10-Q: SmartRent Q3 2025: Revenue Declines Amid Macro Headwinds

Sentiment:

Quarterly Report 5 November 2025 8:11 AM

SmartRent, Inc. reported a significant decrease in total revenue for Q3 and the nine months ended September 30, 2025, primarily due to deferred capital expenditures by customers and leadership changes, alongside a substantial goodwill impairment charge.

Capital raiseWe may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights.From time to time, we may seek to raise additional funds through equity and debt financings.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.

Worse than expectedTotal revenue decreased by 11% in Q3 2025 and 17% for the nine months ended September 30, 2025.Net loss for the nine months ended September 30, 2025, significantly widened by 158% to $(57.314) million, primarily due to a $24.929 million goodwill impairment charge.Hardware revenue and Units Shipped saw substantial declines, indicating reduced customer capital expenditures.Net cash used in operating activities increased to $(29.232) million for the nine months ended September 30, 2025, from $(20.898) million in the prior year.

Summary

Total revenue for the three months ended September 30, 2025, decreased by 11% to $36.202 million from $40.510 million in the same period of 2024.
Total revenue for the nine months ended September 30, 2025, decreased by 17% to $115.854 million from $139.517 million in the same period of 2024.
Net loss for the three months ended September 30, 2025, was $(6.270) million, an improvement from $(9.923) million in the prior year's quarter.
Net loss for the nine months ended September 30, 2025, significantly widened to $(57.314) million from $(22.220) million in the same period of 2024, primarily due to a $24.929 million goodwill impairment charge.
Hardware revenue decreased by 38% in Q3 2025 and 37% for the nine months, driven by a 55% and 38% decrease in Units Shipped, respectively.
Professional services revenue increased by 113% in Q3 2025 to $7.035 million and 21% for the nine months to $15.255 million, largely due to a 49% increase in New Units Deployed in Q3 and a 34% increase in Professional Services ARPU for the nine months.
Hosted Services revenue decreased by 5% in Q3 2025 to $17.661 million but increased by 1% for the nine months to $55.120 million, supported by an 11% increase in Units Deployed.
Cash and cash equivalents stood at $100.022 million as of September 30, 2025, down from $142.482 million at December 31, 2024.
Net cash used in operating activities for the nine months ended September 30, 2025, was $(29.232) million, compared to $(20.898) million in the prior year.
The company repurchased 5.1 million shares of Class A common stock for $4.9 million during the nine months ended September 30, 2025.

Sentiment

Score: 3

Explanation: The company experienced substantial revenue declines and a widened net loss for the nine-month period, largely driven by a significant goodwill impairment charge and reduced customer capital expenditures. While Q3 showed some improvement in net loss and growth in professional services and new units deployed, the overall financial health, cash burn, and continued revenue contraction in key segments indicate significant challenges.

Positives

Net loss improved in Q3 2025 to $(6.270) million from $(9.923) million in Q3 2024.
Professional services revenue increased significantly by 113% in Q3 2025 to $7.035 million and 21% for the nine months ended September 30, 2025, to $15.255 million.
New Units Deployed increased by 49% in Q3 2025 to 22,644 units.
Units Deployed (cumulative active subscriptions) increased by 11% to 870,230 units as of September 30, 2025.
Bookings increased by 22% in Q3 2025 to $23.955 million.
Property Net Revenue Retention improved to 104% as of September 30, 2025, from 101% as of September 30, 2024.
Customer Net Revenue Retention was strong at 113% as of September 30, 2025.
General and administrative expenses decreased significantly by 57% in Q3 2025 and 19% for the nine months, partly due to lower legal and severance expenses.
Improvements in global supply chain challenges are evidenced by a reduction of backlogged Units Deployed for Access Control and made-to-order locks.
Introduced an AI-powered intelligence layer and enhanced energy management tools in June 2025.

Negatives

Total revenue decreased by 11% in Q3 2025 and 17% for the nine months ended September 30, 2025.
Hardware revenue decreased by 38% in Q3 2025 and 37% for the nine months, primarily due to a significant decrease in Units Shipped.
Units Shipped decreased by 55% in Q3 2025 and 38% for the nine months.
Net loss for the nine months ended September 30, 2025, significantly widened by 158% to $(57.314) million.
A substantial goodwill impairment charge of $24.929 million was recorded during the nine months ended September 30, 2025.
Cash and cash equivalents decreased by $42.460 million from December 31, 2024, to September 30, 2025.
Net cash used in operating activities increased to $(29.232) million for the nine months ended September 30, 2025, from $(20.898) million in the prior year.
Interest income, net, decreased by 56% in Q3 2025 and 54% for the nine months, due to lower cash balances and decreased interest rates.
Inventory write-offs of $1.794 million were recorded in Q3 2025 related to the sunsetting of the parking management solution.
Units Booked decreased by 36% for the nine months ended September 30, 2025.
Units Booked SaaS ARPU decreased by 18% in Q3 2025 and 8% for the nine months.
Customer Churn for Smart Communities Solutions increased to 0.05% in Q3 2025 from 0.01% in Q3 2024, and to 0.15% for the nine months from 0.06% in the prior year.

Risks

Macroeconomic conditions and geopolitical events may continue to impact business, including customer deferral of capital expenditures.
Supply chain disruptions, including tariffs and other trade restrictions, could adversely impact cost structure, supply chain, and the broader economic environment.
Ability to attract and retain highly skilled research and development personnel is crucial for performance.
Operating in a very competitive and rapidly changing environment poses ongoing challenges.
Ability to successfully defend litigation brought against the company, including the ongoing Coverage Action related to the 2024 Class Action settlement.
Need to raise additional capital through equity or debt financing to fund future operations, with no assurance that such financing will be available on acceptable terms or at all.
Ability to achieve or maintain profitability remains a key challenge.
Ability to effectively manage growth and future expenses is critical.
Ability to maintain, protect, and enhance intellectual property is essential.
Ability to comply with existing, modified, or new laws and regulations applicable to the business.
Financial statements rely on estimates and assumptions (e.g., goodwill impairment, inventory valuation, stock-based compensation) which, if inaccurate, could lead to materially different actual results.
A further decrease in common stock share price and market capitalization could indicate a decrease in the fair value of equity, potentially leading to additional goodwill impairment charges.
Risk of increased inventory adjustment if actual product demand is significantly lower than forecast or due to rapidly changing technology and customer requirements.
Exposure to fluctuations in foreign currency exchange rates may adversely affect results as international operations grow.

Future Outlook

The company expects cost of revenue to increase in absolute dollars commensurate with revenue increases, though Hosted Services cost of revenue is anticipated to grow at a lower rate than its corresponding revenue. Research and development costs and sales and marketing expenses are projected to increase as investments in product development and sales team expansion continue. The revenue contribution from non-distinct hub amortization is expected to continue decreasing until fully amortized. The company believes its current cash, cash equivalents, and available borrowing capacity will be sufficient to fund operations for at least the next 12 months, but it may seek additional capital through equity or debt financings for future requirements.

Management Comments

We continue to experience improvements in the challenges related to the global supply chain.
The incremental improvements in the global supply chain are evidenced by our reduction of backlogged Units Deployed for Access Control and made-to-order locks.
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.
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.
In June 2025, we introduced an AI-powered intelligence layer and enhanced energy management tools designed to empower operators.
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.
Our future growth depends in part on the continued consumer adoption of software and hardware products which improve the resident experience and the growth of this market.
We need to deliver solutions that enhance the resident experience and deliver value to our customers, rental property owners and operators, as well as homebuilders and developers, by providing products and solutions designed to enhance visibility and control over assets while providing additional revenue opportunities.
During the year ended December 31, 2024, we experienced headwinds to adoption as certain customers deferred capital expenditures, driven by broader macroeconomic conditions, which resulted in a decrease in Units Shipped and New Units Deployed.
Changes in our executive leadership and the structure of our sales organization have impacted sales and overall volumes.
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.
We believe our sales and marketing expenses will increase in future periods as we continue to invest in building a scalable sales team, which began with hiring our new Chief Revenue Officer in September 2024.
We believe that our current cash, cash equivalents, and available borrowing capacity under the Senior Revolving Facility will be sufficient to fund our operations for at least the next 12 months from the filing of this Report.

Industry Context

SmartRent operates in the enterprise real estate technology sector, providing smart building hardware and SaaS solutions. The industry is characterized by rapid technological change and competition. The company's focus on AI-powered tools and energy management aligns with broader industry trends towards efficiency and advanced analytics in property management. However, the company notes that macroeconomic conditions have led customers to defer capital expenditures, impacting adoption rates and unit deployments, reflecting a potential slowdown or caution in the broader real estate tech investment landscape. The "sticky" nature of its integrated enterprise solutions suggests a competitive advantage in customer retention once deployed.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Chief Executive Officer	John Dorman (Interim)	Frank Martell	June 16, 2025	Appointment of permanent CEO.
Interim Chief Executive Officer	Michael Shane Paladin	John Dorman	April 9, 2025	Departure of Michael Shane Paladin.
President and Chief Executive Officer	Management Committee	Michael Shane Paladin	February 24, 2025	Appointment of new CEO.
Chief Executive Officer	Prior Chief Executive Officer	Management Committee	July 29, 2024	Resignation of prior CEO.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Equity Incentive Plan Amendment	Stockholders approved the 2021 Plan, as amended and restated, increasing the number of shares reserved for issuance thereunder by 8,900 shares of Class A common stock.	May 14, 2024	Expands the pool of shares available for equity compensation, potentially aiding in talent attraction and retention.
New Equity Incentive Plan	Board adopted the SmartRent, Inc. 2025 Inducement Equity Incentive Plan to grant equity awards that are intended to qualify as employment inducement awards under NYSE rules.	January 2025	Provides a mechanism for attracting key talent through equity awards, specifically for new hires or those returning after a bona fide non-employment period.
Stock Repurchase Program	Board authorized a stock repurchase program of up to $50,000 million of Class A common stock.	March 2024	Allows for capital return to shareholders and potential share price support, subject to market conditions and discretion.

Legal Proceedings

Supplier Agreement Dispute: Company filed a complaint against a supplier in March 2022 for malfunctioning products; settled in June 2024 with inventory returned.
2024 Class Action: Putative class action filed in February 2024 against FWAA Defendants and Director Defendants for purported damages from the 2021 business combination; parties agreed to settle for $11,375 million in February 2025, subject to court approval.
Coverage Action: Company filed a separate action in December 2024 against D&O insurance carriers regarding coverage and allocation issues for the 2024 Class Action; settlements in principle reached with primary and excess D&O carriers and FWAA's carrier.
Service Provider Agreement Dispute: Service provider sued the Company in January 2024 for breach of contract related to a licensing agreement; Company cross-complained for fraudulent inducement; settled in March 2025.
FLSA Collective Action: Collective action filed in April 2023 by former employees alleging failure to pay overtime wages; settled for $1,500 million in October 2024, approved by court in December 2024, and paid in January 2025.
Legal expenses incurred for the nine months ended September 30, 2025, included $4,649 million of legal fees and $11,375 million of accrued settlement costs, offset by $11,150 million in committed insurance and third-party contributions for the 2024 Class Action.

Related Party Transactions

A member of the Board served on the board of directors of a SmartRent customer until June 2024.
The company earned revenue of $1,298 million from this customer for the six months ended June 30, 2024.
All business dealings with the customer were entered into in the ordinary course of business and the arrangements are on terms no more favorable than terms that would be available to unaffiliated third parties under the same or similar circumstances.

Stakeholder Impact

Shareholders: Impacted by significant net losses, goodwill impairment, and decreased revenue, but also by the stock repurchase program and efforts to improve retention and introduce new products. Legal settlements and associated costs/recoveries also affect shareholder value.
Employees: Affected by leadership changes (multiple CEO changes), stock-based compensation plans (2021 Plan, Inducement Plan, ESPP), and potential for increased R&D and sales/marketing hiring. The FLSA lawsuit settlement indicates past issues with employee compensation.
Customers: Experience deferred capital expenditures due to macroeconomic conditions, impacting hardware sales. Benefit from new AI-powered tools, enhanced energy management, and broader platform offerings. Customer churn is low but slightly increasing.
Suppliers: Impacted by past disputes (e.g., malfunctioning products leading to litigation). Supply chain improvements are noted.
Creditors: The Senior Revolving Facility is collateralized by substantially all assets, and the company was in compliance with financial covenants as of September 30, 2025.

Next Steps

Continue to develop and introduce innovative new software services and hardware products.
Integrate with third-party products and services, mobile applications, and other new offerings.
Invest in building a scalable sales team.
Monitor and evaluate changes in policy impacting global trade, including tariff regulations.
Reassess approach to manage risk relating to fluctuations in currency rates as international operations grow.
Seek court approval for the settlement of the 2024 Class Action.
Negotiate documentation of settlements in the Coverage Action with excess D&O carrier and FWAA's insurance carrier.
Evaluate the effect of new accounting standards (ASU 2024-03, ASU 2025-01, ASU 2025-05, ASU 2025-06, ASU 2023-09) on consolidated financial statement disclosures.

Key Dates

Date	Description
December 2021	Company purchased all outstanding equity interests of iQuue, LLC.
December 2021	Company entered into a $75,000 Senior Revolving Facility with a five-year term.
March 22, 2022	Company filed a complaint against a supplier in the Superior Court for the State of California, County of Santa Clara.
October 2022	Company sought to rescind a licensing agreement with a service provider.
December 2023	FASB issued ASU No. 2023-09 Income Taxes, effective for annual periods after December 15, 2024.
January 2024	Service provider brought suit against the Company for breach of contract in the Superior Court of California for the County of San Francisco.
February 2024	A putative class action complaint was filed against Fifth Wall Acquisition Sponsor, LLC, Fifth Wall Asset Management, LLC, and the individual directors of Fifth Wall Acquisition Corp. I.
March 2024	The Board of Directors authorized a stock repurchase program of up to $50,000 of Class A common stock.
March 31, 2024	Conditional certification of a collective class was granted in the FLSA lawsuit.
May 14, 2024	Stockholders approved the 2021 Plan, as amended and restated, increasing the number of shares reserved for issuance thereunder by 8,900 shares of Class A common stock.
June 2024	The final settlement agreement was signed in the supplier dispute, and inventory was returned to the supplier.
July 15, 2024	Deadline for potential class members to opt into the FLSA lawsuit.
July 29, 2024	The Company's prior Chief Executive Officer resigned.
October 2024	Parties engaged in private mediation and agreed to settle the FLSA matter for a total amount of $1,500.
December 2024	The Court approved the FLSA settlement and dismissed the case.
December 2024	The Company filed the Coverage Action in the Delaware Superior Court.
January 2025	The Board adopted the SmartRent, Inc. 2025 Inducement Equity Incentive Plan.
January 2025	The Company moved for summary judgment on the Agreements limitation of liability provision in the service provider lawsuit.
January 2025	The FLSA settlement amount of $1,500 was paid in full.
February 2025	Parties participated in mediation for the 2024 Class Action, leading to an agreement to settle for $11,375.
February 2025	Parties participated in mediation for the service provider lawsuit, leading to a settlement agreement.
February 24, 2025	The Company appointed Michael Shane Paladin as President and Chief Executive Officer.
March 2025	The final settlement agreement was signed in the service provider lawsuit, and the case was dismissed with prejudice.
March 2025	The Company granted inducement awards under the Inducement Plan to Michael Shane Paladin.
April 9, 2025	Michael Shane Paladin departed from his role as President and Chief Executive Officer.
April 2025	The Company announced the departure of Mr. Paladin.
June 16, 2025	The Company appointed Frank Martell as President and Chief Executive Officer.
June 2025	The Company introduced an AI-powered intelligence layer and enhanced energy management tools.
June 2025	The Company granted RSU awards under the 2021 Plan to Frank Martell.
July 2025	The final earnout payment of $1,466 was made in connection with the iQuue acquisition.
July 4, 2025	The One Big Beautiful Bill Act (OBBBA) was enacted in the U.S.
July 2025	FASB issued ASU No. 2025-05, effective for fiscal years beginning after December 15, 2025.
August 2025	The parties executed a Stipulation and Agreement of Settlement, Compromise and Release for the 2024 Class Action, which remains subject to court approval.
September 2025	FASB issued ASU No. 2025-06, effective for fiscal years beginning after December 15, 2027.
September 30, 2025	End of the current quarterly reporting period.
October 2025	5 shares of the Company's Class A Common Stock were issued to certain employees related to vested RSUs.
October 2025	The Board approved the issuance of 219 RSUs to an employee under the Inducement Plan.
November 3, 2025	189,200,722 shares of the registrant's Class A Common Stock were outstanding.
November 5, 2025	Date the Quarterly Report on Form 10-Q was signed and filed.
December 2026	Maturity date of the Senior Revolving Facility.

Recommendation

hold

While the company faces significant headwinds including declining revenue, a substantial net loss for the nine-month period driven by goodwill impairment, and increased cash burn from operations, there are some mitigating factors. Q3 2025 showed an improved net loss and strong growth in professional services revenue and new units deployed. Customer and property net revenue retention rates are healthy, suggesting a sticky customer base. The company is actively investing in R&D, introducing new AI-powered solutions, and addressing supply chain issues. However, the overall financial performance for the year-to-date remains weak, and the macroeconomic environment continues to pose challenges. A "hold" recommendation reflects the mixed signals: the company is taking steps to improve, but the financial results are still concerning, warranting a cautious stance until a clear turnaround in overall revenue and profitability is demonstrated.

Keywords

Smart home technology, IoT, real estate tech, SaaS, property management, smart apartments, access control, community WiFi, smart operations, multifamily residential, single-family rental, SEC filing, 10-Q, financial results, revenue, net loss, goodwill impairment, stock repurchase, liquidity, capital expenditures, supply chain, R&D, corporate governance

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