in the disruption of trade from foreign countries in which our products are manufactured or the components thereof are sourced; • changes in local economic conditions in the jurisdictions where our suppliers, manufacturers, and partners are located; • the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties, tariffs, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; and • insufficient warranties and indemnities on components supplied to our manufacturers or performance by our partners.
Biggest changeIn addition, these suppliers, manufacturers, and partners may experience delay, disruption, or lapse in the quality of their operations, which would subject us to risks, including the following: • inability to satisfy demand for our products; • reduced control over delivery timing and product reliability; • reduced ability to monitor the manufacturing process and components used in our products; • limited ability to develop comprehensive manufacturing specifications that take into account any materials or components shortages or substitutions; • variance in the manufacturing capability of our third-party manufacturers; • price increases; • failure of a significant supplier, manufacturer, or partner to perform its obligations to us for technical, market, or other reasons; • insolvency, bankruptcy or liquidation of a significant supplier, manufacturer, or partner; • difficulties in establishing additional supplier, manufacturer, or partner relationships if we experience difficulties with our existing suppliers, manufacturers, or partners; • shortages of materials or components; • disagreements with suppliers, manufacturers, or logistics partners as to quality control, leading to a surplus of ineffective products; • misappropriation of our intellectual property; • geopolitical uncertainty and instability, such as the ongoing geopolitical tensions related to conflicts in and around Ukraine, Israel and other areas of the world, or potential conflicts in the region surrounding the Taiwan Strait, which may lead to changes in U.S. or foreign trade policies and general economic conditions that impact our business; • foreign subsidiaries may operate in a way which harms our business including the violation of labor, environmental or other laws, or failure to follow ethical business practices; • exposure to natural catastrophes, political unrest, terrorism, labor disputes, and economic instability resulting in the disruption of manufacturing operations in or trade from foreign countries in which our products are manufactured or the components thereof are sourced; • changes in local economic conditions in the jurisdictions where our suppliers, manufacturers, and partners are located; 11 • the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties, tariffs, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; and • insufficient warranties and indemnities on components supplied to our manufacturers or performance by our partners.
The sale of substantial amounts of shares of our Class A Common Stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock.
The sale of substantial amounts of shares of our Class A Common Stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our Class A Common Stock.
Our Charter provides that, unless we consent in writing to the selection of an alternative forum, the (i) Court of Chancery of the State of Delaware (or, in the event that the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (a) any derivative action, suit or proceeding brought on our behalf; (b) any action, suit or proceeding asserting a claim of breach of fiduciary duty owed by any of our directors, officers, or stockholders to us or to our stockholders; (c) any action, suit or proceeding asserting a claim arising pursuant to the DGCL, our Charter or bylaws; or (d) any action, suit or proceeding asserting a claim governed by the internal affairs doctrine; and (ii) subject to the foregoing, the federal district courts of the U.S. shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Our Charter provides that, unless we consent in writing to the selection of an alternative forum, (i) the Court of Chancery of the State of Delaware (or, in the event that the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (a) any derivative action, suit or proceeding brought on our behalf; (b) any action, suit or proceeding asserting a claim of breach of fiduciary duty owed by any of our directors, officers, or stockholders to us or to our stockholders; (c) any action, suit or proceeding asserting a claim arising pursuant to the DGCL, our Charter or bylaws; or (d) any action, suit or proceeding asserting a claim governed by the internal affairs doctrine; and (ii) subject to the foregoing, the federal district courts of the U.S. shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
In addition, we will face risks in doing business internationally that could materially and adversely affect our business, including: • our ability to comply with differing and evolving technical and environmental standards, telecommunications regulations, building and fire codes, and certification requirements outside the U.S.; • difficulties and costs associated with staffing and managing foreign operations; • our ability to effectively price our products and solutions in competitive international markets; • potentially greater difficulty collecting accounts receivable and longer payment cycles; • the need to adapt and localize our products and subscriptions for specific countries; • the need to offer customer care in various native languages; • reliance on third parties over which we have limited control; • availability of reliable network connectivity in targeted areas for expansion; • difficulties in understanding and complying with local laws, regulations, and customs in foreign jurisdictions; • restrictions on travel to or from countries in which we operate or inability to access certain areas; 25 • changes in diplomatic and trade relationships, including tariffs and other non-tariff barriers, such as quotas and local content rules; • U.S. government trade restrictions, including those which may impose restrictions such as prohibitions, on the exportation, re-exportation, sale, shipment or other transfer of programming, technology, components, and/or services to foreign persons; • our ability to comply with different and evolving laws, rules, and regulations, including the European Union General Data Protection Regulation and other data privacy and data protection laws, rules and regulations; • compliance with various anti-bribery and anti-corruption laws such as the Foreign Corrupt Practices Act and U.K.
In addition, we will face risks in doing business internationally that could materially and adversely affect our business, including: • our ability to comply with differing and evolving technical and environmental standards, telecommunications regulations, building and fire codes, and certification requirements outside the U.S.; • difficulties and costs associated with staffing and managing foreign operations; • our ability to effectively price our products and solutions in competitive international markets; • potentially greater difficulty collecting accounts receivable and longer payment cycles; • the need to adapt and localize our products and subscriptions for specific countries; • the need to offer customer care in various native languages; • reliance on third parties over which we have limited control; • availability of reliable network connectivity in targeted areas for expansion; • difficulties in understanding and complying with local laws, regulations, and customs in foreign jurisdictions; • restrictions on travel to or from countries in which we operate or inability to access certain areas; • changes in diplomatic and trade relationships, including tariffs and other non-tariff barriers, such as quotas and local content rules; • U.S. government trade restrictions, including those which may impose restrictions such as prohibitions, on the exportation, re-exportation, sale, shipment or other transfer of programming, technology, components, and/or services to foreign persons; • our ability to comply with different and evolving laws, rules, and regulations, including the European Union General Data Protection Regulation and other data privacy and data protection laws, rules and regulations; 30 • compliance with various anti-bribery and anti-corruption laws such as the Foreign Corrupt Practices Act and U.K.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the DGCL, which prevents interested stockholders, such as certain stockholders holding more than 15% of our outstanding common stock, from engaging in certain business combinations unless (i) prior to the time such stockholder became an interested stockholder, the Board approved the transaction that resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in such stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the common stock, or (iii) following board approval, such business combination receives the approval of the holders of at least two-thirds of our outstanding common stock not held by such interested stockholder at an annual or special meeting of stockholders.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law ("DGCL"), which prevents interested stockholders, such as certain stockholders holding more than 15% of our outstanding common stock, from engaging in certain business combinations unless (i) prior to the time such stockholder became an interested stockholder, the Board approved the transaction that resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in such stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the common stock, or (iii) following board approval, such business combination receives the approval of the holders of at least two-thirds of our outstanding common stock not held by such interested stockholder at an annual or special meeting of stockholders.
Acquisitions and other strategic investments involve significant risks and uncertainties, including: • the potential failure to achieve the expected benefits of the combination or acquisition; • unanticipated costs and liabilities; • difficulties in integrating new products, solutions, software, features, services, businesses, operations and technology infrastructure in an efficient and effective manner; 15 • the potential loss of key employees of the acquired businesses; • difficulties in maintaining customer relations; • the diversion of the attention of our senior management from the operation of our daily business; • the potential adverse effect on our cash position to the extent that we use cash for the purchase price; • the potential significant increase of our interest expense, leverage, and debt service requirements if we incur additional debt to pay for an acquisition; • the potential issuance of securities that would dilute our stockholders’ percentage ownership; • the potential to incur large and immediate write-offs and restructuring and other related expenses; and • the inability to maintain uniform standards, controls, policies and procedures.
Acquisitions and other strategic investments involve significant risks and uncertainties, including: • the potential failure to achieve the expected benefits of the combination or acquisition; • unanticipated costs and liabilities; • difficulties in integrating new products, solutions, software, features, services, businesses, operations and technology infrastructure in an efficient and effective manner; • the potential loss of key employees of the acquired businesses; • difficulties in maintaining customer relations; • the diversion of the attention of our senior management from the operation of our daily business; • the potential adverse effect on our cash position to the extent that we use cash for the purchase price or for unanticipated costs and liabilities; • the potential significant increase of our interest expense, leverage, and debt service requirements if we incur debt to pay for an acquisition; • the potential issuance of securities that would dilute our stockholders’ percentage ownership; • the potential to incur large and immediate write-offs and restructuring and other related expenses; and • the inability to maintain uniform standards, controls, policies and procedures.
Criminals and other nefarious actors are using increasingly sophisticated methods, including cyber-attacks, phishing, social engineering and other illicit acts to capture, access, or alter various types of information, to engage in illegal activities such as fraud and identity theft, and to expose and exploit potential security and privacy vulnerabilities in corporate systems and websites.
Criminals and other nefarious actors are using increasingly sophisticated methods, including cyber-attacks, phishing and other forms of social engineering, and other illicit acts to capture, access, or alter various types of information, to engage in illegal activities such as fraud and identity theft, and to expose and exploit potential security and privacy vulnerabilities in corporate systems and websites.
Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, financial condition, results of operations, revenue, and future prospects. In that event, the market price of our Class A Common Stock could decline, and you could lose part or all of your investment.
Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, financial condition, results of operations, and future prospects. In that event, the market price of our Class A Common Stock could decline, and you could lose part or all of your investment.
Further, if a high-profile security breach occurs with respect to another provider of smart home solutions, our customers and potential customers or their residents may lose trust in the security of our products and solutions or in the smart home technology industry generally, which could adversely impact our ability to retain existing customers or attract new ones.
Further, if a high-profile security breach or incident occurs with respect to another provider of smart home solutions, our customers and potential customers or their residents may lose trust in the security of our products and solutions or in the smart home technology industry generally, which could adversely impact our ability to retain existing customers or attract new ones.
Although we have implemented policies and procedures designed to ensure compliance with anti-corruption laws, there can be no assurance that all of our employees, representatives, contractors, partners, and agents will comply with these laws and policies. Our operations require us to import from Asia and Europe, which geographically stretches our compliance obligations.
Although we have implemented policies and procedures designed to ensure compliance with anti-corruption laws, there can be no assurance that all of our employees, representatives, contractors, partners, and agents will comply with these laws and policies. 29 Our operations require us to import from Asia and Europe, which geographically stretches our compliance obligations.
Even in the absence of any security breach, customer concerns about security, privacy or data protection may deter them from using our products and solutions. Our insurance policies covering errors and omissions and certain security and privacy damages and claim expenses may not be sufficient to compensate for all potential liability.
Even in the absence of any security breach or incident, customer concerns about security, privacy or data protection may deter them from using our products and solutions. Our insurance policies covering errors and omissions and certain security and privacy damages and claim expenses may not be sufficient to compensate for all potential liability.
Our ability to expand the sales of our products and solutions into new markets depends on several factors, including the reputation and recognition of our products and solutions, the timely completion, introduction and market acceptance of our products and solutions, the ability to attract, retain and effectively train sales and marketing personnel, the effectiveness of our marketing programs, the costs of our products and solutions and the success of our competitors.
Our ability to expand the sales of our products and solutions into this market and new markets depends on several factors, including the reputation and recognition of our products and solutions, the timely completion, introduction and market acceptance of our products and solutions, the ability to attract, retain and effectively train sales and marketing personnel, the effectiveness of our marketing programs, the costs of our products and solutions and the success of our competitors.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; • expiration or non-utilization of net operating loss carryforwards; • tax effects of share-based compensation; • expansion into new jurisdictions; • potential challenges to and costs related to implementation and ongoing operation of our intercompany arrangements; • increases in state or federal statutory tax rates on corporate income; • changes in tax laws and regulations and accounting principles, or interpretations or applications thereof; and • certain non-deductible expenses as a result of acquisitions.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; • expiration or non-utilization of net operating loss carryforwards; • tax effects of share-based compensation; • expansion into new jurisdictions; • potential challenges to and costs related to implementation and ongoing operation of our intercompany arrangements; • increases in U.S. state or federal statutory tax rates on corporate income; • changes in tax laws and regulations and accounting principles, or interpretations or applications thereof; and • certain non-deductible expenses as a result of acquisitions.
Risks Related to Legal and Regulatory Matters • We are subject to legal obligations and laws and regulations related to security and privacy, and any actual or perceived failure to meet those obligations could harm our business. • If there is any breach of security controls; unauthorized or inadvertent access to customer, residential, or other data; or unauthorized control or view of systems, our products and solutions may be perceived as insecure, our business may be harmed, and we may incur significant liabilities. • Design and manufacturing defects in our products and services could subject us to personal injury, property damage, product liability, warranty, and other claims, which could adversely affect our business and result in harm to our reputation.
Risks Related to Legal and Regulatory Matters • We are subject to legal obligations and laws and regulations related to privacy and cybersecurity, and any actual or perceived failure to meet those obligations could harm our business. • If there is any breach of security controls; unauthorized or inadvertent access to customer, residential, or other data; or unauthorized control or view of systems, our products and solutions may be perceived as insecure, our business may be harmed, and we may incur significant liabilities. • Design and manufacturing defects in our products and services could subject us to personal injury, property damage, product liability, warranty, and other claims, which could adversely affect our business and result in harm to our business.
If there is any breach of security controls; unauthorized or inadvertent access to customer, residential, or other data; or unauthorized control or view of systems, our products and solutions may be perceived as insecure, our business may be harmed, and we may incur significant liabilities.
If there is any breach of security controls or any security incident, any unauthorized or inadvertent access to customer, residential, or other data, or any unauthorized control or view of systems, our products and solutions may be perceived as insecure, our business may be harmed, and we may incur significant liabilities.
If there is price compression in the market after these decisions are made, it could have a negative effect on our business. If we fail to continue to develop our brand or our reputation is harmed, our business may suffer.
If there is price compression in the market after these decisions are made, it could have a negative effect on our business. 16 If we fail to continue to develop our brand or our reputation is harmed, our business may suffer.
As a result, we may not be able to obtain adequate protection or to effectively enforce our intellectual property rights. In addition to registered trademarks, we rely on trade secret rights, copyrights and other rights to protect our unpatented proprietary intellectual property and technology.
As a result, we may not be able to obtain adequate protection or to effectively enforce our intellectual property rights. In addition to registered trademarks, we rely on trade secret rights, copyrights and other rights to protect our unpatented intellectual property and technology.
Despite our efforts to protect our proprietary technologies and our intellectual property rights, unauthorized parties, including our employees, consultants, service providers, or subscribers may attempt to copy aspects of our products or obtain and use our trade secrets or other confidential information.
Despite our efforts to protect our technologies and our intellectual property rights, unauthorized parties, including our employees, consultants, service providers, or subscribers may attempt to copy aspects of our products or obtain and use our trade secrets or other confidential information.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE, and other applicable securities rules and regulations.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE, and other applicable securities rules and regulations.
Competitors may independently develop technologies, products, or solutions that are substantially equivalent or superior to our products and solutions or that inappropriately incorporate our proprietary technology into their products or they may hire our former employees who may misappropriate our proprietary technology or misuse our confidential information.
Competitors may independently develop technologies, products, or solutions that are substantially equivalent or superior to our products and solutions or that inappropriately incorporate our technology into their products or they may hire our former employees who may misappropriate our technology or misuse our confidential information.
Some of our products and solutions contain open source software, which may pose particular risks to our proprietary software, technologies, products, and solutions in a manner that could harm our business. We use open source software in our products and solutions and anticipate using open source software in the future.
Some of our products and solutions contain open-source software, which may pose particular risks to our software, technologies, products, and solutions in a manner that could harm our business. We use open-source software in our products and solutions and anticipate using open-source software in the future.
We generally enter into confidentiality agreements with our employees and third parties that have access to our material confidential information, and generally limit access to and distribution of our proprietary information and proprietary technology through certain procedural safeguards.
We generally enter into confidentiality agreements with our employees and third parties that have access to our material confidential information, and generally limit access to and distribution of our information and technology through certain procedural safeguards.
Further, given that our customers deploy our products and solutions to provide a safe and secure living space to their residents, quality problems could subject us to substantial liability, adversely affect the experience for users of our products and solutions and result in harm to our reputation, loss of competitive advantage, poor market acceptance, reduced demand for our products and solutions, delay in new product and solution introductions, and lost revenue.
Further, given that our customers deploy our products and solutions to provide a safe and secure living space to their residents, quality problems could subject us to substantial liability, adversely affect the experience for users of our products and solutions and result in harm to our reputation, loss of competitive advantage, poor market acceptance, reduced demand for our products and solutions, delay in new product and solution introductions, higher costs and lost revenue.
In addition, consumer spending and activities can be materially adversely affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, declines in income or asset values, energy shortages and cost increases, labor and healthcare costs and other economic factors, all of which may have a negative affect on our business and results of operations.
In addition, consumer spending and activities can be materially adversely affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, declines in income or asset values, energy shortages and cost increases, labor and healthcare costs and other economic factors, all of which may have a negative effect on our business and results of operations.
Various states throughout the U.S. are increasingly adopting or revising privacy, information security, and data protection laws and regulations that could have a significant impact on our current and planned privacy, data protection, and information security-related practices, our collection, use, sharing, retention, and safeguarding of customer, consumer, resident, employee, or any other third-party information we receive, and some of our current or planned business activities.
Various states throughout the U.S. are increasingly adopting or revising privacy, information security, and data protection laws and regulations that could have a significant impact on our current and planned privacy, data protection, and cybersecurity-related practices, our collection, use, sharing, retention, safeguarding, and processing of customer, consumer, resident, employee, or any other third-party information we receive, and some of our current or planned business activities.
Depending on the nature of the information compromised, in the event of a data breach or other unauthorized access to our customer data, we may also have obligations to notify individuals, data owner, or customers about the incident and we may need to provide some form of remedy to such customers or their residents, such as a subscription to a credit monitoring service for the individuals affected by the incident.
Depending on the nature of the information compromised, in the event of a security breach or incident or other unauthorized access to or processing of our customer data, we may also have obligations to notify individuals, data owner, or customers about the incident and we may need to provide some form of remedy to such customers or their residents, such as a subscription to a credit monitoring service for the individuals affected by the incident.
For example, we plan to explore opportunities for international expansion and extend our offerings to current customers by introducing new software, services, and products.
For example, we plan to extend our offerings to current customers by introducing new software, services, and products and may explore opportunities for international expansion.
On October 29, 2021, we filed Form S-8 under the Securities Act to register 35,444,576 shares of our Class A Common Stock or securities convertible into or exchangeable for shares of our Class A Common Stock issued pursuant to our equity incentive plans. The Form S-8 registration statements automatically became effective upon filing.
On October 29, 2021, we filed Form S-8 under the Securities Act to register 35,444,576 shares of our Class A Common Stock or securities convertible into or exchangeable for shares of our Class A Common Stock issued pursuant to our equity incentive plans. The Form S-8 registration statement automatically became effective upon filing.
If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation. 27 We do not intend to pay dividends on our Class A Common Stock for the foreseeable future.
If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation. 32 We do not intend to pay dividends on our Class A Common Stock for the foreseeable future.
Dollars with the majority of our customers and suppliers, we have transacted in some foreign currencies, such as the Euro, the Canadian dollar, the Croatian Krona and the Chinese Renminbi and may transact in more foreign currencies in the future. Accordingly, changes in the value of foreign currencies relative to the U.S. Dollar may affect our revenue and operating results.
Dollars with the majority of our customers and suppliers, we have transacted in some foreign currencies, such as the Euro, the Canadian dollar, the Croatian Kuna and the Chinese Renminbi and may transact in more foreign currencies in the future. Accordingly, changes in the value of foreign currencies relative to the U.S. Dollar may affect our revenue and operating results.
The loss of any of these individuals, each of whom is “at will” and may terminate his or her employment relationship with us at any time, could disrupt our operations, harm our reputation and brand, and significantly delay or prevent the achievement of our business objectives.
The loss of any of these individuals, each of whom is “at will” and may terminate his or her employment relationship with us at any time, could disrupt our operations, harm our business, and significantly delay or prevent the achievement of our business objectives.
We also maintain and process confidential and proprietary information in our business, including our employees’ and contractors’ personal information and confidential business information. We rely on proprietary and commercially available systems, software, tools and monitoring to protect against unauthorized use or access of the information we process and maintain.
We also maintain and process confidential information in our business, including our employees’ and contractors’ personal information and confidential business information. We rely on our own and commercially available systems, software, tools and monitoring to protect against unauthorized use of or access to the information we process and maintain.
Our solutions and the networks and information systems we utilize in our business are at risk for breaches as a result of third-party action, employee or partner error, malfeasance, or other factors.
Our solutions and the networks and information systems we utilize in our business are at risk for security breaches and incidents as a result of third-party action, employee or partner error, malfeasance, or other factors.
Adverse macroeconomic conditions, including inflation, slower growth or recession, barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment, currency fluctuations, and other events beyond our control, such as economic sanctions, natural disasters, pandemics, including the COVID-19 pandemic, epidemics, political instability, armed conflicts and wars, including the Russia-Ukraine war can materially adversely affect demand for our products and solutions.
Adverse macroeconomic conditions, including inflation, slower growth or recession, barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment, currency fluctuations, regulatory requirements and other events beyond our control, such as economic sanctions, natural disasters, pandemics, including the COVID-19 pandemic, epidemics, political instability, armed conflicts and wars, including the Russia-Ukraine war and Israel-Hamas war, can materially adversely affect demand for our products and solutions.
Although we have already hired additional employees to comply with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our costs and expenses. As a result, management’s attention may be diverted from other business concerns, which could harm our business and results of operations.
Although we have already hired additional employees to comply with these requirements, we may need to hire more employees in the future or engage additional outside consultants, which will increase our costs and expenses. As a result, management’s attention may be diverted from other business concerns, which could harm our business.
Prolonged economic slowdowns and reductions in new residential and commercial building construction and renovation projects may result in diminished sales of our software, services and products. Further worsening, broadening or protracted extension of an economic downturn could have a negative impact on our business, revenue, results of operations and cash flows.
Prolonged economic slowdowns and reductions in renovation projects and new residential and commercial building construction have resulted and may continue to result in diminished sales of our software, services and products. Further worsening, broadening or protracted extension of an economic downturn could have a negative impact on our business, revenue, results of operations and cash flows.
These factors could also make it more difficult for us to attract and retain qualified members of the Board, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
These factors could also make it more difficult for us to attract and retain qualified members of the Company's Board of Directors ("Board"), particularly to serve on our audit committee and compensation committee, and qualified executive officers.
The trading price of our Class A Common Stock may be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies.
The trading price of our Class A Common Stock may be volatile. The stock market has historically experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies.
You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in “- Risks Related to Our Business and Industry” and the following: • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our products and/or services; • future announcements concerning our business, our clients’ businesses or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • the market’s reaction to our reduced disclosure and other requirements as a result of being an “emerging growth company” under the JOBS Act; • the size of our public float; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect our industry or us; • privacy and data protection laws, privacy or data breaches, or the loss of data; • the impact of the COVID-19 pandemic on our financial condition and the results of operations; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in senior management or key personnel; • issuances, exchanges or sales, or expected issuances, exchanges or sales of our capital stock; • changes in our dividend policy; • adverse resolution of new or pending litigation against us; and • changes in general market, economic and political conditions in the U.S. and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in “- Risks Related to Our Business and Industry” and the following: • our operating and financial performance and prospects; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • conditions that impact demand for our products and/or services; • future announcements concerning our business, our customers’ businesses or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • the market’s reaction to our reduced disclosure and other requirements as a result of being an “emerging growth company” under the JOBS Act; • the size of our public float; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our business strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect our industry or us; • privacy and data protection laws, privacy or data breaches or incidents, or the loss or other unavailability of data; • the impact of pandemics or epidemics, such as the COVID-19 pandemic, on our financial condition and the results of operations; • changes by the Financial Accounting Standards Board or other accounting regulatory bodies to generally accepted accounting principles, standards, guidance, interpretations or policies; • changes in senior management or key personnel; • issuances, exchanges, sales or purchases, or expected issuances, exchanges, sales or purchases of our capital stock; • changes in our dividend policy; • adverse resolution of new or pending litigation against us; and • changes in general market, economic and political conditions in the U.S. and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.
Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and quality problems, and other unknown factors that may result in losses in future periods. If these losses exceed our expectations or our revenue growth expectations are not met in future periods, our financial performance will be harmed and our stock price could decline.
Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and quality problems, and other unknown factors that may result in losses in future periods. If these losses exceed our expectations or our revenue growth expectations are not met in future periods, our business will be harmed and our stock price could decline.
Any interruptions or other problems that cause our website, interactive user interface or information technology systems to malfunction or be unavailable may damage our reputation and brand, result in lost revenue, cause us to incur significant costs seeking to remedy the problem, and otherwise substantially harm our business and results of operations.
Any interruptions or other problems that cause our website, interactive user interface or information technology systems to malfunction or be unavailable may damage our reputation and brand, result in lost revenue, cause us to incur significant costs seeking to remedy the problem, and otherwise substantially harm our business.
We have processes to help alleviate these risks, including a review process for screening requests from our developers for the use of open source software, but we cannot be sure that all open source software is identified or submitted for approval prior to use in our products and services.
We have processes to help alleviate these risks, including a review process for screening change requests from our developers, but we cannot be sure that all open-source software is identified or submitted for approval prior to use in our products and services.
Interruptions to, or other problems with, our website and interactive user interface, information technology systems, manufacturing processes or other operations could damage our reputation and brand and substantially harm our business and results of operations.
Interruptions to, or other problems with, our website and interactive user interface, information technology systems, manufacturing processes or other operations could damage our reputation and brand and substantially harm our business.
These risks are augmented by the fact that our customers and their residents use our products and solutions to operate their lights, locks, and other aspects of their living spaces.
These risks are augmented by the fact that our customers and their residents use our products and solutions to operate their lights, locks, HVAC controls and other aspects of their living spaces.
Our success depends, in part, on our ability to protect our proprietary technology, brands and other intellectual property against dilution, infringement, misappropriation and competitive pressure by defending our intellectual property rights.
Our success depends, in part, on our ability to protect our technology, brands, processes and other intellectual property against dilution, infringement, misappropriation and competitive pressure by defending our intellectual property rights.
They could also subject us to costs, regulatory investigations and orders, litigation, contract damages, indemnity demands, and other liabilities and materially and adversely affect our customer base, sales, revenues, and profits. Any of these could, in turn, have a material adverse impact on our business, financial condition, cash flows, or results of operations.
They could also subject us to costs, regulatory investigations and other proceedings, fines, penalties, and orders, claims and litigation, contract damages, indemnity demands, and other liabilities, and materially and adversely affect our customer base, sales, revenues, and profits. Any of these could, in turn, have a material adverse impact on our business, financial condition, cash flows, or results of operations.
Our ability to compete depends on a number of factors, including: • our product and solution functionality, performance, ease of use, reliability, availability, and cost effectiveness relative to that of our competitors’ products and solutions; • our success in utilizing new and proprietary technologies to offer solutions and features previously not available in the marketplace; • our success in identifying new markets, applications and technologies; • our ability to attract and retain partners; • our name recognition and reputation; • our ability to recruit software engineers and sales and marketing personnel; and • our ability to protect our intellectual property.
Our ability to compete depends on a number of factors, including: • our product and solution functionality, performance, ease of use, reliability, availability, and cost effectiveness relative to that of our competitors’ products and solutions; • our success in utilizing new technologies to offer solutions and features previously not available in the marketplace • our success in identifying new markets, applications and technologies such as our Community WiFi solution; • our ability to attract and retain partners; • our name recognition and reputation; • our ability to recruit software engineers and sales and marketing personnel; and • our ability to protect our intellectual property.
In addition, the Code regulations allow the annual limitation to be increased by certain adjustments, which, for us, would primarily relate to recognized built-in gains on appreciated assets during the five-year recognition period beginning on the ownership change date.
In addition, the Code and related regulations allow the annual limitation to be increased by certain adjustments, which, for us, would primarily relate to certain built-in gains on appreciated assets during the five-year recognition period beginning on the ownership change date.
Customer attrition and reductions in the number of units may also increase due to factors beyond our control, including the failure or unwillingness of customers to pay for our products and solutions due to financial constraints and the impact of a slowing economy.
Customer attrition and reductions in the number of units may also increase due to factors beyond our control, including the failure or unwillingness of customers to pay for our products and solutions due to financial constraints and the impact of a slowing economy or higher interest rates.
Unauthorized intrusion into the portions of our systems and networks and data storage devices that process and store customer and resident confidential and private information, the loss of such information or the deployment of malware or other harmful code to our services or our networks or systems may result in negative consequences, including the actual or alleged malfunction of our products, software or services.
Unauthorized intrusion into the portions of our systems and networks and data storage devices that store or otherwise process customer and resident confidential and private information, the loss, corruption, or unavailability of such information or the deployment of ransomware or other malware, or other harmful code, to our services or our networks or systems may result in negative consequences, including the actual or alleged malfunction of our products, software, or services.
There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business, financial condition, and operating results. 26 Risks Related to Ownership of Our Class A Common Stock Our Class A Common Stock price may be volatile or may decline regardless of our operating performance.
There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business. 31 Risks Related to Ownership of Our Class A Common Stock Our Class A Common Stock price may be volatile or may decline regardless of our operating performance.
Our management’s limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which would result in less time being devoted to our management and growth.
Our management’s limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which would result in less time being devoted to our management of business operations.
We cannot assure you that we will be able to comply with any such restrictive covenants. In the event that we are unable to comply with these covenants in the future, we would seek an amendment or waiver of the covenants. We cannot assure you that any such waiver or amendment would be granted.
In the event that we are unable to comply with these covenants in the future, we would seek an amendment or waiver of the covenants. We cannot assure you that any such waiver or amendment would be granted.
If we have experienced or do experience an ownership change at any time since our formation, use of our net operating loss carryforwards and any other tax attribute carryforwards we may have (e.g., carryforwards of general business credits) would be subject to an annual limitation under Section 382 or 383 of the Code.
If we have experienced or do experience an ownership change at any time since our formation, use of our net operating loss carryforwards and any other tax attribute carryforwards we may have (e.g., carryforwards of general business credits) would be subject to an annual limitation under Section 382 or 383 of the Internal Revenue Code of 1986, as amended, or the Code.
Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have an adverse effect on our business, financial condition, and operating results. 18 Downturns in or uncertainties about general economic and market conditions and reductions in spending may reduce demand for our products and solutions, which could harm our revenue, results of operations and cash flows.
Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have an adverse effect on our business, financial condition, and operating results. Downturns in or uncertainties about general economic and market conditions and reductions in spending may reduce demand for our products and solutions, which could harm our business.
We also expect that there will continue to be new laws, regulations and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions.
We also expect that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and cybersecurity proposed and enacted in various jurisdictions.
There can be no assurance that the limitation of liability provisions in our contracts for a security breach would be enforceable or would otherwise protect us from any such liabilities or damages with respect to any particular claim.
There can be no assurance that the limitation of liability provisions in our contracts would be enforceable or would otherwise protect us from any such liabilities or damages with respect to any particular claim.
Failure to adequately protect our intellectual property, technology, and confidential information could reduce our competitiveness and harm our business and operating results. Our intellectual property, including our trademarks, copyrights, trade secrets and other proprietary rights, constitutes a significant part of our value.
Failure to adequately protect our intellectual property, technology, processes and confidential information could reduce our competitiveness and harm our business. Our intellectual property, including our trademarks, copyrights, trade secrets and other rights, constitutes a significant part of our value.
We collect, process, store, and use a wide variety of data from current and prospective customers and their residents, including personal information, such as home addresses and geolocation. Federal, state, and international laws and regulations governing privacy, data protection, and e-commerce transactions require us to safeguard our customers’ personal information. The scope of such laws and regulations is rapidly changing.
We collect, store, use, and otherwise process a wide variety of data from current and prospective customers and their residents, including personal information, such as home addresses and geolocation. Federal, state, and international laws and regulations governing privacy, data protection, and e-commerce transactions require us to safeguard our customers’ personal information.
Furthermore, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce, thus violating Section 5(a) of the FTC Act.
Furthermore, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce, thus violating the FTC Act.
From time to time, we may be subject to legal proceedings, regulatory disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results.
From time to time, we may be subject to legal proceedings, regulatory disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business.
We also have the ability to issue up to 3,731,411 additional shares of common stock under the Employee Stock Purchase Plan ("ESPP"), subject to annual increases effective as of January 1, 2023 and each subsequent January 1 through and including January 1, 2030 in an amount equal to the smallest of (i) 1% of the number of shares of the common stock outstanding as of the immediately preceding December 31, (ii) 2,000,000 shares or (iii) such amount, if any, as the Board may determine.
We also have the ability to issue up to 5,401,824 additional shares of common stock under the Employee Stock Purchase Plan ("ESPP"), subject to annual increases effective as of January 1, 2022 and each subsequent January 1 through and including January 1, 2030 in an amount equal to the smallest of (i) 1% of the number of shares of the common stock outstanding as of the immediately preceding December 31, (ii) 2,000,000 shares or (iii) such amount, if any, as the Board may determine.
Any such actual or perceived compromises or breaches to systems, or unauthorized access to our customers’ data, products, software or services, or acquisition or loss of data, whether suffered by us, our partners or other third parties, whether as a result of employee error or malfeasance or otherwise, could harm our business.
Any such actual or perceived compromises of or breaches to systems or other security incidents, or unauthorized access to, or unauthorized loss, unavailability, corruption, or other unauthorized use or processing of our customers’ data, products, software or services, or acquisition or loss of data, whether suffered by us, our partners or other third parties, whether as a result of employee error or malfeasance or otherwise, could harm our business.
We cannot be certain that we will not suffer a compromise or breach of the technology protecting the systems or networks that house or access our software, services and products or on which we or our partners process or store personal information or other sensitive information or data, or that any such incident will not be believed or reported to have occurred.
We cannot be certain that we will not suffer a compromise or breach of, or incident impacting, the technology protecting the systems or networks that house or access our software, services and products or on which we or our partners or other third parties on which we rely store or otherwise process personal information or other sensitive information or data, any similar security incident, or that any such breach or other incident will not be believed or reported to have occurred.
Consumer protection laws require us to publish statements that describe how we handle personal information and choices individuals may have about the way we handle their personal information. If such information that we publish is considered untrue, we may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences.
For example, consumer protection laws require us to publish statements that describe how we handle personal information and related choices individuals may have. If such information that we publish is considered untrue or deceptive, we may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences.
In addition, there is an increased risk during these periods that an increased percentage of property developers will file for bankruptcy protection, which may harm our revenue, profitability and results of operations. In addition, we may determine that the cost of pursuing any claim may outweigh the recovery potential of such claim.
In addition, there is an increased risk during these periods that an increased percentage of property developers will file for bankruptcy protection, which may harm our business. In addition, we may determine that the cost of pursuing any claim may outweigh the recovery potential of such claim.
There are a number of factors that could lead to a decline in customer levels or that could prevent us from increasing our customer levels, including: • our failure to introduce new features, software, products, or solutions that customers find engaging or our introduction of new products or solutions, or changes to existing products and solutions that are not favorably received; • harm to our brand and reputation; • pricing and perceived value of our offerings; • our inability to deliver quality products and solutions in a timely manner; • our customers engaging with competitive software, services, products, and solutions; • technical or other problems preventing customers or their residents from using our products and solutions in a rapid and reliable manner or otherwise affecting the customer experience; • deterioration of the apartment or real estate industry, including declining levels of multifamily and single-family rental buildings and reduced spending in the apartment industry; • unsatisfactory experiences with the delivery, installation, or products or solutions; and • deteriorating general economic conditions or a change in consumer spending preferences or buying trends. 12 Additionally, further expansion into international markets will create new challenges in attracting and retaining customers that we may not successfully address.
There are a number of factors that could lead to a decline in customer levels or that could prevent us from increasing our customer levels, including: • our failure to introduce new features, software, products, or solutions that customers find engaging or our introduction of new products or solutions, or changes to existing products and solutions that are not favorably received; • harm to our brand and reputation; • pricing and perceived value of our offerings; • our inability to deliver quality products and solutions in a timely manner; • our customers engaging with competitive software, services, products, and solutions; • technical or other problems preventing customers or their residents from using our products and solutions in a rapid and reliable manner or otherwise affecting the customer experience; • deterioration of the apartment or real estate industry, including declining levels of multifamily and single-family rental buildings and reduced spending in the apartment industry; • unsatisfactory experiences with the delivery, installation, or products or solutions; and • deteriorating general economic conditions or a change in customer or consumer spending preferences or buying trends.
Insurance policies may not cover all of our operating risks and a casualty loss beyond the limits of our coverage could negatively impact our business. We are subject to all of the operating hazards and risks normally incidental to the provision of our products and solutions and business operations.
Insurance policies may not cover all of our operating risks and a casualty loss beyond the limits of our coverage could negatively impact our business. We are subject to all of the operating hazards, such as damaged or stolen inventory, and risks normally incidental to the provision of our products and solutions and business operations.
Similarly, if any of our potential competitors implement new technologies before we are able to implement ours, those competitors may be able to provide more effective products or solutions, possibly at lower prices. Any delay or failure in the introduction of new or enhanced products or solutions could harm our business, financial condition, cash flows and results of operations.
Similarly, if any of our potential competitors implement new technologies before we are able to implement ours, those competitors may be able to provide more effective products or solutions, possibly at lower prices. Any delay or failure in the introduction of new or enhanced products or solutions could harm our business.
During weak or uncertain economic times, the available pool of potential customers may additionally decline as the prospects for new multifamily apartment and single-family rental construction and residential building renovation projects diminish, which may have a corresponding impact on our growth prospects.
During weak or uncertain economic times, the available pool of potential customers and the amount of capital expenditures that our existing customers deploy may decline as the prospects for residential building renovation projects and new multifamily apartment and single-family rental construction diminish, which may have a corresponding impact on our growth prospects.
However, for as long as we remain an “emerging growth company” as defined in the JOBS Act, we will take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, exemption from the requirement to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
However, for as long as we remain an “emerging growth company” as defined in the JOBS Act, we have the ability to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, exemption from the requirement to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding stockholder advisory votes on executive compensation.
There can be no assurances that our defensive measures will prevent cyber-attacks or that we will detect network or system intrusions or other breaches on a timely basis or at all.
There can be no assurances that our or any third-party defensive measures will prevent cyber-attacks or that we or they will detect network or system intrusions or other breaches or incidents on a timely basis or at all.
If these third-party suppliers, manufacturers, and partners experience any delay, disruption or quality control problems in their operations, we could lose market share and our results of operations may suffer. We have limited control over our suppliers, manufacturers, and partners.
If these third-party suppliers, manufacturers, and partners experience any delay, disruption or quality control problems in their operations, we could lose market share and our results of operations may suffer. We have limited control over our suppliers, manufacturers, and partners. These suppliers, manufacturers, and partners may operate in a way which harms our business.
Being a public company and these new rules and regulations may also make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
New rules and regulations applicable to public companies may also make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
Dollars; • new and different sources of competition; • political and economic instability created by the United Kingdom’s departure from the European Union; • deterioration of political relations between the U.S. and other countries in which we may operate; or • political or social unrest, economic instability, conflict or war in such countries, or sanctions implemented by the U.S. against countries in which we operate, all of which could have a material adverse effect on our operations.
Dollars and the transfer of currency from foreign jurisdictions to the U.S.; • new and different sources of competition; • political and economic instability created by the United Kingdom’s departure from the European Union; • deterioration of political relations between the U.S. and other countries in which we may operate; and • political or social unrest, economic instability, conflict or war in, including the war in Ukraine and the Israel-Hamas conflict, or sanctions implemented by the U.S. against countries in which we operate, all of which could have a material adverse effect on our operations.
Complying with these obligations could cause us to incur substantial costs and could increase negative publicity surrounding any incident that compromises customer data. Additionally, some of our customer contracts require us to indemnify customers from damages they may incur as a result of a breach of our systems.
Complying with these obligations could cause us to incur substantial costs and could increase negative publicity surrounding any incident that compromises, or is believed to have compromised, customer data or other personal information. Additionally, some of our customer contracts require us to indemnify customers from damages they may incur as a result of a breach of our systems.
Accusations of infringement of third-party intellectual property rights could materially and adversely affect our business. There has been substantial litigation in the areas in which we operate regarding intellectual property rights and we may be sued for infringement from time to time in the future.
Accusations of infringement of third-party intellectual property rights could materially and adversely affect our business. There has been substantial litigation in the smart home technology industry regarding intellectual property rights and we may be sued for infringement from time to time in the future.
Foreign Corrupt Practices Act of 1977, as amended, the U.S. Travel Act of 1961, and possibly other anti-bribery laws, including those that comply with the Organization for Economic Cooperation and Development, Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and other international conventions.
Travel Act of 1961, and possibly other anti-bribery laws, including those that comply with the Organization for Economic Cooperation and Development, Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and other international conventions.
We may be unable to attract new customers and maintain customer satisfaction, which could have an adverse effect on our business and growth. We have experienced significant customer growth over the past several years.
We may be unable to attract new customers and maintain customer satisfaction, which could have an adverse effect on our business and growth. We have experienced significant customer growth over the past several years and now have 593 customers as of December 31, 2023.
The threats we and our third-party affiliates face continue to evolve and are difficult to predict due to advances in computer capabilities, new discoveries in the field of cryptography and new and sophisticated methods used by criminals.
The threats we, our third-party partners, and other third parties on which we rely face continue to evolve and are difficult to predict due to advances in computer capabilities, new discoveries in the field of cryptography, and new and sophisticated methods used by criminals.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition to our facilities located in the U.S., we lease 2,690 square feet of office space and 3,229 square feet of warehouse space in Zagreb, Croatia. We believe that our facilities are adequate to meet our needs for the immediate future and that suitable additional space will be available to accommodate any expansion of our operations as needed.
Biggest changeIn addition to our facilities located in the U.S., we lease 4,101 square feet of office space and 2,110 square feet of warehouse space in Zagreb, Croatia. We believe that our facilities are adequate to meet our needs for the immediate future and that suitable additional space will be available to accommodate any expansion of our operations as needed.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Performance Graphs and Cumulative Total Return The following shall not be deemed incorporated by reference into any of our other filings under the Exchange Act or the Securities Act.
Biggest changeStock Performance Graphs and Cumulative Total Return The following shall not be deemed incorporated by reference into any of our other filings under the Exchange Act or the Securities Act. 37 The graph below compares the cumulative total stockholder return on our Class A Common Stock with the cumulative total return on the Standard & Poor’s 500 Index and the Russell 2000 Index.
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our Proxy Statement for the 2023 Annual Meeting of Stockholders. 31 Issuer Purchases of Equity Securities None. Item 6. INTENTIONALLY OMITTED
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our Proxy Statement for the 2024 Annual Meeting of Stockholders. Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities None. Item 6. [Reserved]
The chart assumes $100 was invested on January 3, 2022, in the Class A common stock of SmartRent Inc., the S&P 500 Index, the Russell 2000 Index and the De-SPAC ETF, and assumes the reinvestment of any dividends.
The chart assumes $100 was invested on February 9, 2021, in the Class A Common Stock of SmartRent Inc., the S&P 500 Index, and the Russell 2000 Index, and assumes the reinvestment of any dividends.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock is listed on the NYSE under the ticker symbol “SMRT.” FWAA's Class A Common Stock was listed on Nasdaq under the ticker symbol "FWAA" prior to the Business Combination. 30 Holders of Record As of December 31, 2022, there were 24 stockholders of record of our Class A Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock is listed on the NYSE under the ticker symbol “SMRT.” FWAA's Class A Common Stock was listed on Nasdaq under the ticker symbol "FWAA" prior to the Business Combination.
Dividend Policy We have never declared or paid any dividends on our Class A Common Stock. We currently intend to retain all available funds and any future earnings for use in our business and therefore we do not anticipate declaring or paying any cash dividends in the foreseeable future.
We currently intend to retain all available funds and any future earnings for use in our business and therefore we do not anticipate declaring or paying any cash dividends in the foreseeable future.
Removed
The graph below compares the cumulative total stockholder return on our Class A common stock with the cumulative total return on the Standard & Poor’s 500 Index, the Russell 2000 Index and the De-SPAC ETF (NYSE:DSPC) which tracks the performance of The De-SPAC Index (DESPACTR on Bloomberg), an equally weighted portfolio of 25 of the largest de-SPACs on a rolling 12-month basis.
Added
Holders of Record As of December 31, 2023, there were 17 stockholders of record of our Class A Common Stock. Dividend Policy We have never declared or paid any dividends on our Class A Common Stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYears Ended December 31, 2022 vs 2021 Change 2021 vs 2020 Change 2022 2021 2020 $ % $ % (dollars in thousands) Revenue Hardware $ 87,372 $ 69,629 $ 31,978 $ 17,743 25 % $ 37,651 118 % Professional services 32,301 22,732 12,304 9,569 42 % 10,428 85 % Hosted services 48,148 18,276 8,252 29,872 163 % 10,024 121 % Total revenue 167,821 110,637 52,534 57,184 52 % 58,103 111 % Cost of revenue Hardware 83,289 70,448 35,225 12,841 18 % 35,223 100 % Professional services 59,547 38,189 16,176 21,358 56 % 22,013 136 % Hosted services 23,637 12,073 5,430 11,564 96 % 6,643 122 % Total cost of revenue 166,473 120,710 56,831 45,763 38 % 63,879 112 % Operating expense Research and development 29,422 21,572 9,406 7,850 36 % 12,166 129 % Sales and marketing 20,872 14,017 5,429 6,855 49 % 8,588 158 % General and administrative 55,305 25,990 16,584 29,315 113 % 9,406 57 % Total operating expenses 105,599 61,579 31,419 44,020 71 % 30,160 96 % Loss from operations (104,251 ) (71,652 ) (35,716 ) (32,599 ) 45 % (35,936 ) 101 % Other income (expense) Interest income (expense) 1,946 (249 ) (559 ) 2,195 (882 )% 310 (55 )% Other income (expense), net 595 55 (685 ) 540 982 % 740 (108 )% Loss before income taxes (101,710 ) (71,846 ) (36,960 ) (29,864 ) 42 % (34,886 ) 94 % Income tax (expense) benefit 5,388 (115 ) (149 ) 5,503 (4785 )% 34 (23 )% Net Loss $ (96,322 ) $ (71,961 ) $ (37,109 ) $ (24,361 ) 34 % $ (34,852 ) 94 % Comparison of the years ended December 31, 2022 and 2021 Revenue Years Ended December 31, Change Change 2022 2021 $ % (dollars in thousands) Revenue Hardware $ 87,372 $ 69,629 $ 17,743 25 % Professional services 32,301 22,732 9,569 42 % Hosted services 48,148 18,276 29,872 163 % Total revenue $ 167,821 $ 110,637 $ 57,184 52 % Total revenue increased by $57.2 million, or 52%, to $167.8 million for the year ended December 31, 2022, from $110.6 million for the year ended December 31, 2021.
Biggest changeYears ended December 31, 2023 vs 2022 Change 2022 vs 2021 Change 2023 2022 2021 $ % $ % (dollars in thousands) Revenue Hardware $ 137,201 $ 87,372 $ 69,629 $ 49,829 57 % $ 17,743 25 % Professional services 35,473 32,301 22,732 3,172 10 % 9,569 42 % Hosted services 64,164 48,148 18,276 16,016 33 % 29,872 163 % Total revenue 236,838 167,821 110,637 69,017 41 % 57,184 52 % Cost of revenue Hardware 108,780 83,289 70,448 25,491 31 % 12,841 18 % Professional services 55,495 59,547 38,189 (4,052 ) (7 )% 21,358 56 % Hosted services 23,034 23,637 12,073 (603 ) (3 )% 11,564 96 % Total cost of revenue 187,309 166,473 120,710 20,836 13 % 45,763 38 % Operating expense Research and development 28,805 29,422 21,572 (617 ) (2 )% 7,850 36 % Sales and marketing 19,209 20,872 14,017 (1,663 ) (8 )% 6,855 49 % General and administrative 44,674 55,305 25,990 (10,631 ) (19 )% 29,315 113 % Total operating expenses 92,688 105,599 61,579 (12,911 ) (12 )% 44,020 71 % Loss from operations (43,159 ) (104,251 ) (71,652 ) 61,092 (59 )% (32,599 ) 45 % Other income (expense) Interest income (expense), net 8,580 1,946 (249 ) 6,634 341 % 2,195 882 % Other (expense) income, net (116 ) 595 55 (711 ) (119 )% 540 982 % Loss before income taxes (34,695 ) (101,710 ) (71,846 ) 67,015 66 % (29,864 ) (42 )% Income tax (benefit) expense (108 ) (5,388 ) 115 5,280 98 % (5,503 ) (4785 )% Net Loss $ (34,587 ) $ (96,322 ) $ (71,961 ) $ 61,735 64 % $ (24,361 ) (34 )% 45 Comparison of the Years ended December 31, 2023 and 2022 Revenue Years ended December 31, Change Change 2023 2022 $ % (dollars in thousands) Revenue Hardware $ 137,201 $ 87,372 $ 49,829 57 % Professional services 35,473 32,301 3,172 10 % Hosted services 64,164 48,148 16,016 33 % Total revenue $ 236,838 $ 167,821 $ 69,017 41 % Total revenue increased by $69.0 million, or 41%, to $236.8 million for the year ended December 31, 2023, from $167.8 million for the year ended December 31, 2022.
Our operating results and cash flows are dependent upon a number of opportunities, challenges and other factors, including our ability to grow our customer base in a cost-effective manner, expand our hardware and hosted service offerings to generate increased revenue per Unit Deployed (as defined below), provide high quality hardware products and hosted service applications to maximize revenue and improve the leverage of our business model.
Our operating results and cash flows are dependent upon a number of opportunities, challenges and other factors, including our ability to grow our customer base in a cost-effective manner, expand our hardware and hosted service offerings to generate increased revenue per Unit Deployed (as defined below), and provide high quality hardware products and hosted service applications to maximize revenue and improve the leverage of our business model.
Category Adoption and Market Growth Our future growth depends in part on the continued consumer adoption of hardware and software products which improve resident experience and the growth of this market.
Category Adoption and Market Growth Our future growth depends in part on the continued consumer adoption of hardware and software products which improve the resident experience and the growth of this market.
Cost of Revenue Cost of revenue consists primarily of direct costs of products and services together with the indirect cost of estimated warranty expense and customer care and support over the life of the service arrangement. We expect cost of revenue to increase in absolute dollars in future periods.
Cost of Revenue Cost of revenue consists primarily of direct costs of products and services together with the indirect cost of estimated warranty expense and customer care and support over the life of the service arrangement. We expect the cost of revenue to increase in absolute dollars in future periods.
All historic non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures - these non-GAAP financial measures are not intended to supersede or replace our GAAP results. We define EBITDA as net income or loss computed in accordance with GAAP before interest expense, income tax expense and depreciation and amortization.
All historic non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures - these non-GAAP financial measures are not intended to supersede or replace our GAAP results. We define EBITDA as net income or loss computed in accordance with GAAP before interest income/expense, income tax expense and depreciation and amortization.
Hardware Cost of hardware revenue consists primarily of direct costs of proprietary products, Hub Devices, hardware devices and supplies purchased from third-party providers, shipping costs, warehouse facility (including depreciation and amortization of capitalized assets and right-of-use assets) and infrastructure costs, personnel-related costs associated with the procurement and distribution of our products and estimated warranty expenses together with the indirect cost of customer care and support.
Hardware Cost of hardware revenue consists primarily of direct costs of products, Hub Devices, hardware devices and supplies purchased from third-party providers, shipping costs, warehouse facility (including depreciation and amortization of capitalized assets and right-of-use assets) and infrastructure costs, personnel-related costs associated with the procurement and distribution of our products and estimated warranty expenses together with the indirect cost of customer care and support.
The extended transition period exemptions afforded by our emerging growth company status may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of this exemption because of the potential differences in accounting standards used.
The extended transition period exemptions afforded by our emerging growth company status may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company 53 or is an emerging growth company that has chosen not to take advantage of this exemption because of the potential differences in accounting standards used.
For the year ended December 31, 2021, we used $16.4 million net cash from changes in our operating assets and liabilities resulting primarily from increases of $24.0 million in accounts receivable, $15.8 million in inventory, $11.3 million in prepaid expenses and other assets, and $9.3 million in deferred cost of revenue.
For the year ended December 31, 2021, we used $16.4 million net cash from changes in our operating assets and liabilities resulting primarily from increases of $24.0 million in 51 accounts receivable, $15.8 million in inventory, $11.3 million in prepaid expenses and other assets, and $9.3 million in deferred cost of revenue.
In February and March 2021, Legacy SmartRent issued approximately 3.4 million shares of Series C Preferred Stock (which automatically converted into a number of shares of Common Stock upon consummation of the Business Combination) in exchange for $35.0 million gross cash proceeds.
Legacy SmartRent Preferred Stock Issuances In February and March 2021, Legacy SmartRent issued approximately 3.4 million shares of Series C Preferred Stock (which automatically converted into a number of shares of Common Stock upon consummation of the Business Combination) in exchange for $35.0 million gross cash proceeds.
The GAAP measure most directly comparable to EBITDA and Adjusted EBITDA is net income or loss. EBITDA and Adjusted EBITDA are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP.
The GAAP measure most directly comparable to EBITDA and Adjusted EBITDA is net income or loss. 49 EBITDA and Adjusted EBITDA are not used as measures of our liquidity and should not be considered alternatives to net income or loss or any other measure of financial performance presented in accordance with GAAP.
A change in our estimates could have a significant impact on the value of our inventory and our results of operations. 43 Stock-Based Compensation Our stock-based compensation relates to stock options and restricted stock units ("RSUs") granted to our employees and directors. Stock-based awards are measured based on the grant date fair value.
A change in our estimates could have a significant impact on the value of our inventory and our results of operations. Stock-Based Compensation Our stock-based compensation relates to stock options and restricted stock units ("RSUs") granted to our employees and directors. Stock-based awards are measured based on the grant date fair value.
These hardware devices provide features that function independently without subscription to our proprietary software, and the performance obligation for hardware revenue is considered satisfied and revenue is recognized at a point in time when the hardware device is shipped to the customer.
These hardware devices provide features that function independently without subscription to our software, and the performance obligation for hardware revenue is considered satisfied and revenue is recognized at a point in time when the hardware device is shipped to the customer.
We continue to monitor the change in tariffs. If tariffs are increased, such actions may increase our cost of hardware revenue and reduce our hardware revenue margins further in the future.
We continue to monitor the change in tariffs. If tariffs are increased, such actions may increase our cost of hardware revenue and reduce our hardware revenue margins in the future.
We expect cost of revenue to increase in absolute dollars in future periods. In 2019, the U.S. administration imposed significant changes to U.S. trade policy with respect to China. Tariffs have subjected certain SmartRent products manufactured overseas to additional import duties. The amount of the import tariff has changed numerous times based on action by the U.S. administration.
We expect an increase in cost of hardware revenue in absolute dollars in future periods. In 2019, the U.S. administration imposed significant changes to U.S. trade policy with respect to China. Tariffs have subjected certain SmartRent products manufactured overseas to additional import duties. The amount of the import tariff has changed numerous times based on action by the U.S. administration.
Hosted Services Revenue Hosted services primarily consist of monthly subscription revenue earned from the fees collected from customers to provide access to one or more of our software applications including access controls, asset monitoring and related services. These subscription arrangements have contractual terms ranging from one month to ten years and include recurring fixed plan subscription fees.
Hosted Services Revenue Hosted Services primarily consist of monthly subscription revenue earned from the fees collected from customers to provide access to one or more of our software applications including access controls, asset monitoring and related services. These subscription arrangements have contractual terms ranging from one month to eight years and include recurring fixed plan subscription fees.
For ABR Loans, the interest rate is based upon the highest of (i) the Prime Rate, (ii) the Federal Funds Effective Rate plus 0.50%, or (iii) 3.25%, plus an applicable margin. As of December 31, 2022, the applicable margins for SOFR Loans and ABR Loans under the Senior Revolving Facility were 1.75% and (0.50%), respectively.
For ABR Loans, the interest rate is based upon the highest of (i) the Prime Rate, (ii) the Federal Funds Effective Rate plus 0.50%, or (iii) 3.25%, plus an applicable margin. As of December 31, 2023, the applicable margins for SOFR Loans and ABR Loans under the Senior Revolving Facility were 1.75% and (0.50%), respectively.
We expect cost of revenue to increase in absolute dollars in future periods at a rate that is lower than the corresponding increase in hosted services revenue. 35 Operating Expenses Research and Development Research and development expenses consist primarily of personnel-related costs directly associated with our research and development.
In future periods, we expect the cost of Hosted Services revenue to increase in absolute dollars at a rate that is lower than the corresponding increase in Hosted Services revenue. Operating Expenses Research and Development Research and development expenses consist primarily of personnel-related costs directly associated with our research and development activities.
The hardware performance obligation includes the delivery of hardware, and the hosted services performance obligation allows the customer use of our proprietary software during the contracted-use term. The subscription for the software and certain Hub Devices combine as one performance obligation, and there is no support or ongoing subscription for other device hardware.
The hardware performance obligation includes the delivery of hardware, and the Hosted Services performance obligation allows the 52 customer use of our software during the contracted-use term. The subscription for the software and certain Hub Devices combine as one performance obligation, and there is no support or ongoing subscription for other device hardware.
Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of December 31, 2022. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with GAAP.
Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as of December 31, 2023. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with GAAP.
To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. 36 Results of Operations for the Years Ended December 31, 2022, 2021 and 2020 The results of operations presented below should be reviewed together with the consolidated financial statements and notes included elsewhere in this Report.
To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made. 44 Results of Operations for the Years Ended December 31, 2023, 2022 and 2021 The results of operations presented below should be reviewed together with the consolidated financial statements and notes included elsewhere in this Report.
I” to “SmartRent, Inc.” and changed our trading symbol and exchange listing from “FWAA” on Nasdaq to “SMRT” on the NYSE. The Business Combination is accounted for as a reverse capitalization in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
I” to “SmartRent, Inc.” and changed our trading symbol and exchange listing from “FWAA” on Nasdaq to “SMRT” on the NYSE. The Business Combination is accounted for as a reverse capitalization in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Both SmartRent and SightPlan offer an open-API architecture that enables a myriad of third-party partner integrations, resulting in a multi-functional platform that enhances property management workflow efficiencies, empowers teams to get more done, elevates resident interactions, and improves resident living experiences.
We offer an open-API architecture that enables a myriad of third-party partner integrations, resulting in a multi-functional platform that enhances property management workflow efficiencies, empowers teams to get more done, elevates resident interactions, and improves resident living experiences.
We will remain an “emerging growth company” under the JOBS Act until the earliest of (a) the last day of our first fiscal year following the fifth anniversary of our initial public offering, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.07 billion, (c) the last date of our fiscal year in which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non- convertible debt securities during the previous three years.
We will remain an “emerging growth company” under the JOBS Act until the earliest of (a) the first fiscal year following the fifth anniversary of the initial public offering by FWAA (the "FWAA IPO"), which closed on February 9, 2021, (b) the last date of our fiscal year in which we have total annual gross revenue of at least $1.235 billion, (c) the last date of our fiscal year in which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non- convertible debt securities during the previous three years.
Emerging Growth Company Status Section 102(b)(1) of the JOBS Act exempts “emerging growth companies” as defined in Section 2(A) of the Securities Act of 1933, as amended, from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.
Emerging Growth Company Status Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") exempts “emerging growth companies” as defined in Section 2(A) of the Securities Act of 1933, as amended, from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.
Foreign currency transaction gains and losses relate to the impact of transactions denominated in a foreign currency other than the U.S. dollar. As we have expanded our international operations, our exposure to fluctuations in foreign currencies has increased, which we expect to continue.
Foreign currency transaction gains and losses relate to the impact of transactions denominated in a foreign currency other than the U.S. dollar. If we continue to expand our international operations, our exposure to fluctuations in foreign currencies has increased, which we expect to continue.
Specifically, increased demand for electronics as a result of the COVID-19 pandemic, the U.S. trade relations with China and certain other factors have led to a global shortage of semiconductors, including Z‑wave chips, which are a central component of our Hub Devices.
In prior periods, the increased demand for electronics as a result of the COVID-19 pandemic, U.S. trade relations with China and certain other factors in recent periods led to a global shortage of semiconductors, including Z‑wave chips, which are a central component of our Hub Devices.
Expenses in connection with the issuance of the Series C Preferred Stock were $0.2 million, resulting in net cash proceeds of $34.8 million. We have incurred negative cash flows from operating activities and significant losses from operations in the past as reflected in our accumulated deficit of $250.9 million as of December 31, 2022.
Expenses in connection with the issuance of the Series C Preferred Stock were $0.2 million, resulting in net cash proceeds of $34.8 million. 50 We have incurred negative cash flows from operating activities and significant losses from operations in the past as reflected in our accumulated deficit of $285.5 million as of December 31, 2023.
Certain Hub Devices do not function independently without the subscription, and therefore, the revenue is recognized in hosted services revenue. The Company generally provides a one-year warranty period on hardware devices that are delivered and installed. The cost of the warranty is recorded as a component of cost of hardware revenue.
Certain Hub Devices do not function independently without the subscription, and therefore, the revenue is recognized in Hosted Services revenue. We generally provide a one-year warranty period on hardware devices that are delivered and installed. We record the cost of the warranty as a component of cost of hardware revenue.
We record the cost of the warranty as a component of cost of hardware revenue. 34 Professional Services Revenue We generate professional services revenue from installing smart home hardware devices, which does not result in significant customization of the installed products and is generally performed over a period ranging from two to four weeks.
Professional Services Revenue We generate professional services revenue from installing smart home hardware devices, which does not result in significant customization of the installed products and is generally performed over a period ranging from two to four weeks.
For the year ended December 31, 2021, we used $9.4 million of cash for investing activities, resulting primarily due to $5.9 million used for the iQuue acquisition, net of cash acquired. For the year ended December 31, 2020, we used $2.7 million of cash for investing activities, primarily related to the Zenith acquisition, net of cash acquired.
For the year ended December 31, 2021, we used $9.4 million of cash for investing activities, resulting primarily due to $5.9 million used for the iQuue acquisition, net of cash acquired.
Key Operating Metrics We regularly monitor a number of operating and financial metrics, which include certain non-GAAP financial measures in order to evaluate our operating performance, identify trends affecting our business, formulate business plans, measure our progress and make strategic decisions.
Key Operating and Financial Metrics We regularly monitor a number of operating and financial metrics, which include certain non-GAAP financial measures in order to evaluate our operating performance, identify trends affecting our business, formulate business plans, measure our progress and make strategic decisions. Non-GAAP financial measures may not provide accurate predictions of future GAAP financial results.
The acquisition of SightPlan enhances our overall platform offering and customer value proposition by providing a comprehensive one-stop platform that broadens our support of property operations, enhancing the experience for residents, property owners and managers.
Our Smart Operations Solutions enhance our overall platform offering and customer value proposition by providing a comprehensive one-stop platform that broadens our support of property operations, enhancing the experience for residents, property owners and managers.
We record revenue as earned when control of these products and services is transferred to the customer in an amount that reflects the consideration we expect to collect for those products and services.
We record revenue as earned when control of these products and services is transferred to the customer in an amount that reflects the consideration we expect to collect for those products and services. The table below summarizes our revenue by solution.
Hardware Revenue We generate revenue from the direct sale to our customers of hardware smart home devices, which devices generally consist of a Hub Device, door-locks, thermostats, sensors, and light switches.
Currently, the majority of our revenue is generated from the direct sale to our customers of hardware smart home devices, which devices generally consist of a Hub Device, door-locks, thermostats, sensors, and light switches.
The estimated average in-service life of those devices is four years. When a Hub Device without independent functionality is included in a contract that does not require a long-term service commitment, the customer obtains a material right to renew the service because purchasing a new device is not required upon renewal.
When a Hub Device without independent functionality is included in a contract that does not require a long-term service commitment, the customer obtains a material right to renew the service because purchasing a new device is not required upon renewal.
Our cash equivalents are comprised primarily of money market funds. To date, our principal sources of liquidity have been the net proceeds we received through the private issuance of our convertible SmartRent preferred stock, the net proceeds received as a result of the Business Combination, and payments collected from sales to our customers.
Our cash equivalents are comprised primarily of money market funds. To date, our principal sources of liquidity have been the net proceeds received as a result of the Business Combination, and payments collected from sales to our customers.
Management uses EBITDA and Adjusted EBITDA to identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance, while neutralizing the impact of expenses included in our operating results which could otherwise mask underlying trends in our business. See “Non-GAAP Financial Measures” for additional information and reconciliations of these measures.
Management uses EBITDA and Adjusted EBITDA to identify controllable expenses and make decisions designed to help us meet our current financial goals and optimize our financial performance, while neutralizing the impact of expenses included in our operating results which could otherwise mask underlying trends in our business.
For the year ended December 31, 2021, our financing activities provided $473.9 million of cash consisting primarily of net proceeds from the consummation of the Business Combination in the amount of $444.6 million and convertible preferred stock issued of $34.8 million, net of expenses.
For the year ended December 31, 2021, our financing activities provided $473.9 million of cash consisting primarily of net proceeds from the consummation of the Business Combination in the amount of $444.6 million and convertible preferred stock issued of $34.8 million, net of expenses. The proceeds were partially offset by paying off the balance of the Term Loan Facility.
Components of Results of Operations Revenue We generate revenue primarily from sales of systems that consist of hardware devices, professional installation services and hosted services enabling property owners and property managers to have visibility and control over assets, while providing all-in-one home control offerings for residents.
See “Non-GAAP Financial Measures” for additional information and reconciliations of these measures. 41 Components of Results of Operations Revenue We generate revenue primarily from sales of systems that consist of hardware devices, professional installation services and Hosted Services enabling property owners and property managers to have visibility and control over assets, while providing all-in-one home control offerings for residents.
We expect that our sales and marketing expenses will increase over time as we hire additional sales and marketing personnel, increase our marketing activities, grow our domestic and international operations, and continue to build brand awareness.
Our sales and marketing expenses may increase over time as we hire additional sales and marketing personnel, increase our marketing activities, grow our operations, and continue to build brand awareness.
We expect our research and development costs to increase in absolute dollars as we increase our investment in product development to broaden the capabilities of our solutions and introduce new products and features.
We believe our research and development costs will increase in absolute dollars as we increase our investment in product development to broaden the capabilities of our solutions and introduce new products and features – in particular, as we enhance our WiFi offering.
Provision for Income Taxes The income tax benefit on the Consolidated Statement of Operations and Comprehensive Loss is primarily related to the valuation allowance release due to deferred tax liabilities from the SightPlan acquisition. We have established a full valuation allowance for net deferred U.S. federal and state tax assets, including net operating loss carryforwards.
Provision for Income Taxes The income tax benefit on the Consolidated Statement of Operations and Comprehensive Loss is primarily related to the federal, state, and international taxes offset by a change in the valuation allowance. We have established a full valuation allowance for net deferred U.S. federal and state tax assets, including net operating loss carryforwards.
Item 7. Management’s Discussion and Analysis of Fi nancial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included in Item 8 of this Report.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included in Item 8 of this Report. This discussion contains forward-looking statements that involve risks and uncertainties.
We utilize the concept of Units Booked to measure estimated near-term resource demand and the resulting approximate range of post-delivery revenue that we will earn and record. Units Booked represent binding orders only and are a subset of Committed Units. We had 282,512 and 219,901 Units Booked during the years December 31, 2022 and 2021, respectively.
We utilize the concept of Units Booked to measure estimated near-term resource demand and the resulting approximate range of post-delivery revenue that we will earn and record. Units Booked represent binding orders only. For the years ended December 31, 2023, 2022 and 2021 there were 173,195, 282,512, and 219,901 Units Booked, respectively.
Financing Activities For the year ended December 31, 2022, our financing activities used $2.8 million of cash primarily for taxes paid related to net share settlements of stock-based compensation awards.
Financing Activities For the year ended December 31, 2023, our financing activities used $1.9 million of cash, resulting primarily from $1.7 million used for earnout payments related to the iQuue acquisition. For the year ended December 31, 2022, our financing activities used $2.8 million of cash primarily for taxes paid related to net share settlements of stock-based compensation awards.
While these areas represent opportunities for us, they also represent challenges and risks that we must successfully address in order to operate our business. Active Supply Chain Management We are focused on successfully navigating unprecedented global supply chain disruptions.
While these areas represent opportunities for us, they also represent challenges and risks that we must successfully address in order to operate our business. Active Supply Chain Management We continue to experience improvements in the challenges related to the global supply chain.
Due to this shortage, we have experienced Hub Device production delays, which have occasionally affected our ability to meet scheduled installations and facilitate customer upgrades to our higher-margin Hub Devices. Further, we've experienced shortages and shipment delays related to components for Alloy Access and made-to-order specialty locks. Consequently, scheduled deployments have been delayed to future periods.
Due to this shortage in prior periods, we experienced Hub Device production delays, which affected our ability to meet scheduled installations and facilitate customer upgrades to our higher-margin Hub Devices. We also experienced shortages and shipment delays related to components for Access Control and made-to-order specialty locks.
Non-GAAP financial measures may not provide accurate predictions of future GAAP financial results. 33 The limitations our Key Operating Metrics have as an analytical tool are: (i) they might not accurately predict our future GAAP financial results, (ii) we might not realize all or any part of the anticipated value reflected in Units Booked and (iii) other companies, including companies in our industry, may calculate our Key Operating Metrics or similarly titled measures differently, which reduces its usefulness as a comparative measure.
The limitations our Key Operating Metrics have as an analytical tool are: (i) they might not accurately predict our future GAAP financial results, (ii) we might not realize all or any part of the anticipated value reflected in Units Booked, and (iii) other companies, including companies in our industry, may calculate our Key Operating Metrics or similarly titled measures differently, which reduces its usefulness as a comparative measure. 40 Units Deployed, New Units Deployed and Units Shipped We define Units Deployed as the aggregate number of Hub Devices that have been installed (including customer self-installations) as of a stated measurement date.
The increase in both periods resulted from the increase in the aggregate number of Units Deployed and the resulting increase in hub amortization and the number of active subscriptions for our software service applications.
The decrease resulted from the decrease in personnel related costs, partially offset by the increase in the aggregate number of Units Deployed and the resulting increase in hub amortization and the number of active subscriptions for our software service applications.
Hardware cost of revenue increased by $12.8 million, or 18%, to $83.3 million for the year ended December 31, 2022, from $70.4 million for the year ended December 31, 2021.
Hardware cost of revenue increased by $25.5 million, or 31%, to $108.8 million for the year ended December 31, 2023, from $83.3 million for the year ended December 31, 2022.
The increase from both components of hosted services revenue resulted primarily from the increased aggregate number of Units Deployed from 339,485 units at December 31, 2021 to 547,196 units at December 31, 2022 and an increase in SaaS ARPU of 93% to $5.32 for the year ended December 31, 2022 from $2.76 for the year ended December 31, 2021.
The increase from both components of Hosted Services revenue resulted primarily from a 32% increase in the aggregate number of Units Deployed, primarily of our Smart Apartment solution, from 547,196 units at December 31, 2022 to 719,691 units at December 31, 2023 and an increase in SaaS ARPU of 2% to $5.40 for the year ended December 31, 2023 from $5.32 for the year ended December 31, 2022.
We also expect to increase the size of our general and administrative staff in order to support the growth of our business. Other Expenses Other expenses consist primarily of interest expense, foreign currency transaction gains and losses, and other income related to the operations of foreign subsidiaries. Interest expense is recorded in connection with our various debt facilities.
Other Income/Expenses Other income/expenses consist primarily of interest income, net of interest expense, foreign currency transaction gains and losses, and other income related to the operations of foreign subsidiaries. Interest expense is recorded in connection with our various debt facilities.
We define Adjusted EBITDA as EBITDA reduced by stock-based compensation expense, non-employee warrant expense, warranty provisions for battery deficiencies, asset impairment, loss on extinguishment of debt, change in fair value of derivatives, unrealized gains and losses in currency exchange rates, non-recurring expenses in connection with acquisitions and other expenses caused by non-recurring, or unusual, events that are not indicative of our ongoing business.
We define Adjusted EBITDA as EBITDA before the following items: stock-based compensation expense, non-employee warrant expense, non-recurring warranty provisions, asset impairment, loss on extinguishment of debt, non-recurring expenses in connection with acquisitions, severance charges, and other expenses caused by non-recurring or unusual events that are not indicative of our ongoing business.
Years Ended December 31, (amounts in thousands) 2022 2021 2020 Net loss $ (96,322 ) $ (71,961 ) $ (37,109 ) Interest (income) expense, net (1,946 ) 249 559 Provision for income taxes (5,388 ) 115 149 Depreciation and amortization 4,262 463 295 EBITDA (99,394 ) (71,134 ) (36,106 ) Stock-based compensation 13,716 8,131 1,759 Non-employee warrant expense 289 931 481 Compensation expense in connection with acquisitions 5,042 - 3,353 Other non-recurring acquisition expenses 1,197 - - Asset impairment 4,441 - - Loss on extinguishment of debt - 27 164 Loss on change in exchange rates - - 470 Loss on warranty provision - 6,430 3,200 Adjusted EBITDA $ (74,709 ) $ (55,615 ) $ (26,679 ) 40 Liquidity and Capital Resources Sources of Liquidity As of December 31, 2022, we had cash and cash equivalents of $210.4 million, which were held for working capital and general corporate purposes.
For the years ended December 31, 2023 2022 2021 (dollars in thousands) Net loss $ (34,587 ) $ (96,322 ) $ (71,961 ) Interest (income) expense, net (8,580 ) (1,946 ) 249 Income tax (benefit) expense (108 ) (5,388 ) 115 Depreciation and amortization 5,533 4,262 463 EBITDA (37,742 ) (99,394 ) (71,134 ) Stock-based compensation 13,271 13,716 8,131 Non-employee warrant expense (193 ) 289 931 Compensation expense in connection with acquisitions 2,010 5,042 - Asset impairment - 4,441 - Severance charges 1,070 - - Other acquisition expenses 651 1,197 - Loss on extinguishment of debt - - 27 Non-recurring warranty provision 1,746 - 6,430 Adjusted EBITDA $ (19,187 ) $ (74,709 ) $ (55,615 ) Liquidity and Capital Resources Sources of Liquidity As of December 31, 2023, we had cash and cash equivalents of $215.2 million, which were held for working capital and general corporate purposes.
Units Deployed and New Units Deployed We define Units Deployed as the aggregate number of Hub Devices that have been installed (including customer self-installations) as of a stated measurement date. We define New Units Deployed as the aggregate number of Hub Devices that were installed (including customer self-installations) during a stated measurement period.
We utilize the Units Deployed metric to assess the health of our business and measure the trajectory of our growth. We define New Units Deployed as the aggregate number of Hub Devices that were installed (including customer self-installations) during a stated measurement period.
Income Taxes Years Ended December 31, Change Change 2022 2021 $ % (dollars in thousands) Loss before income taxes $ (101,710 ) $ (71,846 ) $ (29,864 ) 42 % Income tax (expense) benefit 5,388 (115 ) 5,503 (4785 )% We provided a full valuation allowance on our net U.S. federal and state deferred tax assets at December 31, 2022, and December 31, 2021.
Income Taxes Years ended December 31, Change Change 2023 2022 $ % (dollars in thousands) Loss before income taxes $ (34,695 ) $ (101,710 ) $ 67,015 66 % Income tax benefit (108 ) (5,388 ) 5,280 98 % We provided a full valuation allowance on our net U.S. federal and state deferred tax assets at December 31, 2023, and December 31, 2022.
We must continually develop and introduce innovative new software services and hardware products, integrate with third-party products and services, mobile applications and other new offerings. New Products, Features and Functionality We will need to expend additional resources to continue introducing new products, features and functionality to enhance the value of our smart home operating system.
We must continually develop and introduce innovative new software services and hardware products, and integrate with third-party products and services, mobile applications and other new offerings. 39 New Products, Features and Functionality We are evolving our business into a more diverse platform with new products, features and functionality that enhance the value of our smart home operating system.
We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and stock exchange listing requirements, additional insurance expense, investor relations activities and other administrative and professional services.
General and Administrative Expenses General and administrative expenses consist primarily of personnel-related costs associated with our general and administrative organization, professional fees for legal, accounting and other consulting services, office facility, insurance, information technology costs, and expenses incurred as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and stock exchange listing requirements, additional insurance expense, investor relations activities and other administrative and professional services.
We do not currently expect the Inflation Reduction Act to have a material impact on our financial results, including on our annual estimated effective tax rate. 39 Comparison of the years ended December 31, 2021 and 2020 For comparison of the fiscal years ended December 31, 2021 and 2020, refer to Part II, Item 7 "Management's discussion and analysis of financial condition and results of operations" on Form 10-K for our fiscal year ended December 31, 2021 filed with the SEC on March 5, 2022, under the subheading "Comparison of the years ended December 31, 2021 and 2020".
For comparison of the fiscal years ended December 31, 2022 and 2021, refer to Part II, Item 7 "Management's discussion and analysis of financial condition and results of operations" on Form 10-K for our fiscal year ended December 31, 2022 filed with the SEC on March 8, 2023, under the subheading "Comparison of the years ended December 31, 2022 and 2021".
Of the $48.1 million revenue in 2022, $20.3 million is related to hub amortization and $27.8 million is related to SaaS revenue. Revenue increased from hub amortization and SaaS by $10.0 million and $19.9 million, respectively, from the year ended December 31, 2021 to the year ended December 31, 2022.
Of the $64.1 million revenue in 2023, $23.0 million is related to hub amortization and $41.1 million is related to SaaS revenue. Revenue increased from hub amortization and SaaS by $2.7 million and $13.3 million, respectively, from the year ended December 31, 2022 to the year ended December 31, 2023.
Annual Recurring Revenue We define Annual Recurring Revenue (“ARR”) as the annualized value of our recurring SaaS revenue earned in the current quarter. We monitor our ARR to assess the general health and trajectory of our hosted services business. Our ARR was approximately $32.3 million, $10.6 million and $4.9 million as of December 31, 2022, 2021 and 2020, respectively.
We monitor our ARR to assess the general health and trajectory of our Hosted Services business. Our ARR was approximately $46.2 million, $32.3 million, and $10.6 million as of December 31, 2023, 2022 and 2021 respectively.
We have recently introduced a number of product enhancements and features, including the Building Access Control, Video Intercom, WiFi, Parking, and Work Order Management solutions. In the future, we intend to continue to release new products and solutions and enhance our existing products and solutions, and we expect that our operating results will be impacted by these releases.
In the future, we intend to continue to release new products and solutions and enhance our existing products and solutions, and we expect that our operating results will be impacted by these releases.
Variable consideration is immaterial. We sell certain Hub Devices, which only function with the subscription to our proprietary software applications and related hosting services. We consider those devices and hosting services subscription as a single performance obligation, and therefore we defer the recognition of revenue for those devices that are sold with application subscriptions.
We consider those devices and hosting services subscription as a single performance obligation, and therefore we defer the recognition of revenue for those devices that are sold with application subscriptions. The estimated average in-service life of those devices is four years.
As of December 31, 2022, we had $205.8 million of U.S. federal and $188.3 million of state gross net operating loss carryforwards available to reduce future taxable income, which will be carried forward indefinitely for U.S. federal tax purposes and will expire on varying dates for state tax purposes.
As of December 31, 2023, we had U.S. federal net operating losses of $3.7 million that begin to expire in 2032 and $200.9 million which will be carried forward indefinitely. As of December 31, 2023, we had $193.4 million of state net operating loss carryforwards that expire on varying dates.
For the years December 31, 2022, 2021 and 2020, there were 282,512, 219,901, and 112,555 Units Booked, respectively. EBITDA and Adjusted EBITDA We define EBITDA as net income or loss computed in accordance with GAAP before the following items: interest expense, income tax expense and depreciation and amortization.
Non-GAAP Financial Measures EBITDA and Adjusted EBITDA We define EBITDA as net income or loss computed in accordance with GAAP before the following items: interest income/expense, income tax expense and depreciation and amortization.
We define Adjusted EBITDA as EBITDA before the following items: stock-based compensation expense, non-employee warrant expense, warranty provisions for battery deficiencies, asset impairment, loss on extinguishment of debt, change in fair value of derivatives, unrealized gains and losses in currency exchange rates, and non-recurring expenses in connection with acquisitions.
We define Adjusted EBITDA as EBITDA before the following items: stock-based compensation expense, non-employee warrant expense, non-recurring warranty provisions, asset impairment, loss on extinguishment of debt, non-recurring expenses in connection with acquisitions, severance charges, and other expenses caused by non-recurring, or unusual, events that are not indicative of our ongoing business.
This was partially offset by a $32.8 million increase in deferred revenue and $1.0 million decrease in prepaid expenses and other assets. Investing Activities For the year ended December 31, 2022, we used $130.8 million of cash for investing activities, resulting primarily from $129.7 million used for the SightPlan acquisition, net of cash acquired.
For the year ended December 31, 2022, we used $134.0 million of cash for investing activities, resulting primarily from $129.7 million used for the SightPlan acquisition, net of cash acquired.
Our expectation is that we will not see marked improvements with respect to supply chain delays for Alloy Access and for made-to-order locks through 2023. 32 Investing in Research and Development Our performance is significantly dependent on the investments we make in research and development, including our ability to attract and retain highly skilled research and development personnel.
Investing in Research and Development Our performance is significantly dependent on the investments we make in research and development, including our ability to attract and retain highly skilled research and development personnel.
Approximately $9.9 million of the 2022 increase in SaaS resulted from contributions from iQuue and SightPlan. Excluding contributions from iQuue and SightPlan, SaaS ARPU was $3.42 for the year ended December 31, 2022. We define SaaS ARPU as total SaaS revenue for a given period divided by the average aggregate Units Deployed in the same period.
We define SaaS ARPU as total SaaS revenue during a given period divided by the average aggregate Units Deployed in the same period. For the years ended December 31, 2023, 2022 and 2021, SaaS ARPU was $5.40, $5.32 and $2.76, respectively.
If we are unable to raise additional capital when desired and on reasonable terms, our business, results of operations, and financial condition may be adversely affected. 41 Cash Flow Summary - Years Ended December 31, 2022, 2021 and 2020 The following table summarizes our cash flows for the periods presented: Years Ended December 31, 2022 2021 2020 (dollars in thousands) Net cash (used in) provided by Operating activities $ (81,037 ) $ (70,376 ) $ (28,490 ) Investing activities (130,789 ) (9,373 ) (2,680 ) Financing activities (2,801 ) 473,926 48,221 Operating Activities For the year ended December 31, 2022, our operating activities used $81.0 million in cash resulting primarily from our net loss of $96.3 million and $8.1 million used in changes in our operating assets and liabilities, partially offset by $23.4 million provided by non-cash expenses.
Cash Flow Summary - Years Ended December 31, 2023, 2022 and 2021 The following table summarizes our cash flows for the periods presented: Years ended December 31, 2023 2022 2021 (dollars in thousands) Net cash provided by (used in) Operating activities $ 5,981 $ (77,833 ) $ (70,376 ) Investing activities (6,023 ) (133,993 ) (9,373 ) Financing activities (1,905 ) (2,801 ) 473,926 Operating Activities For the year ended December 31, 2023, our operating activities resulted in net proceeds of $6.0 million in cash resulting primarily from $27.8 million provided by non-cash expenses and $12.8 million provided by changes in our operating assets and liabilities, partially offset by our net loss of $34.6 million.
For the year ended December 31, 2022, general and administrative expenses increased by $29.3 million, or 113%, to $55.3 million from $26.0 million for the year ended December 31, 2021, resulting primarily from increases of approximately $10.3 million in personnel-related expenses, asset impairment of $4.4 million related to a prepaid license agreement and a loan receivable, stock-based compensation of $4.2 million, business insurance of $3.6 million, primarily related to Directors and Officers insurance, and $2.8 million of intangible asset amortization.
For the year ended December 31, 2023, general and administrative expenses decreased by $10.6 million, or 19%, to $44.7 million, from $55.3 million for the year ended December 31, 2022, resulting primarily from a $4.4 million asset impairment related to a prepaid license agreement during the year ended December 31, 2022.
Overview We are an enterprise real estate technology company that provides a comprehensive management platform designed for property owners, managers and residents. Our suite of products and services, which includes both smart building hardware and cloud-based SaaS solutions, provides seamless visibility and control over real estate assets.
Our suite of products and services, which includes both smart building hardware and cloud-based SaaS solutions, provides seamless visibility and control over real estate assets. Our platform can lower operating costs, increase revenues, mitigate operational friction and protect assets for owners and operators, while providing a differentiated, elevated living experience for residents.
Our arrangements do not provide the customer with the right to take possession of our software at any time. Customers are granted continuous access to the services over the contractual period. Accordingly, fees collected for subscription services are recognized on a straight-line basis over the contract term beginning on the date the subscription service is made available to the customer.
The majority of our recurring revenue contracts range from one month to one year and our average recurring revenue contract term is 1.6 years. Our arrangements do not provide the customer with the right to take possession of our software at any time. Customers are granted continuous access to the services over the contractual period.
Other Income (Expenses) Years Ended December 31, Change Change 2022 2021 $ % (dollars in thousands) Interest income (expense), net $ 1,946 $ (249 ) $ 2,195 882 % Other income (expense), net 595 55 540 982 % Interest income, net increased by $2.2 million, or 882%, to $1.9 million for the year ended December 31, 2022, from $(0.2) million for the year ended December 31, 2021.
Additionally, business insurance and third-party consulting expenses decreased by $2.3 million and $2.0 million, respectively. 48 Other Income Years ended December 31, Change Change 2023 2022 $ % (dollars in thousands) Interest income, net $ 8,580 $ 1,946 $ 6,634 341 % Other (expense) income, net (116 ) 595 (711 ) (119 )% Interest income, net increased by $6.6 million to approximately $8.5 million for the year ended December 31, 2023, from $1.9 million for the year ended December 31, 2022.
For the year ended December 31, 2020, our operating activities used $28.5 million in cash resulting primarily from our net loss of $37.1 million, which was partially offset by $11.3 million of non-cash expenses consisting primarily of $3.4 million of non-cash compensation expense related to the Zenith Highpoint Inc.
For the year ended December 31, 2022, our operating activities used $77.8 million in cash resulting primarily from our net loss of $96.3 million and $4.9 million used in changes in our operating assets and liabilities, partially offset by $23.4 million provided by non-cash expenses.
For the year ended December 31, 2020, we used net cash of $2.7 million from changes in our operating assets and liabilities resulting primarily from an increase of $13.5 million in accounts receivable, an $11.1 million increase in inventory, an $8.6 million increase in deferred cost of revenue, and $3.2 million decrease in accrued expenses and other liabilities.
Changes in our operating assets and liabilities primarily resulted from a $31.7 million decrease in inventory and a $13.0 million decrease in deferred cost of revenue, partially offset by a $16.8 million decrease in deferred revenue and an $11.0 million decrease in accrued expenses and other liabilities.
This increase in hardware cost of revenue was primarily attributable to approximately $16.7 million resulting from greater sales volumes and an increase of approximately $2.5 million for direct personnel-related costs for the year ended December 31, 2022.
This increase in hardware cost of revenue was primarily attributable to approximately $26.4 million of additional cost resulting from greater sales volumes and the shipment of distinct Hub Devices during the year ended December 31, 2023, partially offset by reductions to other costs of revenue attributable to improved processes and efficiencies.
This increase in hardware revenue resulted from a 4% increase in units shipped and an Average Revenue per Unit ("ARPU") increase of 21% to $436.49 for the 2022 period from $361.02 for the 2021 period. We define hardware ARPU as total hardware revenue for a given period divided by number of Hub Devices shipped in the same period.
We define Hardware ARPU as total hardware revenue during a given period divided by the total units shipped during the same period. For the years ended December 31, 2023, 2022 and 2021, Hardware ARPU was $605.15, $436.49 and $361.02, respectively.
As of December 31, 2022, we had 547,196 Units Deployed, 851,815 Committed Units, and 501 customers, including many of the top multifamily residential owners in the U.S. As of that date, our customers owned an aggregate of approximately 6.7 million units. This represents approximately 15% of the U.S. market for institutionally owned multifamily rental units and single-family rental homes.
As of that date, our customers owned an aggregate of approximately 7.0 million units. This represents approximately 16% of the United States market for institutionally owned multifamily rental units and single-family rental homes. In addition to multifamily residential owners, our customers include some of the leading homebuilders, single-family rental homeowners, and iBuyers in the United States.
Operating Expenses Years Ended December 31, Change Change 2022 2021 $ % (dollars in thousands) Research and development $ 29,422 $ 21,572 $ 7,850 36 % Sales and marketing 20,872 14,017 6,855 49 % General and administrative 55,305 25,990 29,315 113 % Research and development expenses increased by $7.9 million, or 36%, to $29.4 million for the year ended December 31, 2022, from $21.6 million for the year ended December 31, 2021, resulting primarily from an increase of approximately $6.9 million of personnel-related expenses, as we increased our research and development staff, and an increase in stock-based compensation of $1.3 million.
Operating Expenses Years ended December 31, Change Change 2023 2022 $ % (dollars in thousands) Research and development $ 28,805 $ 29,422 $ (617 ) (2 )% Sales and marketing 19,209 20,872 (1,663 ) (8 )% General and administrative 44,674 55,305 (10,631 ) (19 )% Research and development expenses decreased by $0.6 million, or 2%, to $28.8 million for the year ended December 31, 2023, from $29.4 million for the year ended December 31, 2022, resulting primarily from a decrease of approximately $0.5 million of personnel-related expenses recorded during the year ended December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical consolidated financial statements. To date, we have not engaged in any hedging strategies.
Biggest changeThe effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical consolidated financial statements. To date, we have not engaged in any hedging strategies. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.
Substantially all of our revenue is generated in U.S. dollars. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the U.S. and to a lesser extent in Croatia and other international markets.
Substantially all of our revenue is generated in U.S. dollars. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the United States and to a lesser extent in Croatia and other international markets.
Interest Rate Fluctuation Risk As of December 31, 2022, we had cash, cash equivalents, and restricted cash of approximately $217.7 million, which consisted primarily of institutional money market funds, which carries a degree of interest rate risk.
Interest Rate Fluctuation Risk As of December 31, 2023, we had cash, cash equivalents, and restricted cash of approximately $215.7 million, which consisted primarily of institutional money market funds, which carries a degree of interest rate risk.
A hypothetical 10% change in interest rates would increase interest income by $21.7 million, or decrease interest income by $2.7 million, based on our cash position as of December 31, 2022. 45 Foreign Currency Exchange Rate Risk Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.
A hypothetical 10% change in interest rates would increase our annual interest income by $21.6 million, or decrease our annual interest income by $8.5 million, based on our cash position as of December 31, 2023. Foreign Currency Exchange Rate Risk Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates.
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As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates. 46

Other SMRT 10-K year-over-year comparisons