LTCH.OIDLatch, INC
10-Q: Latch (DOOR) Q2 2024: Revenue Up, Losses Narrow, Risks Remain
Sentiment:
Quarterly Report
Latch, now rebranded as DOOR, reported increased Q2 2024 revenue and narrowed net losses, driven by strategic acquisitions and significant cost reductions, despite ongoing internal control weaknesses and legal challenges.
Delay expectedThe Quarterly Report on Form 10-Q for the period ended June 30, 2024, was filed on November 5, 2025, indicating a significant delay in financial reporting.The company suspended the use of its S-8 Registration Statement on August 10, 2022, and has not granted any RSUs since then, impacting employee compensation and retention.The Schwartz Action was stayed pending completion of the Restatement, and the lead plaintiff was given 21 days post-Restatement to file an amended complaint, indicating delays in legal proceedings tied to financial reporting issues.
Worse than expectedThe filing date for Q2 2024 is November 5, 2025, indicating a severe and prolonged delay in financial reporting and compliance.The company continues to report material weaknesses in internal control over financial reporting, which are fundamental to reliable financial statements.The company has been delisted from Nasdaq and now trades on the OTC Expert Market, significantly reducing liquidity and investor confidence.Ongoing SEC investigation into key performance indicators and revenue recognition practices creates significant regulatory uncertainty.Multiple legal settlements, totaling millions of dollars, highlight past operational and governance issues.Despite improvements in net loss and Adjusted EBITDA, the company remains unprofitable and faces substantial operational and legal headwinds.
Summary
- Total revenue for Q2 2024 increased by 27.1% to $12.9 million, compared to $10.2 million in Q2 2023.
- Net loss for Q2 2024 significantly narrowed by 45.1% to $16.9 million, from $30.9 million in Q2 2023.
- Adjusted EBITDA improved by 50.7% to a loss of $9.9 million in Q2 2024, compared to a loss of $20.1 million in Q2 2023.
- Operating expenses were substantially reduced by 32.7% in Q2 2024, primarily due to decreases in R&D (-66.1%) and sales & marketing (-48.6%).
- The company completed the acquisition of HelloTech, Inc. in July 2024, aiming to expand its service platform.
- Acquired property management divisions in March and May 2024, forming Door Property Management, LLC (DPM).
- Repaid $23.9 million in principal and accrued interest on unsecured promissory notes in April 2024.
- Ongoing material weaknesses in internal control over financial reporting persist as of June 30, 2024.
- Multiple legal proceedings, including securities class actions, have been settled or are in negotiation, incurring significant costs.
- The Quarterly Report on Form 10-Q for the period ended June 30, 2024, was filed on November 5, 2025, indicating a significant delay in financial reporting.
Sentiment
Score: 3
Explanation: While the company shows some operational improvements like revenue growth and reduced losses, these are overshadowed by severe governance and compliance issues, including an extremely late filing, persistent material weaknesses in internal controls, delisting from Nasdaq, ongoing SEC investigation, and significant legal settlements. The strategic acquisitions and liquidity runway are positive, but the fundamental issues create high uncertainty and risk.
Positives
- Significant revenue growth across all segments in Q2 2024: Hardware (+31.0%), Software (+13.8%), Professional Services (+55.3%).
- Substantial reduction in net loss and Adjusted EBITDA loss, indicating improved operational efficiency and cost control.
- Operating expenses decreased significantly, particularly in R&D (-66.1%) and Sales & Marketing (-48.6%).
- Strategic acquisitions of HelloTech and property management divisions aim to expand service offerings and platform capabilities.
- Repayment of $23.9 million in promissory notes strengthens the balance sheet by reducing debt.
- Cash and cash equivalents, along with available-for-sale securities, totaling $110.0 million as of June 30, 2024, are expected to fund operational cash requirements for at least 12 months from the filing date (November 5, 2025).
Negatives
- Continued net losses, with a Q2 2024 net loss of $16.9 million and a six-month net loss of $30.6 million.
- Persistent material weaknesses in internal control over financial reporting, indicating ongoing compliance and operational risks.
- Delisting from Nasdaq and trading on the OTC Expert Market, leading to limited liquidity and depressed stock prices.
- Significant legal expenses and settlement costs from multiple class action lawsuits and an ongoing SEC investigation.
- High general and administrative expenses, despite a decrease, still reflect substantial legal and audit fees.
- The Q2 2024 10-Q was filed on November 5, 2025, indicating severe delays in financial reporting and compliance.
- Workforce reductions in 2022 and 2023 impacted 51% of full-time employees, potentially affecting operational stability and morale.
- HelloTech acquisition consideration included assuming $6.9 million of HelloTech's existing term loan, adding to debt.
Risks
- Inability to remediate identified material weaknesses in internal control over financial reporting in a timely manner.
- Limited liquidity and depressed trading prices of common stock due to delisting from Nasdaq and trading on the OTC Expert Market.
- Uncertainty regarding the outcome of pending stockholder class action and derivative complaints, and other legal proceedings.
- Potential for regulatory disputes and governmental inquiries, including the ongoing SEC Investigation, to result in enforcement actions.
- Risks related to 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.
- Defects in new products or enhancements to existing products.
- Challenges in developing new products, services, and innovations to meet evolving customer demands.
- Difficulties in hiring, retaining, managing, and motivating employees, including key personnel.
- Potential adverse impact of workforce reductions on business, financial condition, and results of operations.
- Inability to improve operating and financial results and attain profitability.
- Challenges in complying with laws and regulations applicable to the business.
- Impact of macroeconomic conditions on the business, suppliers, and customers.
- Difficulties in upgrading and maintaining information technology systems.
- Inability to acquire and protect intellectual property.
- Challenges in successfully identifying, completing, integrating, and realizing 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 existing 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 its DOOR Platform and device integrations to encompass broader smart home solutions, laying the groundwork for a building intelligence platform. It anticipates automating and streamlining building operations, including work order management, property maintenance, and unit inspections and repairs. The company expects to resume granting Restricted Stock Units (RSUs) once it is current in its SEC filings, which will increase stock-based compensation expense. It also expects to be able to fund its operational cash requirements for at least 12 months from the filing date of this Form 10-Q (November 5, 2025).
Management Comments
- "We are actively expanding the DOOR Platform and our device integrations to encompass broader smart home solutions, managing devices such as sensors, thermostats and lighting."
- "This ongoing expansion leverages our established platform to create more connected and efficient buildings as we lay the groundwork for a building intelligence platform, automating and streamlining building operations, including work order management and automation, property maintenance and unit inspections and repairs."
- "We expect hardware cost of revenue to move in-line with our hardware revenue."
- "We expect to resume granting RSUs pursuant to the S-8 Registration Statement once we are current in our SEC filings. Any such grants will increase the Company’s stock-based compensation expense."
- "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 operates in the smart building technology sector, specifically targeting the multifamily rental market with integrated hardware, software, and services. Its rebranding to DOOR and expansion into broader smart home solutions and property management services (DPM) aligns with a growing trend towards comprehensive building intelligence and integrated resident services. The acquisition of HelloTech further supports this by enhancing last-mile installation and connected device support, positioning DOOR to offer a more complete ecosystem for property owners and residents. The focus on automating building operations reflects a broader industry push for efficiency and enhanced user experience in residential properties.
Comparison to Industry Standards
- The filing does not provide specific comparable companies or projects to benchmark against. However, the company's strategy of integrating smart access, smart home, and property management services positions it against a fragmented market of specialized providers.
- Competitors in smart access include companies like Allegion (Schlage), Assa Abloy (Yale), and various IoT startups.
- In the broader smart home and building management space, companies like Honeywell, Siemens, and various proptech startups offer solutions.
- The company's move into property management services (DPM) and last-mile support (HelloTech) suggests a vertical integration strategy, aiming to capture more value across the building lifecycle, which is a common trend among technology providers seeking to deepen customer relationships and expand recurring revenue streams.
- The significant reduction in R&D and Sales & Marketing expenses, while improving net loss, could be a concern if it hinders future innovation or market penetration compared to more aggressive industry players.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chief Product Officer | NA | Jason Mitura | 2024-08-16 | Appointment |
| Chief Product Officer | Jason Mitura | NA | 2024-11-26 | Mutual agreement to step down |
| Chief Strategy Officer | Jamie Siminoff | NA | 2024-12-31 | Mutual agreement to step down, transitioning to advisory role |
| Interim Chief Executive Officer | Jason Keyes | NA | 2025-02-06 | Resignation |
| Interim Chief Financial Officer | Marc Landy | NA | 2025-02-06 | Resignation |
| Chief Executive Officer | NA | David Lillis | 2025-02-06 | Appointment |
| Chief Financial Officer | NA | Jeff Mayfield | 2025-02-06 | Appointment |
| Chief Strategy and Legal Officer | NA | Priyen Patel | 2025-02-06 | Appointment |
| Advisory Services | Jamie Siminoff | NA | 2025-05-01 | Company terminated advisory services |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Internal Control Weaknesses | Company lacked appropriate policies and resources, ineffective risk assessment, control activities, information and communication, and monitoring activities, contributing to inability to properly analyze, record, and disclose accounting matters timely and accurately. | 2022-12-31 | Material weaknesses persist as of June 30, 2024, hindering reliable financial reporting and requiring ongoing remediation efforts. |
| Tone at the Top Remediation | Appointment of interim and then permanent executive officers (CEO, CFO, CSLO) to improve executive management tone, reinforce commitment to integrity, and promote accurate record keeping and ethical values. | 2023-01-01 | Meaningfully enhanced the control environment, but not yet fully remediated as of June 30, 2024, pending long-term effectiveness evidence. |
| Personnel Changes & Restructuring | Undertook various personnel changes, including voluntary and involuntary terminations within sales and finance departments, and established a new leadership team. | 2023-06-01 | Aimed at strengthening the control environment and improving operational efficiency, but also contributed to initial material weaknesses. |
| Policy & Procedure Revisions | Revised policies and procedures related to revenue recognition, including assessment, approval matrix, and exception handling processes. Updated sales contracts to clarify terms and require legal approval for non-standard terms. | 2024-01-01 | Designed to mitigate risks of material misstatement in revenue and improve accuracy of financial reporting. |
| Sarbanes-Oxley Compliance Program | Actively reviewing, reevaluating, and improving the Sarbanes-Oxley compliance program, including governance, risk assessment, testing methodologies, and corrective action. Implemented internal control compliance software. | 2024-01-01 | Aimed at strengthening overall internal control environment and ensuring compliance with regulatory requirements. |
| Enterprise Risk Committee | Reestablished an enterprise risk committee, meeting regularly, and enhanced procedures for a comprehensive enterprise risk assessment. | 2024-01-01 | Intended to improve identification, assessment, and communication of risks to achieve objectives and adapt to business changes. |
Legal Proceedings
- Brennan Action: Securities class action alleging false or misleading statements. Settled for $1.95 million, paid in March 2025.
- Schwartz Action: Securities class action alleging false or misleading statements. Agreed in principle to settle for $1.95 million, expected to be paid before December 31, 2025.
- Merger Lawsuits: Consolidated class actions alleging breach of fiduciary duties related to the TSIA merger. Settled for $29.75 million, paid in January 2025, with the company paying $4.875 million and insurers contributing $10.0 million.
- Derivative Litigation: Two derivative actions alleging breach of fiduciary duties and violations of the Exchange Act. Company is negotiating a potential settlement and has accrued $0.1 million.
- Service Provider Demand: Discussions with a service provider regarding a $6.8 million payment demand under a prior agreement. Company has accrued $6.8 million.
- SEC Investigation: Ongoing investigation by the SEC into issues related to the company's key performance indicators and revenue recognition practices. Outcome and duration are unpredictable.
Related Party Transactions
- The company has one customer who is an affiliate of a Board member.
- Receivables due from this customer: $0.01 million as of June 30, 2024, and $0.02 million as of December 31, 2023.
- Hardware revenue from this customer: $0.001 million for Q2 2024 and $0.003 million for the six months ended June 30, 2024.
- Software revenue from this customer: $0.04 million for Q2 2024 and $0.1 million for the six months ended June 30, 2024.
- All transactions are at market rates.
Stakeholder Impact
- Shareholders: Experience depressed stock prices and limited liquidity due to Nasdaq delisting. Face dilution risk from future equity grants (RSUs) and performance-based equity programs. Subject to uncertainty from ongoing legal proceedings and SEC investigation.
- Employees: Impacted by workforce reductions. Benefit from extended cash-based leadership compensation program and new performance-based equity incentive program, but RSU grants are suspended until SEC filings are current.
- Customers: Benefit from expanded product offerings through acquisitions (HelloTech, DPM) and continued development of the DOOR Platform. May face potential service disruptions or uncertainty due to company's financial and operational challenges.
- Creditors: The $22.0 million promissory notes were repaid, but a new $6.0 million term loan was secured, with covenants requiring a liquidity ratio of at least 4.00.
- Regulatory Authorities: Actively involved in an ongoing SEC investigation, indicating scrutiny over past financial reporting practices.
Next Steps
- Continue remediation efforts for material weaknesses in internal control over financial reporting.
- Cooperate with the SEC Investigation.
- Seek final court approval for the Schwartz Action settlement.
- Resume granting RSUs once current in SEC filings.
- Integrate HelloTech and DPM acquisitions to realize expected synergies and expand service offerings.
- Make monthly principal and interest payments on the new $6.0 million term loan starting January 15, 2025.
- Maintain a liquidity ratio of at least 4.00 as per the loan agreement.
- File the 2024 Annual Report on Form 10-K concurrently with, or promptly after, this 10-Q.
Key Dates
| Date | Description |
|---|---|
| 2021-06-04 | Company consummated merger with TS Innovation Acquisitions Corp. (TSIA), changing its name to Latch, Inc. |
| 2021-06-04 | Public warrants from TSIA IPO converted into public warrants for Post-Combination Company common stock. |
| 2021-06-03 | Latch, Inc. 2021 Incentive Award Plan (the 2021 Plan) approved by TSIA stockholders and became effective upon Business Combination closing. |
| 2021-07-01 | Company purchased a convertible promissory note from a counterparty for $4.0 million. |
| 2021-11-01 | Company executed additional convertible promissory notes for $0.3 million. |
| 2022-03-01 | Company executed additional convertible promissory notes for $0.3 million. |
| 2022-06-30 | Audit committee commenced an investigation into key performance indicators and revenue recognition practices. |
| 2022-08-10 | Company suspended use of its registration statement on Form S-8 under the Securities Act (the S-8 Registration Statement). |
| 2022-12-31 | Company restated certain financial statements in its Annual Report on Form 10-K for the year ended December 31, 2022. |
| 2023-01-11 | Schwartz v. Latch, Inc., et al. securities class action complaint filed. |
| 2023-03-01 | Company adopted ASU 2023-07 for interim periods beginning in the three months ended March 31, 2024 on a retrospective basis. |
| 2023-03-26 | Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC. |
| 2023-04-24 | Scott Schwartz appointed lead plaintiff in Schwartz Action. |
| 2023-05-09 | Kilari v. TS Innovation Acquisitions Sponsor, LLC, et al. class action complaint filed. |
| 2023-05-10 | Subramanian v. TS Innovation Acquisitions Sponsor, LLC, et al. class action complaint filed. |
| 2023-05-18 | Garfield v. Speyer, et al. class action complaint filed. |
| 2023-07-03 | Company completed acquisition of Honest Days Work, Inc. (HDW Acquisition). |
| 2023-07-06 | Merger Lawsuits consolidated under In re TS Innovation Acquisitions Sponsor, L.L.C. Stockholder Litigation. |
| 2023-07-13 | Gottlieb v. Latch, Inc., et al. derivative action filed. |
| 2023-08-01 | Manley Action and Gottlieb Action consolidated under In re Latch Inc. Derivative Litigation. |
| 2023-08-31 | Brennan v. Latch, Inc., et al. securities class action complaint filed. |
| 2023-11-01 | Company relocated its headquarters to St. Louis (Olivette), Missouri. |
| 2023-12-02 | Defendants and lead plaintiffs filed a settlement in the Merger Lawsuits for $29.75 million. |
| 2024-01-01 | Number of shares reserved for future issuance under the 2021 Plan increased by 8,810,007 shares. |
| 2024-01-17 | VB PTC Establishment as Trustee of Gersec Trust appointed lead plaintiff in Brennan Action. |
| 2024-03-01 | Company launched Door Property Management, LLC (DPM) and acquired property management division of The Broadway Company. |
| 2024-04-26 | Company repaid unsecured promissory notes in full for $23.9 million. |
| 2024-05-01 | Company purchased substantially all assets of the property management division of Boston Realty Advisors. |
| 2024-06-21 | Company and LS HT Merger Sub, Inc. entered into an Agreement and Plan of Merger with HelloTech, Inc. |
| 2024-07-01 | HelloTech Merger completed, HelloTech became a wholly-owned subsidiary. |
| 2024-07-15 | Company, Latch Systems, Inc., and HelloTech entered into an Amended and Restated Loan and Security Agreement with Customers Bank for a $6.0 million term loan. |
| 2024-08-11 | Board approved extension of temporary cash-based leadership compensation program and a performance-based equity incentive program (Performance Equity Program). |
| 2024-08-11 | Jason Mitura appointed Chief Product Officer, effective August 16, 2024. |
| 2024-09-13 | Company granted approximately 8.6 million Performance Options to service providers. |
| 2024-09-27 | Company filed a motion to transfer the Schwartz Action to the United States District Court for the Southern District of New York. |
| 2024-11-05 | Filing date of this Form 10-Q. |
| 2024-11-12 | Company and lead plaintiff filed settlement agreement in Brennan Action for $1.95 million. |
| 2024-11-13 | Motion to transfer Schwartz Action denied. |
| 2024-11-18 | Jamie Siminoff and Company mutually agreed he would step down as Chief Strategy Officer on December 31, 2024. |
| 2024-11-26 | Company and Jason Mitura mutually agreed he would step down as Chief Product Officer. |
| 2024-12-02 | Parties agreed in principle to a settlement in Schwartz Action for $1.95 million. |
| 2024-12-31 | Jamie Siminoff stepped down as Chief Strategy Officer. |
| 2025-01-01 | Number of shares reserved for future issuance under the 2021 Plan increased by 8,241,264 shares. |
| 2025-01-15 | Borrowers required to pay equal monthly installments of principal plus accrued interest on the New Loan. |
| 2025-01-31 | Full settlement amount of $29.75 million for Merger Lawsuits paid. |
| 2025-02-04 | Jason Keyes (Interim CEO) and Marc Landy (Interim CFO) provided notice of resignations. |
| 2025-02-06 | David Lillis appointed CEO, Jeff Mayfield appointed CFO, Priyen Patel appointed Chief Strategy and Legal Officer. |
| 2025-03-23 | Consulting agreement with Mr. Mitura terminated. |
| 2025-05-01 | Company terminated Mr. Siminoff's Advisory Services. |
| 2025-05-28 | Court approved settlement in Brennan Action. |
| 2025-07-01 | Court approved settlement in Merger Lawsuits. |
| 2025-07-15 | New Loan matures. |
| 2025-08-01 | Company rebranded as DOOR. |
| 2025-08-01 | Proposed settlement in Schwartz Action preliminarily approved by court. |
| 2025-09-30 | Unrestricted cash and cash equivalents and current and non-current available-for-sale securities were approximately $44.1 million. |
| 2025-12-31 | Company expects to pay Schwartz Action settlement amount before this date. |
| 2026-12-31 | Expected end date of Mr. Siminoff's advisory role. |
| 2027-12-15 | ASU 2025-06 (Intangibles Goodwill and Other Internal-Use Software) effective for fiscal years beginning after this date. |
Recommendation
strong sellDespite some improvements in revenue growth and reduced net losses, the company faces severe and fundamental challenges that make it a high-risk investment. The extremely late filing of the Q2 2024 10-Q (filed November 2025) is a critical red flag, indicating profound operational and compliance issues. The persistence of material weaknesses in internal controls, delisting from Nasdaq, an ongoing SEC investigation, and substantial legal settlements collectively point to significant governance failures and a highly uncertain future. While strategic acquisitions and a stated 12-month liquidity runway offer a glimmer of hope, the magnitude of the underlying problems suggests that the stock carries an exceptionally high risk of further decline and potential long-term value erosion. A seasoned investor would view these issues as insurmountable in the short to medium term, warranting an exit.
Keywords
Smart Access, SaaS, Property Management, IoT, Real Estate Technology, Smart Home, SEC Filing, Financial Results, Corporate Governance, Legal Proceedings, Internal Controls, Acquisition, HelloTech, DOOR Platform
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