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Latch, Inc. (LTCH)·Q1 2022 Earnings Summary

Executive Summary

  • Q1 2022 revenue was $13.7M, up 106% y/y; software revenue was $3.0M (+88% y/y) and exceeded the high end of guidance; Adjusted EBITDA loss of $36.8M beat guidance; ARR reached $7.9M and Spaces were 126,746 (+137% and +129% y/y respectively) .
  • Hardware margins improved sharply q/q (from -50% in Q4 to -21% in Q1) while software margins remained high at 89%; management expects spot buys to pressure hardware margins for the remainder of 2022 .
  • Guidance was tightened/mixed: software revenue FY raised to $14.3–$15.3M, FY Adjusted EBITDA improved to $(176)–$(156)M, total revenue FY maintained at $75–$100M; Latch introduced ARR (FY $11.1–$11.9M) and Spaces (FY 182k–194k) guidance; Q2 software revenue guided to $3.3–$3.4M and total revenue to $16.5–$18.5M .
  • Strategic catalysts: accelerated software activations, second/third-party device partnerships contributing >$1M revenue, services ramp (now >10% of revenue), and sales compensation realigned to recurring software/services; management highlighted retrofit strength and a path to broader distribution via partner channels .

What Went Well and What Went Wrong

What Went Well

  • Software revenue growth (+88% y/y to $3.0M) exceeded the high end of guidance, supported by shortened timelines between hardware sales and software starts; “we are raising software revenue guidance for the year” .
  • Hardware gross margins improved q/q from -50% to -21% on fewer spot purchases; services revenue broke out at >10% of total, with direct deployment contributing >$1.5M, strengthening competitive position in installation support .
  • New KPIs (ARR $7.9M, Spaces 126,746) introduced to reflect platform scale; partnerships and 2P/3P device strategy delivered >$1M revenue in Q1, underpinning broader distribution and recurring software growth .

What Went Wrong

  • Hardware revenue timing remains difficult to predict due to macro supply chain and construction delays; management expects continued margin pressure from spot buys through 2022 .
  • Operating expenses were $51.2M in Q1 despite sequential decline vs Q4, reflecting ongoing investment needs; net loss of $44.2M (vs $38.1M y/y) underscores the scale-up phase .
  • Estimates data (Wall Street consensus) unavailable via S&P Global for LTCH at the time of retrieval, limiting comparative beat/miss analysis versus the Street; management’s beat vs internal guidance is clear, but Street context is not [GetEstimates error].

Financial Results

Revenue, EPS, Adjusted EBITDA vs prior quarters

MetricQ3 2021Q4 2021Q1 2022
Total Revenue ($USD Millions)$11.197 $14.522 $13.655
Basic & Diluted EPS ($)n/an/a$(0.31)
Adjusted EBITDA ($USD Millions)$(26.201) $(44.414) $(36.815)

Margins

Margin MetricQ3 2021Q4 2021Q1 2022
Hardware Gross Margin %-21% -50% -21%
Software Gross Margin %91% n/a89%

Segment Revenue Breakdown (Quarterly)

SegmentQ1 2021 ($USD Millions)Q1 2022 ($USD Millions)
Hardware$5.014 $9.055
Software$1.615 $3.039
Services$0.000 $1.561
Total$6.629 $13.655

KPIs

KPIQ1 2021Q1 2022
ARR ($USD Millions)$3.3 $7.9
Spaces (Units with active software contracts)55,305 126,746

Q1 2022 Actual vs Q1 2022 Guidance (from Feb 24, 2022)

MetricGuidance (Range)Actual
Software Revenue ($USD Millions)$2.7–$2.8 $3.039 (Beat)
Total Revenue ($USD Millions)$12.7–$14.8 $13.655 (In line)
Adjusted EBITDA ($USD Millions)$(42)–$(38) $(36.815) (Beat)

Guidance Changes

MetricPeriodPrevious Guidance (Feb 24, 2022)Current Guidance (May 5, 2022)Change
Software Revenue ($USD Millions)FY 2022$14–$15 $14.3–$15.3 Raised
Total Revenue ($USD Millions)FY 2022$75–$100 $75–$100 Maintained
Adjusted EBITDA ($USD Millions)FY 2022$(180)–$(160) $(176)–$(156) Improved
ARR ($USD Millions)FY 2022n/a$11.1–$11.9 Introduced
Spaces (Units)FY 2022n/a182,000–194,000 Introduced
Software Revenue ($USD Millions)Q2 2022n/a$3.3–$3.4 Introduced
Total Revenue ($USD Millions)Q2 2022n/a$16.5–$18.5 Introduced
Adjusted EBITDA ($USD Millions)Q2 2022n/a$(40)–$(36) Introduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2021)Previous Mentions (Q4 2021)Current Period (Q1 2022)Trend
Supply chain & spot buysMacro delays; hardware margin sequentially fell on spot buys Assume disruption persists; small sequential margin improvement targeted Fewer spot purchases in Q1; q/q hardware margin improved; expect pressure through 2022 Improving near-term, cautious outlook
Sales compensation & metricsFocus on bookings growth and attach rates Sunset bookings; comp pivot to in-year software/services; introduce ARR & Spaces Compensation aligned to recurring revenue; exceeded software guidance; raised FY software guide Execution-focused metrics adopted
Partnerships (2P/3P devices)Latch Lens, new Latch M, ecosystem build 2P/3P strategy; distribution/channel leverage >$1M from 2P/3P in Q1; plan broader distribution via partners Scaling contribution
Retrofit marketC2 deadbolt growth; faster revenue conversion Retrofit expansion; upside if persists Two new retrofit products piloting; retrofit strength offsets construction delays Positive momentum
Margins-21% hardware; 91% software Hardware margin pressure from spot buys; seek small sequential improvement Hardware margin -21% (from -50% in Q4); software margin 89% Hardware improving; software resilient
M&A appetiteInorganic opportunities emerging Formalized corp dev efforts Strong inbound; opportunistic acquisitions considered Ongoing
Expansion (Office/Europe)Small office via channel; pilots for large office Europe via partners; office pilots continue Continued office pilots; opportunistic expansion Methodical

Management Commentary

  • “Demand for Latch-enabled spaces continues to grow... after 88% year-over-year growth in software revenue in the first quarter, we are raising software revenue guidance for the year” — Luke Schoenfelder, CEO .
  • “Our software margin was 89%... hardware margins improved from negative 50% to negative 21%... we expect spot buying... to put pressure... for at least the remainder of 2022” — Barry Schaeffer, Interim CFO .
  • “We had more than $1 million of revenue from second-party devices and associated software... enabling broader distribution of our products” — Management .
  • “Services now represent over 10% of our total revenue in the quarter” — Barry Schaeffer .
  • “We now have almost 127,000 spaces... up 129% year-over-year... ARR... was $7.9 million, representing 137% year-over-year growth” — Luke Schoenfelder .

Q&A Highlights

  • Sales compensation realignment: Early proof points include software revenue exceeding high-end guidance and FY raise; focus on recurring software/services .
  • Macro and retrofit: Guidance assumes status quo supply chain; retrofit projects less subject to delays and are a focus, with new retrofit products piloting .
  • Hardware mix and partner channels: Expect trend toward more 2P/3P over time; >$1M Q1 contribution; potential to leverage lock manufacturers’ channels for broader software distribution .
  • Spaces cadence: FY Spaces guide reflects caution due to macro headwinds; management emphasized confidence in the range .
  • M&A and breakeven: Strong inbound opportunities; fully funded plan; focus on efficiency while scaling .

Estimates Context

  • We attempted to pull Wall Street consensus (S&P Global) for LTCH for Q1 2022, Q2 2022, and FY 2022 (EPS, revenue, EBITDA, target price). Data retrieval was unavailable due to missing CIQ mapping for LTCH at the time of request; therefore, comparative analysis versus Street consensus is not provided [GetEstimates error].
  • Implication: Focus on comparisons versus company guidance and prior periods; investors should monitor consensus updates post-mapping for potential estimate revisions.

Key Takeaways for Investors

  • Strong software momentum and recurring KPIs: Software revenue beat and FY raise, with ARR and Spaces accelerating; recurring metrics anchor the thesis as hardware shifts to partner-enabled distribution .
  • Margin trajectory improving: Hardware margins improved materially q/q; software margins remain high; watch spot-buy dynamics and mix shift to 2P/3P for continued gross margin expansion .
  • Services and 2P/3P contributions diversifying revenue: Services now >10%; >$1M from partner devices; broader distribution channels can accelerate space activation and recurring monetization .
  • Guidance signals cautious macro but execution resilience: FY total revenue maintained, FY EBITDA improved, Q2 guidance implies continued growth; retrofit strength and sales comp changes support nearer-term execution .
  • Watch catalysts: New retrofit products, LatchOS update, partner announcements, and potential opportunistic M&A could drive narrative and estimates; management tone confident on long-term scale and efficiency .
  • Risk factors: Persistent supply chain/construction delays and spot-buy pressure can affect hardware revenue/margins and timing; company emphasizes recurring software/services to mitigate .
  • Actionable: Track ARR and Spaces growth versus FY guide, hardware margin progression, services revenue mix, and Q2 execution against guidance; monitor S&P Global consensus once available for beat/miss dynamics [GetEstimates error].