10-Q: DOOR (Latch) Q3 Revenue Soars 54.5% Amid Acquisitions & Leadership Shift

Latch, Inc., now operating as DOOR, reported a significant 54.5% increase in total revenue for Q3 2024, driven by strategic acquisitions and growth in professional services, despite ongoing internal control remediation.

Summary

• Total revenue increased by 54.5% to $14.943 million for the three months ended September 30, 2024, compared to $9.673 million in the prior year.
• Net loss improved by 37.5% to $(17.056) million for Q3 2024, down from $(27.278) million in Q3 2023.
• Adjusted EBITDA improved by 7.7% to $(12.409) million for Q3 2024, compared to $(13.444) million in Q3 2023.
• Professional services revenue surged by 247.9% to $6.255 million, primarily due to the HelloTech Merger and Property Management Acquisitions.
• Software revenue grew by 8.9% to $5.077 million, reflecting continued growth in subscriptions.
• Hardware revenue increased by 12.3% to $3.611 million due to increased shipments.
• The company completed the HelloTech Merger on July 1, 2024, and Property Management Acquisitions in March and May 2024, expanding service offerings.
• Repaid $22.0 million in unsecured promissory notes in full on April 26, 2024.
• Secured a new $6.0 million term loan with Customers Bank on July 15, 2024, maturing July 15, 2029.
• Ongoing material weaknesses in internal control over financial reporting persist, though remediation efforts are underway.
• Several key executive leadership changes occurred in late 2024 and early 2025, including new CEO, CFO, and Chief Strategy & Legal Officer appointments.
• Settled multiple securities class action lawsuits (Brennan Action for $1.95 million, Schwartz Action for $1.95 million, Merger Lawsuits for $29.75 million with Latch paying $4.875 million).

Sentiment

Score: 5

Explanation: While the company demonstrated strong revenue growth and a reduction in net loss and Adjusted EBITDA loss, these improvements are largely driven by acquisitions and come alongside a significant decrease in cash and available-for-sale securities, a decline in total assets and equity, and persistent material weaknesses in internal controls. The ongoing legal settlements and SEC investigation also weigh on the sentiment.

Positives

• Total revenue increased by 54.5% to $14.943 million for the three months ended September 30, 2024, compared to the prior year.
• Professional services revenue saw a substantial increase of 247.9% to $6.255 million, driven by strategic acquisitions.
• Net loss improved by 37.5% to $(17.056) million in Q3 2024, demonstrating progress in reducing losses.
• Adjusted EBITDA improved by 7.7% to $(12.409) million in Q3 2024.
• Successfully repaid $22.0 million in unsecured promissory notes in full on April 26, 2024.
• Secured a new $6.0 million term loan with Customers Bank, extending maturity to July 15, 2029, and forgiving approximately $0.9 million of principal and all accrued interest on the prior loan.
• Cash and cash equivalents, combined with available-for-sale securities, are expected to fund operational cash requirements for at least 12 months from the filing date.
• The HelloTech Merger and Property Management Acquisitions expand the company's service offerings and market reach, supporting its building intelligence platform strategy.

Negatives

• Total cost of revenue increased significantly by 147.8% to $8.868 million in Q3 2024, outpacing revenue growth.
• Hardware cost of revenue increased by 153.9%, partly due to a $1.3 million increase in excess and obsolete reserves.
• Cash and cash equivalents decreased from $94.675 million at December 31, 2023, to $82.591 million at September 30, 2024.
• Available-for-sale securities decreased substantially from $84.861 million at December 31, 2023, to $8.644 million at September 30, 2024.
• Total assets decreased from $294.432 million at December 31, 2023, to $213.548 million at September 30, 2024.
• Total stockholders' equity decreased from $169.137 million at December 31, 2023, to $127.399 million at September 30, 2024.
• Ongoing material weaknesses in internal control over financial reporting persist, indicating continued control deficiencies and potential for misstatements.
• Significant legal fees and settlement costs incurred from multiple class action lawsuits and an SEC investigation.
• Workforce reductions (July 2023 RIF) impacted approximately 70% of full-time employees, potentially affecting operational stability and morale.
• Forfeiture of equity grants due to workforce reductions and executive separations.

Risks

• Ability to remediate identified material weaknesses in internal control over financial reporting and the timing of such remediation.
• Performance of the company's stock, particularly given limited liquidity and depressed trading prices due to delisting from Nasdaq.
• Uncertainty regarding whether common stock and warrants will remain on the OTC Expert Market or be listed on other OTC markets.
• Developments in pending stockholder class action and derivative complaints or other legal proceedings.
• Regulatory disputes and governmental inquiries, including the SEC Investigation.
• Privacy and data protection laws, privacy or data breaches, or loss of data.
• Impact of changes in consumer spending patterns, preferences, economic conditions, crime, weather, demographic trends, and employee availability.
• Increases in component costs, long lead times, supply shortages, and other disruptions to the supply chain.
• Delays in construction timelines at customer building sites.
• Any defects in new products or enhancements to existing products.
• Ability to continue developing new products, services, and innovations to meet evolving customer demands.
• Ability to hire, retain, manage, and motivate employees, including key personnel.
• Impact of workforce reductions on business, financial condition, and results of operations.
• Ability to improve operating and financial results and attain profitability.
• Compliance with laws and regulations applicable to the business.
• Impact of macroeconomic conditions on the business, suppliers, and existing and potential customers.
• Ability to upgrade and maintain information technology systems.
• Ability to acquire and protect intellectual property.
• Ability to successfully identify, complete, integrate, and realize synergies from acquisitions, such as the HelloTech Merger, including retaining key personnel.
• Potential adverse impact of the HelloTech Merger and any future acquisitions, including increased risks, poor performance, or decline in value of acquired businesses and unexpected costs or liabilities.
• Impact of remediating the findings of the Investigation.

Future Outlook

The company expects to continue expanding the DOOR Platform and device integrations to encompass broader smart home solutions, laying the groundwork for a building intelligence platform. It also anticipates resuming RSU grants once current in SEC filings, which will increase stock-based compensation expense. The company expects to fund operational cash requirements for at least 12 months from the filing date.

Management Comments

• "We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act)."
• "Management believes that the condensed consolidated financial statements and related financial information included in this Form 10-Q fairly present in all material respects the Companys financial condition, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with GAAP."
• "The Company is committed to remediating the Legacy Material Weaknesses, fostering continuous improvement in internal controls and enhancing its overall internal control environment."
• "Management believes the ultimate liability arising from such actions, individually and in the aggregate, which existed at September 30, 2024 (other than detailed above), will not materially affect the Companys condensed consolidated results of operations, financial position or cash flows."
• "Based on our current business plan, we expect to be able to use our current cash and cash equivalents and available-for-sale securities to fund our operational cash requirements for at least 12 months from the date of this Form 10-Q."

Industry Context

The company's rebranding to DOOR and expansion into broader smart home solutions and property management services (DPM) aligns with a growing trend in the PropTech sector towards integrated building intelligence platforms. The acquisition of HelloTech positions the company to offer comprehensive last-mile installation and support, a critical component for smart device adoption in multifamily buildings. This strategy aims to capture a larger share of the market by providing end-to-end solutions, from hardware and software to installation and property management, differentiating itself in a competitive landscape.

Comparison to Industry Standards

• The company's strategy of integrating hardware, software, and services, including property management, is comparable to broader trends seen in the smart building and PropTech industry, where companies like SmartRent and RealPage offer integrated solutions for multifamily properties.
• The acquisition of HelloTech for on-demand installation and support services mirrors efforts by larger tech companies and service providers to ensure seamless adoption and maintenance of smart home devices, addressing a common pain point for consumers and property managers.
• The significant increase in professional services revenue (247.9%) suggests successful integration and scaling of new service lines, potentially outperforming industry averages for organic growth in this segment, though specific comparable company data is not provided in the filing.
• The ongoing net losses and material weaknesses in internal controls, however, indicate that the company is still in a challenging operational and financial phase, contrasting with more established, profitable players in the PropTech space.

Management Changes

Corporate Governance

Legal Proceedings

• Brennan v. Latch, Inc., et al. (Securities Class Action): Settled for $1.95 million. The company paid the settlement amount in March 2025, and the court approved it on May 28, 2025.
• Schwartz v. Latch, Inc., et al. (Securities Class Action): Parties agreed in principle to a settlement of $1.95 million in December 2024. A final stipulation was filed in June 2025, preliminarily approved in August 2025, with payment expected before December 31, 2025.
• In re TS Innovation Acquisitions Sponsor, L.L.C. Stockholder Litigation (Merger Lawsuits): Settled for $29.75 million. The company paid $4.875 million, and its insurers paid $10.0 million in January 2025. The court approved the settlement in July 2025.
• In re Latch Inc. Derivative Litigation (Derivative Actions): Two derivative actions consolidated, alleging breach of fiduciary duties and seeking unspecified damages and corporate governance reforms. The company is negotiating a potential settlement and has accrued $0.1 million.
• Service Provider Demand: The company is in discussions with a service provider regarding a demand for $6.8 million. The company believes a settlement is probable, but no legal proceedings have been initiated.
• SEC Investigation: An ongoing investigation by the SEC into the company's key performance indicators and revenue recognition practices. The company is cooperating but cannot predict the duration or outcome.

Related Party Transactions

• A customer, an affiliate of a Board member, had $0.09 million in gross accounts receivable due as of September 30, 2024 ($0.02 million as of December 31, 2023).
• Hardware revenue from this customer was $0.01 million for the three and nine months ended September 30, 2024.
• Software revenue from this customer was $0.03 million for the three months ended September 30, 2024, and $0.11 million for the nine months ended September 30, 2024.
• All transactions with this related party are conducted at market rates.

Stakeholder Impact

• Shareholders: Face risks from ongoing legal proceedings and the SEC investigation, and are impacted by the company's delisting from Nasdaq and trading on the OTC Expert Market. The decrease in total stockholders' equity is a direct negative impact. Potential future equity grants (Performance Options) could lead to dilution.
• Employees: Affected by workforce reductions (July 2023 RIF impacting ~70% of full-time employees), executive leadership changes, and forfeiture of equity grants. New Performance Options were granted to officers and key service providers.
• Customers: Benefit from expanded service offerings through the HelloTech Merger and Property Management Acquisitions, providing integrated smart access, smart home, and property management solutions.
• Creditors (Customers Bank): Provided a new $6.0 million term loan, secured by substantially all company assets (excluding intellectual property), and received a warrant to purchase 1,000,000 shares. The company is in compliance with loan covenants.
• Suppliers/Contract Manufacturers: Impacted by changes in demand plans, though unfunded non-cancellable purchase commitments decreased to zero by September 30, 2024.

Next Steps

• Continue remediation efforts for material weaknesses in internal control over financial reporting.
• Resume granting RSUs once current in SEC filings.
• Continue expanding the DOOR Platform and device integrations for broader smart home solutions.
• Develop a building intelligence platform to automate and streamline building operations.
• Pay the Schwartz Action settlement amount before December 31, 2025.
• Continue discussions regarding a potential resolution for the Derivative Litigation.
• Cooperate with the SEC Investigation.
• Make monthly interest payments on the new term loan until January 15, 2025, then equal monthly installments of principal plus accrued interest until July 15, 2029.

Key Dates

Recommendation

While the company shows promising revenue growth and a reduction in net losses, driven by strategic acquisitions and an expanded service portfolio, significant concerns remain. The substantial decrease in cash and available-for-sale securities, coupled with persistent material weaknesses in internal controls and ongoing legal and regulatory challenges, indicates a high level of operational and financial risk. The stock's delisting from Nasdaq and trading on the OTC Expert Market further limits liquidity and investor confidence. A "hold" recommendation is appropriate as the company navigates these challenges; investors should monitor the remediation of internal controls, the outcome of legal proceedings, and the successful integration and profitability of recent acquisitions before considering further investment.

Keywords

Smart access control, SaaS platform, Property technology, Multifamily rental market, HelloTech, DOOR App, SEC filing, Financial results, Internal controls, Acquisitions, Corporate governance, Legal proceedings, Smart home solutions, Building intelligence