SMRT Q2 Deep Dive: Recurring Revenue Growth and Cost Resets Underpin Path to Profitability

Smart home company SmartRent (NYSE:SMRT) fell short of the market’s revenue expectations in Q2 CY2025, with sales falling 21% year on year to $38.31 million. Its non-GAAP loss of $0.06 per share was $0.03 below analysts’ consensus estimates.

Is now the time to buy SMRT? Find out in our full research report (it’s free).

StockStory’s Take

SmartRent’s second quarter results were met with a significant positive market response, as management emphasized a strategic transition away from bulk hardware sales toward a more predictable, recurring revenue model. CEO Frank Martell highlighted that the company’s focus on cost reductions and operational efficiency is starting to deliver measurable benefits. Martell noted, “We’ve built sticky and long-term customer relationships,” referencing a 108% net customer revenue retention rate, and stressed that the company’s installed base of approximately 850,000 units provides a strong foundation for future growth.

Looking forward, SmartRent’s leadership pointed to ongoing investments in artificial intelligence (AI), new product enhancements, and further expansion of its software-as-a-service (SaaS) revenue as key levers for growth. Martell stressed that the company is “laser-focused on disciplined execution and market leadership,” with ambitions to achieve adjusted EBITDA and cash flow neutrality exiting 2025. CFO Daryl Stemm added that the company’s enhanced SaaS offerings are driving higher average revenue per user, and management expects these trends, combined with a streamlined cost structure, to support long-term margin expansion.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to the deliberate shift away from hardware-centric sales and described progress in building recurring SaaS revenue streams and operational discipline.

• Cost structure reset: The company implemented over $30 million in annualized cost reductions, focusing on staff reductions, workflow optimization, and lower third-party spending. Management expects these actions to benefit financial results progressively throughout the year.
• Recurring revenue transition: The decision to move away from bulk hardware sales resulted in a short-term revenue decline but is intended to create a more predictable and higher-margin revenue mix. This transition is already reflected in SaaS revenue comprising 37% of total revenue, up from 26% the previous year.
• Expanded SaaS product adoption: The company’s SaaS segment continues to see strong adoption, with annual recurring revenue growing 11% year over year. Management highlighted successful launches of new solutions such as the energy dashboard and SMRT IQ, which leverage SmartRent’s large installed base and data platform.
• AI and data-driven innovation: SmartRent is investing in AI capabilities to enhance both internal efficiencies and customer-facing products. Martell described AI’s role in workflow automation, risk detection, and servicing efficiency across the company’s 850,000 installed units.
• Customer retention and engagement: Net customer revenue retention remained robust at 108%, with churn below 0.1%. Management cited high engagement and continued expansion within existing accounts as evidence of SmartRent’s strong customer relationships.

Drivers of Future Performance

SmartRent’s outlook centers on expanding its recurring SaaS revenue, leveraging AI-driven innovation, and maintaining cost discipline to achieve profitability.

• SaaS growth and margin expansion: Management believes that continued adoption of its SaaS offerings and increased average revenue per user will drive both top-line growth and higher gross margins over time. The company aims to align new bookings at higher pricing tiers to accelerate this trend.
• AI-driven operational gains: The company is prioritizing AI investments to improve customer service, automate workflows, and enhance product capabilities such as risk detection and analytics. Leadership expects these initiatives to support operational efficiency and create new value for customers.
• Transition risks and revenue predictability: Management cautioned that the shift away from bulk hardware deals could cause near-term revenue variability but expects revenue to become more consistent and recurring as the transformation completes by next year. The company’s ability to expand into new customer segments and maintain low churn rates remains a key focus.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will closely watch (1) SmartRent’s progress in expanding its SaaS revenue as a share of total sales, (2) the operational impact and realized savings from its cost reduction initiatives, and (3) the effectiveness of new AI-powered features in driving customer engagement and retention. Additional milestones include the pace of new unit deployments and the company’s ability to achieve its targeted break-even run rate.

SmartRent currently trades at $1.32, up from $0.98 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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