Smart home company SmartRent (NYSE:SMRT) missed Wall Street’s revenue expectations in Q4 CY2024, with sales falling 41.3% year on year to $35.37 million. Its GAAP loss of $0.06 per share was $0.03 below analysts’ consensus estimates.
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Revenue: $35.37 million vs analyst estimates of $39.39 million (41.3% year-on-year decline, 10.2% miss)
EPS (GAAP): -$0.06 vs analyst estimates of -$0.03 ($0.03 miss)
Adjusted EBITDA: -$7.36 million vs analyst estimates of -$4.16 million (-20.8% margin, 76.8% miss)
Operating Margin: -36.6%, down from -9.7% in the same quarter last year
Free Cash Flow was -$14.59 million, down from $7.32 million in the same quarter last year
Annual Recurring Revenue: $54.4 million at quarter end, up 17.7% year on year
Market Capitalization: $244.6 million
Founded by an employee at a real estate rental company, SmartRent (NYSE:SMRT) provides smart home devices and software for multifamily residential properties, single-family rental homes, and student housing communities.
Industrial Internet of Things (IoT) companies are buoyed by the secular trend of a more connected world. They often specialize in nascent areas such as hardware and services for factory automation, fleet tracking, or smart home technologies. Those who play their cards right can generate recurring subscription revenues by providing cloud-based software services, boosting their margins. On the other hand, if the technologies these companies have invested in don’t pan out, they may have to make costly pivots.
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, SmartRent’s 35.1% annualized revenue growth over the last four years was incredible. Its growth surpassed the average industrials company and shows its offerings resonate with customers, a great starting point for our analysis.
SmartRent Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. SmartRent’s recent history shows its demand has slowed significantly as its annualized revenue growth of 2.1% over the last two years was well below its four-year trend.
SmartRent Year-On-Year Revenue Growth
SmartRent also reports its annual recurring revenue (ARR), or the revenue it expects to generate from its existing customer base in the next 12 months. SmartRent’s ARR reached $54.4 million in the latest quarter and averaged 41.5% year-on-year growth over the last two years. Because this performance is better than its normal revenue growth, we can see the company generated more revenue from its existing customers than new customers. Holding everything else constant, this is a positive sign as it should lead to lower sales and marketing expenses.
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SmartRent Annual Recurring Revenue
This quarter, SmartRent missed Wall Street’s estimates and reported a rather uninspiring 41.3% year-on-year revenue decline, generating $35.37 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 8% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and suggests its newer products and services will catalyze better top-line performance.
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SmartRent’s high expenses have contributed to an average operating margin of negative 39.9% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out.
On the plus side, SmartRent’s operating margin rose by 44.1 percentage points over the last five years, as its sales growth gave it operating leverage. Still, it will take much more for the company to reach long-term profitability.
This quarter, SmartRent generated a negative 36.6% operating margin.
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Although SmartRent’s full-year earnings are still negative, it reduced its losses and improved its EPS by 67.3% annually over the last four years. The next few quarters will be critical for assessing its long-term profitability. We hope to see an inflection point soon.
SmartRent Trailing 12-Month EPS (GAAP)
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For SmartRent, its two-year annual EPS growth of 41.4% was lower than its four-year trend. We still think its growth was good and hope it can accelerate in the future.
In Q4, SmartRent reported EPS at negative $0.06, down from negative $0.02 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast SmartRent’s full-year EPS of negative $0.17 will reach break even.
We struggled to find many positives in these results. Its revenue missed significantly and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 7.2% to $1.17 immediately following the results.
SmartRent may have had a tough quarter, but does that actually create an opportunity to invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.
