SmartRent (SMRT)

Smart home company SmartRent (NYSE:SMRT) reported Q1 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 18.1% year on year to $41.34 million. Its non-GAAP loss of $0.21 per share was significantly below analysts’ consensus estimates.

Company Overview

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.

Competitors offering similar products include Vivint Smart Home (NYSE:VVNT), Alarm.com (NASDAQ:ALRM), and Resideo (NYSE:REZI).

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last four years, SmartRent grew its sales at an incredible 31.7% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

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 performance marks a sharp pivot from its four-year trend as its revenue has shown annualized declines of 7.9% over the last two years. SmartRent isn’t alone in its struggles as the Internet of Things industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

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 $55.9 million in the latest quarter and averaged 28.5% 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.

This quarter, SmartRent’s revenue fell by 18.1% year on year to $41.34 million but beat Wall Street’s estimates by 3.1%.

Looking ahead, sell-side analysts expect revenue to grow 26.3% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and suggests its newer products and services will catalyze better top-line performance.

Gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.

SmartRent has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 14.3% gross margin over the last five years. Said differently, SmartRent had to pay a chunky $85.71 to its suppliers for every $100 in revenue.

In Q1, SmartRent produced a 32.8% gross profit margin, down 5.7 percentage points year on year. Zooming out, however, SmartRent’s full-year margin has been trending up over the past 12 months, increasing by 5.9 percentage points. If this move continues, it could suggest an environment where the company has better pricing power and stable or shrinking input costs (such as raw materials).

SmartRent’s high expenses have contributed to an average operating margin of negative 43.1% 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 25.3 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.

SmartRent’s operating margin was negative 99.9% this quarter.

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 61.5% 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.

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 11.5% was lower than its four-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q1, SmartRent reported EPS at negative $0.21, down from negative $0.02 in the same quarter last year. This print missed analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

SmartRent’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 27.9%, meaning it lit $27.86 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that SmartRent’s margin expanded by 11.9 percentage points during that time. In light of its glaring cash burn, however, this improvement is a bucket of hot water in a cold ocean.

SmartRent burned through $15.64 million of cash in Q1, equivalent to a negative 37.8% margin. The company’s cash burn was similar to its $3.37 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although SmartRent has shown solid business quality lately, it struggled to grow profitably in the past. Its five-year average ROIC was negative 47%, meaning management lost money while trying to expand the business.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

SmartRent is a well-capitalized company with $125.6 million of cash and no debt. This position is 72.5% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We enjoyed seeing SmartRent beat analysts’ revenue expectations this quarter. On the other hand, its EPS and EBITDA fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 5.4% to $0.85 immediately after reporting.

Updated: July 10, 2025 at 11:17 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in SmartRent.

There are a lot of things to like about SmartRent. First off, its revenue growth was exceptional over the last four years. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its ARR growth has been marvelous. On top of that, its rising cash profitability gives it more optionality.

SmartRent’s forward price-to-sales ratio is 1.2x. Looking at the industrials landscape right now, SmartRent trades at a pretty interesting price. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $1.65 on the company (compared to the current share price of $1.01), implying they see 63.4% upside in buying SmartRent in the short term.