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Latch, Inc. (LTCH)·Q4 2021 Earnings Summary

Executive Summary

  • Q4 2021 revenue was $14.5M, up 94% year-over-year; Adjusted EBITDA loss widened to $(44.4)M as Latch absorbed supply-chain costs and accelerated opex investments .
  • Management pivoted from “bookings” to in-period revenue execution and introduced 2022 guidance: total revenue $75–$100M, software revenue $14–$15M, Adjusted EBITDA $(180)M to $(160)M .
  • Q4 call emphasized faster activation via retrofit mix (C2 deadbolt +200% YoY) and new second/third-party device partnerships (TownSteel, Marks USA; intended dormakaba) to broaden distribution and lower hardware R&D burden .
  • Consensus context: S&P Global consensus estimates were unavailable; third-party data indicate a modest revenue beat (~$14.52M vs $13.84M) and a slight EPS beat (−$0.26 vs −$0.28) for Q4 2021 .
  • Near-term stock catalysts: discontinuation of bookings incentives, a transition to second/third-party hardware, and supply-chain normalization that could lift hardware margins; risks include continued macro and activation timing volatility .

What Went Well and What Went Wrong

  • What Went Well

    • Strategic device partnerships announced (TownSteel, Marks USA; intended dormakaba) to scale LatchOS via second/third-party distribution; “We’re very excited to announce our first partners officially in Q4” .
    • Retrofit momentum: C2 deadbolt category grew +200% YoY, supporting quicker time-to-revenue; “We saw over 200% year-over-year growth in our deadbolt product line” .
    • Expanded property management integrations (Yardi, Entrata, RealPage) enabling operator efficiencies; “LatchOS now integrating with the three largest ePMS providers… save on average over four hours per 100 residents” .

  • What Went Wrong

    • Hardware margins pressured by spot-buying and logistics; sequential margin headwinds carried through year-end, with only small sequential improvement expected in 2022 .
    • Activation delays reduced recognized software per dollar of hardware revenues in 2021; management reorganized product teams to accelerate monetization .
    • Opex ramp widened losses; Q4 Adjusted EBITDA loss was $(44.4)M, toward lower end of guidance as gross margins and opex weighed on results .

Financial Results

MetricQ2 2021Q3 2021Q4 2021
Revenue ($USD Millions)$9.0 $11.2 $14.5
Revenue YoY Growth %+227% +120% +94%
Primary EPS ($USD)−0.66 −0.25 −0.26
Adjusted EBITDA ($USD Millions)$(17.4) $(26.2) $(44.4)
Hardware Margin %−12% −21% N/A
Software Margin %90% 91% N/A

Note: S&P Global consensus was unavailable; EPS and revenue estimates cited from third-party aggregator Chartmill.

Consensus vs Actual (third-party, for context):

MetricQ2 2021Q3 2021Q4 2021
Revenue Consensus ($USD Millions)$10.27 $10.76 $13.84
EPS Consensus ($USD)−0.16 −0.26 −0.28

KPIs

KPIQ2 2021Q3 2021Q4 2021
Total Bookings ($USD Millions)$95.8 $96.0 $96.8
Total Booked ARR ($USD Millions)$48.8 $59.8 $71.5
Non-Access Module Attach Rate (%)90% 83% N/A

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Millions)FY 2021$38–$42 Actual $41.4 Achieved
Adjusted EBITDA ($USD Millions)FY 2021$(105) to $(90) Actual $(101.9) Inline
Total Revenue ($USD Millions)Q4 2021 (implied)$11.2–$15.2 Actual $14.5 Inline (upper range)
Adjusted EBITDA ($USD Millions)Q4 2021 (implied)$(47.5) to $(32.5) Actual $(44.4) Inline
Software Revenue ($USD Millions)Q1 2022N/A$2.7–$2.8 New
Total Revenue ($USD Millions)Q1 2022N/A$12.7–$14.8 New
Adjusted EBITDA ($USD Millions)Q1 2022N/A$(42) to $(38) New
Software Revenue ($USD Millions)FY 2022N/A$14–$15 New
Total Revenue ($USD Millions)FY 2022N/A$75–$100 New
Adjusted EBITDA ($USD Millions)FY 2022N/A$(180) to $(160) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4)Trend
Supply chain & marginsQ2: Hardware margin improved to −12% YoY but spot-buy risks; Q3: sequential hardware margin fell to −21% due to spot-buy and shipping costs Expect small sequential hardware margin improvement through 2022; upside if supply chain normalizes Improving if macro recovers
Retrofit strategyC2 deadbolt launched; retrofit mix trending to ~50/50 vs new build C2 deadbolt +200% YoY; retrofit product partnerships (interconnect in CA) to accelerate activation Stronger focus
Sales metrics pivotQ3: Bookings used for guidance and raised for FY21 Sunset “bookings”; align incentives to in-period revenue, software, ARR and “Spaces” Structural change
Device ecosystemEarly Latch Lens program and Google Nest integrations Formal second/third-party partner announcements (TownSteel, Marks USA; intended dormakaba) Expansion
New verticalsOffice pilots (Empire State Building, Rockefeller Center, Brookfield Place) Small office via channels; large office requires partner constellation; limited 2022 revenue expected Methodical, low near-term
ePMS integrationsRealPage; adding Yardi, Entrata Full coverage of the three largest US ePMS; operator time savings quantified Completed triad
Activation timingCOVID/material/labor delays affecting conversions 2021 activation delays reduced software recognition; re-org to speed product delivery Addressed operationally

Management Commentary

  • “Beginning with Q1 2022… we will guide quarterly and annually to total revenue, specific software revenue, and adjusted EBITDA… and report on ARR and a new spaces metric” — Luke Schoenfelder, CEO .
  • “We’re very excited to announce our first partners officially in Q4… TownSteel Interconnect… Marks USA… intended partnership with dormakaba” .
  • “We saw over 200% year-over-year growth in our deadbolt product line… designed for the retrofit market… generally creating faster time to revenue” .
  • “Delays in activating devices resulted in a lower ratio of recognized software revenues per dollar of hardware revenues in 2021… we have reorganized our product development teams for 2022” .
  • “Small sequential improvement [in hardware margins] for the remainder of the year… any material sustained improvement will lead to upside to guidance” — CFO Garth Mitchell .

Q&A Highlights

  • Timing of bookings-to-revenue conversion: Macro volatility extended activation timelines; upside to guidance if conditions improve .
  • Latch Lens partnerships: Designed to embed Latch hardware/firmware and link to LatchOS; channel distribution from partners expected to broaden reach .
  • Retrofit traction: Strong growth in retrofit products supports faster conversion to revenue; guidance assumes conservatism on retrofit mix persistence .
  • Sales incentive changes and opex: Transition may increase metric volatility; opex leverage expected to show more meaningfully in H2 2022 and sharply in 2023 .
  • Installation labor costs: Mostly borne by customers; direct deployment quotes kept tight to preserve margins; higher labor affects revenue timing more than margins .

Estimates Context

  • S&P Global consensus estimates for Q4 2021 were unavailable through our data tool.
  • Third-party aggregator indicates Q4 2021 revenue modestly beat consensus (~$14.52M vs $13.84M) and EPS slightly beat (−$0.26 vs −$0.28) .
  • Given Latch’s pivot away from bookings and continuing activation volatility, near-term estimate dispersion is likely to remain elevated .

Key Takeaways for Investors

  • Execution pivot: Sunset of bookings incentives and focus on in-year software and services revenue should improve revenue quality and investor transparency, but may increase near-term volatility .
  • Distribution leverage: Second/third-party device strategy (Latch Lens + Matter support) broadens go-to-market while preserving recurring software economics; expect lower, less predictable hardware revenue near term .
  • Retrofit acceleration: C2 adoption and retrofit partnerships shorten activation cycles; if retrofit mix persists, revenue conversion may improve relative to new construction .
  • Margin trajectory: Hardware margins could see gradual sequential improvement; sustained supply-chain relief would be a positive surprise relative to guidance .
  • 2022 outlook: High top-line growth guided ($75–$100M total revenue), but sizable Adjusted EBITDA loss ($(180)M to $(160)M) reflects investment intensity and macro costs .
  • Activation risks: Continued COVID/material/labor pressures can delay conversions; watch ARR/Spaces metrics and software revenue cadence as leading indicators .
  • Trade setup: Narrative catalysts include supply-chain normalization, retrofit momentum, and partner channel contributions; monitor quarterly guidance updates and margin commentary for inflection signals .