SMRT Q3 2026 earnings call transcript, November 4, 2026

Hello, everyone. Thank you for joining. And welcome to the Smart Rent Third Quarter 2026 earnings call.

After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one. Again, I will now hand the conference over to Kelly Reisdorf, Head of Investor Relations. Kelly, please go ahead.

Thank you for joining us today. My name is Kelly Reisdorf. Head of Investor Relations for SmartRent. I'm joined today by our President and Chief Executive Officer, Frank Martel, and Daryl Stem, Chief Financial Officer. Before the market opened today, we issued an earnings release and filed our 10Q with SEC, both of which are available. on the Investor Relations section of our website. I would like to remind everyone that the discussion today may contain certain forward-looking statements that involve risks and uncertainties. Various factors could cause our actual... ...results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including in our annual report on Form 10-K and quarterly reports. ...reports on Form 10-Q. We undertake no obligation to provide updates regarding forward-looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial... position in SMRT rent. Also during today's call, we will refer to certain non-GAAP financial measures. A discussion of these non-GAAP financial measures, along with the reconciliation to the most directly compared... ...GAAP measure is included in today's earnings release. We would also like to highlight that our quarterly earnings presentation is available on the Investor Relations section of our website. And with that, I will turn the call...

...over to Frank.

Good morning, everyone. Today I'm going to discuss our third quarter results, which I believe clearly represent our strongest quarterly financial and operational performance in over two years. I will also highlight the expanding opportunity... ...across our installed base and our strategy for sustained long-term value creation. I will then turn the call over to Daryl for a more detailed discussion of our third quarter financials, as well as guidance related to the fourth quarter. Our Vision 2028 strategy is built around two objectives, accelerating growth by extending our competitive...

advantage, and increasing profitability through a more scalable operating model. We have now delivered four successive quarters of improving growth and margin trends, reflecting progress across our sales capabilities, technology advancements, and operational effectiveness. Over the past year, we have focused intently on building a stronger SMRT rent. We've reduced our costs, refined our processes, and engaged with best-in-class partners to support our scale and data capabilities. Having largely put that foundational work behind us, we built a business model. designed to drive sustainable revenue growth and profitability with increasing operating leverage as we grow our industry-leading footprint and expand the insights we provide to our customers. As I said in the past, the SMRT rent team is on a march to 1 million installed units. I believe that we will reach that goal in the first half of next year. Today, SMRT's footprint incorporates approximately 942,000 installed units, providing our customers with high ROI solutions across more than 3,500 multi-family communities and more than 100. 100,000 single-family rental units across the country. The scale of our footprint is unique and provides us with the ability to invest, enhancing our existing solutions, as well as new and emerging technology which supports the success of our customers. and elevating resident experiences. Reaching the 1 million unit threshold represents far more than a milestone of scale. It cements an unmatched footprint across rental housing that reinforces customer retention, drives recurring software revenue, and unlocks...

future hardware refresh opportunities. Combined with our deep industry relationships, this scale increasingly positions SMRTRENT as the logical choice for owners and operators seeking to streamline workflows, improve efficiency, and enhance asset performance. I believe our third quarter results provide an important proof point of the merits inherent in our expanding footprint and our focus on increasing the value we deliver to our customers. In my opinion, the clearest evidence of progress has been the increasing revenue velocity. Q3 core revenue grew 24% ARR increased 11% and gross margin expanded by 1500 basis points to 41%. As we look ahead, our investment in building a truly exceptional sales team is already having a positive impact on growth. And customer engagement. This is clearly reflected by the trend in our trailing 12 months units booked, which has increased by 44%. We believe this supports continuing growth and momentum entering the fourth quarter and 2027. Importantly, we believe our investments in sales, technology, and operations positions the company to convert that demand into revenue more efficiently as deployment activity ramps up. Our scale also sits at the bottom of the screen. Sets the stage for what comes next. Historically, rental housing has operated through disconnected systems and workflows, creating vast amounts of fragmented operational data that managers struggle to translate into better decisions.

SMRT has already done the heavy lifting by deploying connected hardware across nearly 1 million units and building the enterprise operating system to manage it. Now, as our footprint expands, we are laying the foundation to turn that operational data into actionable building intelligence. Over time, the combination of our installed footprint, platform software, and data will help operators automate routine workflows, catch maintenance issues proactively, and improve property level economics. That is our long-term building intelligence opportunity, and it deepens our competitive moat as we look ahead to 2027 and beyond. As I close out my prepared remarks today, I want to reiterate my strong belief that our third quarter results... ...clearly demonstrate the progress that we're making against the key deliverables outlined in Vision 2028, and how that progress is translating into stronger financial performance. The combination of a large installed footprint, a broadening product portfolio, and disciplined execution gives us a compelling opportunity... expand the company's value proposition, and realize the full potential of Vision 2028. We're on the verge of realizing our March to 1 million installed units, and we're exiting 2026 with strong operational and financial momentum. In the coming year, I... I believe SmartRent will reach an important and meaningfully positive inflection point in our ability to scale and consistently grow our revenues and profits. In conclusion, I want to thank our employees, customers, and shareholders for their continued partnership and support. I'll now turn the call over to Daryl to walk through the numbers.

in greater detail. Thank you, Frank, and good morning, everyone. I'll review our third quarter financial and operating performance, including the drivers of revenue growth, margin expansion, profitability. and liquidity. Total revenue was $42 million, an increase of 15%. Core revenue, which excludes non-cash hub amortization revenue associated with hubs shipped in prior years. was $41 million, an increase of 24%. We believe core revenue provides a more useful view of underlying business activity as legacy hub amortization continues to decline. In the quarter hub amortization revenue was approximately $1 million compared to $3 million a year ago. Turning to revenue mix, hardware revenue increased 61% to $19 million. On a trailing 12-month or TTM basis, hardware units shipped totaled approximately $107,000 compared to $114,000 in the prior year period. TTM hardware ARPU increased $14,000. 14% to $558. Three primary factors drove hardware revenue growth. First, shipments supporting fourth quarter deployments of new units. Second, access control shipments increased to $2.5 million, a 242% year over year increase. And finally, equipment upgrades and refreshes create ongoing opportunities for continued growth. Underscore the important role hardware plays throughout the customer lifecycle, as Frank highlighted earlier. Hosted services revenue was $17 million, including $16 million of software revenue and $1 million of hub amortization. Software revenue

increased 11% year-over-year and was driven by expansion of our installed base and increased adoption of access control and self-guided tour solutions, partially offset by attrition within our maintenance solutions. We are currently integrating our maintenance solutions into our core platform, which incorporates significant enhancements to customer workflows, which we believe will expand functionality, improve the customer experience, strengthen long-term retention, and drive revenue growth. As Frank mentioned, we're seeing strong customer demand, which supports our growing pipeline of future deployments. TTM units booked increased 44% to 123,000, and TTM bookings in dollars increased 29% to approximately 144 million dollars. This momentum supports our expectations for higher deployment activity in the fourth quarter in 2027. Third quarter results demonstrate the growing financial contribution of SMRT's full lifecycle business model, with revenue opportunities extending beyond initial deployments to include equipment upgrades and refrages. and expanded technology adoption across our installed base. Hardware and installation revenue associated with upgrade and refresh deployments increased approximately six percent. Over a year to $2.4 million upgrade and refresh hardware revenue increased approximately 65 percent to $400,000 while associated installation revenue. Remain relatively stable at approximately $2 million. As Frank mentioned earlier, an important pillar of Vision 2028 is to build a more scalable operating model that supports profitable growth. We continue to demonstrate progress against that objective.

In the third quarter, with gross margin expanding to 41% from 26% a year ago and gross profit increasing 79% to $17 million. We continue to manage our cost structure with discipline while investing in the capabilities supporting revenue growth and operating leverage. Operating expenses totaled $22 million, compared with $17 million in the prior year quarter. Excluding... In a $2.5 million non-recurring accrual reversal that benefited the prior year period, operating expenses increased approximately 15%, reflecting higher revenues as well as targeted investments in sales, operations, and technology. Net loss narrowed to $3.9 million from $6.3 million. Adjusted EBITDA improved by $4 million year-over-year to $1.1 million, marking our fourth consecutive quarter of positive adjusted EBITDA. We ended September with $89 million in cash and no debt. We generated positive cash flow from operations in the third quarter, an important demonstration of the improving cash-generating capabilities of our business. Driven by improved profitability and working capital management, our significant cash war chest and positive cash flow from operations provide financial flexibility and the ability to fund our growth initiatives and opportunities. Capital return. During the third quarter, we repurchased approximately two and a half million shares or 1.3% of the total outstanding common stock for an aggregate cost of $3.4 million.

Looking ahead, we expect to remain active under our existing share repurchase authorization, reflecting our confidence in the company's long-term value and commitment to disciplined capital allocation. For the fourth quarter... ...we anticipate total revenue growth of 15% to 20% year-over-year. We also expect core revenue growth of 20% to 25% and adjusted EBITDA to increase roughly 450% to 600%. In conclusion, I believe our growing installed base, expanding equipment upgrade and refresh opportunities, and increasing adoption of the integrated technologies... ...solutions provide multiple avenues for revenue growth and improving profitability. In my view, the financial results we delivered this quarter demonstrate the operating leverage inherent in our business model. We delivered strong core revenue growth... ...meaningful gross margin improvement and adjusted EBITDA expansion, all while investing in capabilities that support our next phase of growth. We believe SmartRent is well positioned...

...to translate these investments into sustained financial performance and long-term shareholder value. Thank you. Operator, let's open the call for questions.

We will now begin the question and answer session. If you would like to ask... ...to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you...

...you are muted locally, please remember to unmute your device. Your first question comes from the line of Matthew Mauss with B Reilly Securities. Your line is now open. Please go ahead. Hi, thanks for taking my questions. Congrats on a strong bookings quarter.

Yeah, thank you. Thanks for the compliment and thanks for joining the call. You actually saw the first. Fruits of deployment volume increase during Q3 and the way it manifested itself in Q3 was through hardware shipments. We first have to deliver the hardware to the sites. For the deployments and we're expecting to see an increase in the deployment activity beginning in Q4 and then continuing into 2027. And we still, consistent with our objectives around Vision 2028, expect to achieve 1 million deployed units in the first half of 2027.

Got it, thanks. Similar to that, I'm just wondering, so the, before CivaDug guide is well ahead of where the streak was, so as we look into 2027, how should we think about the balance between continued margin expansion and the Vision 2028 investment in sales? Is there any other early framing on 2027 that you can also share, possibly?

Hi, Matt. This is Frank. Just, look, I think in terms of investment, we have been carrying, you know, a couple million, a quarter investment in primarily in the tech platforms, but also operational enhancements and improvements. And I think, as Daryl mentioned, things like installations. We install.

You know, we are working on, for example, we have a very large increase in access control and self-guided touring, and so the field teams have to install all of that equipment. It doesn't necessarily show up in the IoT booking number. We'll continue. To do that, we'll continue to ramp up going into next year, and I think as it relates to the investment levels, we do expect to start to yield actual revenue in 2027 from those. Investments. Right now, it's just kind of preparatory investment in the capability, but we're on track for, I think, a lot of new and exciting products and solutions that these investments. are going to yield as we go forward. I think in terms of, it's a little early, you know, we want to provide a guide on the fourth quarter, at least a kind of range, largely because we're pretty certain of kind of what fourth quarter is looking like or shaping up. But in terms of 2027, we're not, we're not guiding or providing. specific feedback on the trajectory of the growth, but we do expect continuing improvement. I will tell you that across all of the major financial metrics. Great. Yeah, I understand. The 4Q is a great starting point so far. This last one for me. So hardware. Upgrade units were up 27% over the 12 months. I'm just wondering, like, where are you in refreshing the roughly 300,000 legacy units and how are customers responding to renewal pricing as those contracts come up?

Yeah, I think we are seeing an increasing rate of hardware refreshment. They come in different ways from the standpoint of, you know, it's either a whole unit or some subset of equipment within that. We believe that that's a,

because, you know, equipment doesn't last forever.

Going, going, going into, you know, that kind of phase and where, you know, the useful life is, is, is ending, but it's really a customer by customer strategy and planning session. So obviously working quite closely with them on. How they want to refresh, but we do think that that, along with areas like access control, offer really a, yes, an elevation in our growth rate and a sustained. Level one as we go forward and we're seeing that certainly great. That was all for me. Thanks for taking my questions and congrats on a strong quarter.

Your next question comes from the line of Ryan Tomasello with KBW. Your line is now open. Please go ahead.

We also believe that, you know, this is an additional benefit from having everything on one platform. You get full integration, which helps further improve the efficiency of our customer operations. In terms of ARPU. An economic impact on the company. I would, first of all, caution you that much like with IOT deployments, there can be big variation from community on the ARPU. We typically price our access control installations around the number of doors, common area doors, that exist within a community and typically there's going to be 10 to 20 common area doors in a community, but we also see some communities that approach 100 doors. So there can be big, big variance on the ARPU. from the access control solutions. Great. And then on the macro side, if you can just talk about. The current sentiment you're hearing from multi-family operators appetite for capex spend. Just specifically, if you've seen any thawing of the headwinds, I know that have been an issue in that backdrop. In light of higher rates, if that's impacting sentiment there. Yeah, I would say, you know, the most of the conversations I have with customers, they're, you know, the market's not great, but it doesn't. It doesn't stop them from investing and, you know, their efficiency, their effectiveness, and the resident experience. I think our, you know, we're able to mathematically prove the return on the investment in our solution.

So generally, our discussion with the customers are around that, specifically in the context of what they want to achieve and what we have to offer. And I haven't seen any real change in that, certainly over this year. And so I think we went on the merits of our solutions. And as Daryl said, a lot of investments going into a single platform. We traditionally had different platforms offering our solution sets, putting them into one platform for ease of access. Ease of use. And ultimately through adding additional layer of insight around the data. We have quite an exciting initiative from my perspective and my experience in data for many, many years that, you know, we talked about Databricks. And building a unified database. We're making good progress there. And that's something that we'll unveil next year. And as I said in my remarks, I believe that data analytics and insight is an area. You know, we're relatively underdeveloped in at this moment. And, you know, we're going to rectify that next year. So I think there's, you know, the customers will pay for good quality. And our footprint allows us to be. Wherewithal and carry that within the P&L, which we've done this year. I mean, we would be making more money if we weren't investing in the money we are every quarter in the market and technology areas. We're also. Investing in our operational teams to make sure. Part of the issue is, you know, as we look at it, and so we have a field.

Behind that field force. You know, I think it's all within our control, which is the good news. ROI. And Daryl mentioned, I mean, access control, there's a lot of demand for it because it does work and it's efficient and it's a good solution as is the self-guided tool. And that allows them to get an equal tour from the automation and the applications that we can. And whatever happens in the macro environment, I feel like we can definitely deal with it. And then one last one for me, looking at SAS metrics, it looks like ARR declined sequentially. Driven by a step down in SAS ARR. Can you just talk about the drivers there?

Yeah, we've been experiencing attrition on our smart operation. Solutions. We believe that we'll continue to see some attrition from that particular solution for a couple more quarters. And, you know, the way the mathematics work on our SAS ARR. Calculations. There's no unit attrition that's attributable to smart operations. So that's having some impact. We're mitigating that with improvement in software revenue from access. Control and self-guided touring. And we believe that as we continue to or really resume a higher volume of new unit deployment, that'll provide further growth on software revenues. From the IOT offerings. And, you know, really that's it in a nutshell, right? Yeah. Yeah. I just, Ryan, I mean, it's, it's, that's a pretty isolated and long-term, long-term in the making. As Daryl mentioned, it's really in the, in the maintenance area. And, uh, you know, I think that that will abate, uh, we believe in the coming quarters and, uh, you know, as we grow the IOT footprint, um, and. Some of these other areas that are, uh, are, are high in high demand. I think that will, uh, uh, that, that, that will be a temporary, uh, uh, challenge and just to, uh, to add one final comment. On top of this, we recognize that, um, you know, we can further strengthen our maintenance solution offering by enhancing certain features as well as.

Um, adding it into our core platform. And that's, uh, as Frank mentioned earlier, we've been investing a fairly significant amount of, uh, of our cash into doing that. So, uh, our expectation is that we'll see the fruits of those investments beginning in 2027. Great. Thank you. There are no further questions at this time.

This concludes today's call. Thank you for attending. You may now disconnect.