SMRT

Hello, everyone. Thank you for joining us, and welcome to SmartRent First Quarter 2026 earnings release. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Kelly Reisdorf, Head of Investor Relations. Please go ahead.

Hello, and thank you for joining us today. My name is Kelly Reisdorf, Head of Investor Relations for SmartRent. I'm joined today by our President and Chief Executive Officer, Frank Martell, and Daryl Stemm, Chief Financial Officer. Before the market opened today, we issued an earnings release and filed our 10-Q with the SEC, both of which are available on the investor relations section of our website. Before I turn the call over to Frank, I would like to remind everyone that the discussion today may contain certain forward-looking statements that involve risks and uncertainties. Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including in our annual report on Form 10-K and quarterly reports on Form 10-Q.

We undertake no obligation to provide updates regarding forward-looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial position in SmartRent. During today's call, we will refer to certain non-GAAP financial measures. A discussion of these non-GAAP financial measures, along with the reconciliation to the most directly comparable GAAP measure, is included in today's earnings release. We would also like to highlight that our quarterly earnings presentation is available on the investor relations section of our website. With that, I will turn the call over to Frank.

Good morning, everyone. My remarks today are going to focus on the more notable financial and operational accomplishments the team delivered in the first quarter. This progress builds on the momentum we achieved in the second half of 2025. I will also provide some important color on the progress that we're making driving our imperatives that underpin our Vision 2028 strategic plan. Daryl will close out our prepared remarks today with a more detailed financial discussion. Over the past three quarters, we have focused aggressively on strengthening our leadership team, right-sizing our cost structure, driving increasing levels of operating leverage through process reengineering and automation, and finally, investing in our go-to-market and technology capabilities. I believe that the benefits of this focus were evident in our first quarter operating and financial results.

From my point of view, some of the more important proof points of our progress in Q1 are the following. First, we grew our IoT footprint 10% in Q1 from the prior year. At the end of March, SmartRent's industry-leading IoT technology solutions are now deployed in over 911,000 rental units across the U.S. These units provide our owner and operator customers with a proven rate of return on their investment while significantly enhancing the experience of their residents. We expect to eclipse the 1 million level for IoT unit installations in the first half of 2027. Second, ARR revenue grew 9% year-over-year to $61 million or approximately 39% of our total revenue. We expect to drive higher levels of ARR and profitability over the medium to longer term as we continue to expand our deployed IoT footprint.

Third, gross profit and margin for Q1 totaled $15 million and 39% respectively. Gross margins were up 630 basis points in Q1. The upswing in gross profit and margins were driven by a 15% year-over-year reduction in cost of sales and a 32% reduction in operating expenses. Fourth, we delivered positive adjusted EBITDA of approximately $0.4 million in Q1. This was our second consecutive quarter of positive adjusted EBITDA. Our net loss on a GAAP basis fell from $40 million to $4 million year-over-year, benefiting from significantly lower cost run rates and a 2025 non-cash impairment charge that has no counterpart in Q1 of 2026. Finally, we ended March with $99 million of cash and no debt, providing us with the financial flexibility to execute against Vision 2028 with confidence.

Our focus and accomplishments so far in 2026 are part of a longer-term strategy which we call Vision 2028. I discussed Vision 2028 in some depth on our last earnings call. As you may remember, it's a three-year program built around two clear priorities. First, accelerating profitable growth by expanding our installed IoT footprint at a compound double-digit growth rate from 2026 through 2028, and at the same time, expanding our portfolio of data-driven insights and solutions that deliver industry-leading customer ROI. Second, achieving higher levels of profitability and cash flow through accelerated growth and a highly scalable operating model. We will operationalize these priorities through the execution of five strategic pillars. First, growing our installed base at a double-digit pace. Second, scaling a world-class go-to-market organization. Third, deepening platform integration with data, analytics, and AI.

Fourth, simplifying our hardware architecture while investing in next-generation capabilities. Lastly, strengthening our internal operating rigor to drive sustainable profit and free cash flow. I will provide more detail on each of these strategic pillars during subsequent calls. On this call, I plan to touch on our focus relative to accelerating profitable growth. Specifically, I believe that SmartRent has a number of significant opportunities in the following areas. Our first opportunity is centered around deepening our penetration within the portfolios of our existing customers. Currently, our installed base of 911,000 IoT units serves roughly 600 customers who collectively own or control more than 6 million units in the U.S. That means we have deployed smart technology in roughly 15% of the addressable portfolio within our existing customer base, and 85% remains a significant expansion opportunity.

Our March to One Million initiative is first and foremost a story about converting that white space. As our installed base matures, we are also focused on a second key growth opportunity, which is establishing a cadence of hardware refresh cycles, which is a natural milestone for a platform at our scale and one that deepens our relationships with our longest-tenured customers. Our IoT platform currently stands at over 911,000 units installed with Smart Hubs connected to more than 3 million devices across approximately 3,500 properties. Equipment deployed in the company's early years are now approaching end of life. We are working proactively with customers to plan on refreshes in an organized way. This ensures customers continue to benefit from our latest hardware and insights, and it gives SmartRent a sizable hardware revenue cadence as the business matures and equipment is replaced.

The third opportunity we have is expanding our reach to small and medium multifamily owners and operators as well as merchant builders through a dedicated SmartRent team supplemented by the value-added reseller or VAR program that we recently launched. That program is designed to access this opportunity in a capital-efficient way, leveraging partners with established market presence rather than scaling a direct sales force to effectively address this segment. Our fourth growth opportunity is expanding our software and hardware solution sets that are powered by AI as well as our unique data repository. SmartRent's market leadership has been built on delivering measurable and significant ROI for its customers. We believe that we can expand the benefits within our existing footprint and for new customers through the introduction of solutions that leverage the unique insights from our data collected from millions of connected devices.

We're accelerating our use of AI and other techniques that make the adoption of additional solutions in the near to medium term a significant opportunity for the company. Looking forward to the remainder of this year, we remain laser-focused on expanding our footprint of installed IoT units in line with our March to 1 million program. Despite current market headwinds, we are pushing to accelerate the growth of our core revenues while delivering positive adjusted EBITDA and cash flow for the full year. In terms of the market, although many of our customers remain cautious, we believe our solutions provide compelling ROI in all market conditions and that the long-term demand picture for our platform remains positive as market fundamentals gradually improve. Daryl will provide additional color around market conditions in a couple of minutes.

To wrap up my prepared remarks today, I want to acknowledge the hard work and dedication of the SmartRent team as well as the support of our shareholders. Over the past three quarters, we've made significant progress on many critical fronts and are now increasingly well positioned to achieve our goals that we have outlined in our Vision 2028 strategic plan. With that said, I'll now turn the call over to Daryl.

Thank you, Frank, and good morning, everyone. Today, I'll walk you through our first quarter financial results in more detail, covering revenue, margins, operating expenses, and cash, and then offer some perspective on how we're thinking about the rest of the year. Total revenue for the first quarter was $38.7 million, a decrease of approximately 6% from $41.3 million in the first quarter of 2025, driven primarily by a $2.6 million decline in non-cash hub amortization revenue and a hardware comparison against an especially strong prior year quarter. Although total revenue was down 6%, importantly, cost of sales were down by 15%, primarily driven by our cost alignment actions in the second half of 2025.

Excluding non-cash hub amortization, core revenue was $36.6 million, essentially flat to the $36.7 million in the prior year quarter. We believe that's the more representative measure of the underlying volume of our business. Within the revenue mix, SaaS revenue was $15.2 million, up 9% year-over-year. SaaS revenue now represents 39% of total revenue. Hardware revenue was $15.4 million, down 18% year-over-year from $18.8 million, which included an unusually large customer order that contributed to an elevated prior year comparison. Professional services revenue was $6 million, up 55% year-over-year from $3.9 million in the prior year quarter, reflecting improved deployment volume within our installation teams.

Before I move to margins, I want to address bookings, which were 16,592 units, down 9% year-over-year. There were 4 things that impacted bookings in the first quarter. 4 things drove the shortfall. First, our new enterprise reps are still ramping. Q1 reflects early-stage output from a team that isn't yet at full productivity. Second, our contract renewal work shifted some signings into later quarters. Third, hardware refresh conversations with long-tenured customers consume sales capacity that would otherwise have gone towards new bookings. Fourth, the broader market environment has operators being deliberate about capital deployment decisions in a way that affects the timing of new commitments. These are timing and ramp issues. In other words, these are cyclical and not structural demand issues.

Total gross profit was $15.1 million compared to $13.6 million in the first quarter of 2025, with total gross margin expanding approximately 630 basis points year-over-year to 39.1% from 32.8%. This improvement reflects the structural cost actions we took in the second half of 2025, better operating discipline, and a more favorable revenue mix as SaaS becomes a larger share of the total. Professional services gross profit improved dramatically from a loss of $3.4 million in the prior year quarter to approximately break even in Q1 2026. This is now our third consecutive quarter of positive professional services margins, reflecting genuine structural improvement in how we're executing installations and durable ARPU increases.

Hardware gross margin was 18.2%, down approximately 760 basis points year-over-year, reflecting product mix and lower shipment volumes. Operating expenses in the first quarter were $20.2 million, a decrease of 32% from $29.9 million in the prior year quarter. That $9.7 million year-over-year reduction is the direct result of the cost alignment actions taken in the second half of 2025 and also reflects the elimination of one-time costs primarily related to concluded legal proceedings. At the same time, we're actively reinvesting in our go-to-market organization, and we believe the sales and marketing line on our income statement will increase as we add headcount and build out the commercial infrastructure Frank described in connection with the fulfillment of our Vision 2028 imperatives.

Net loss for the first quarter was $4.4 million compared to $40.2 million in the first quarter of 2025. The prior year figure included a $24.9 million goodwill impairment charge that does not have a current year counterpart. Excluding that, operational net loss improved from approximately $15.3 million to $4.4 million year-over-year, meaningful improvement driven by both margin expansion and the lower cost structure created by actions taken in the second half of 2025. Adjusted EBITDA was $0.4 million and was positive for the second consecutive quarter, compared to a loss of $6.4 million in the prior year quarter, reflecting the combined effect of SaaS margin expansion, cost discipline, and improved professional services execution.

We ended the quarter with $99 million in cash, no debt, and an undrawn $75 million credit facility. Cash decreased by approximately $6 million from approximately $105 million at the end of 2025. As we communicated previously, cash use in the first quarter was expected as these results reflect the timing of annual incentive compensation payments. We view this use of cash as seasonal rather than a go-forward cash consumption level. Working capital remained healthy. Accounts receivable declined to $36.8 million from $47.4 million at year-end, reflecting strong collections resulting from continued workflow changes executed in the quarter. Inventory came down to $24.4 million from $26.7 million, consistent with our more disciplined approach to hardware procurement and forecasting.

We remain confident in our ability to deliver positive adjusted EBITDA and positive free cash flow on a full year basis. Before opening the call for questions, I want to offer a few comments related to how we're thinking about the rest of the year. On revenue, we expect continued ARR growth, primarily driven by expansion of our installed base. Hub amortization revenue will continue to decline. It was $2.1 million in Q1, and we expect it to be less than $5 million for the full year, which creates a modest headwind to reported total revenue but improves the quality of our revenue mix as non-cash revenue becomes a smaller component.

We expect revenue to improve as the year progresses, primarily driven by our sales team reaching fuller productivity and our VAR channel beginning to contribute. We're not providing quarterly guidance, but we expect the second half of the year to be stronger than the first. Our expectation is to be adjusted EBITDA profitable for the full year. On cash, we expect to be free cash flow positive on a full year basis, with Q1 seasonal use not reflective of our expected annual results. With that, I'll turn the call back to the operator for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question. If you're muted locally, please remember to unmute your device. Your first question comes from the line of Ryan Tomasello from KBW. Please go ahead.

Thanks. Was hoping you could elaborate on the initiatives underway to scale the sales organization. Just maybe any parameters around how many reps you currently have, sales reps you have, the hiring plans, and just overall, Frank, the strategy there to build out more capacity and improve the productivity. Thanks.

Sure. Yeah, thanks, Ryan. Look, we're gonna double the on staff sales team. We've been recruiting very heavily the last six months. We're trying to make sure that we get the highest quality people on board, so that takes a little bit of time. You know, we're gonna add about 25% in the next three months. We have those candidates identified. That's ongoing. Secondly, I would say that, you know, Daryl mentioned it, Ryan, but, you know, we've had a very heavy period of resetting the original kind of founder contract base that we have, which will make a significant difference in the profitability of the company going forward, and Daryl alluded to that.

There has been also this, you know, adding people, but also freeing up people that have been, you know, really working that effort to renegotiate those contracts. We're making significant progress there, but it takes a bit of time. You know, we launched a VAR program, and it's a very focused program around geographic white space and using, you know, really primarily installation partners that we feel really good about. We won't limit it to that, but that is the focus initially. We're getting good traction there. That's really primarily focused on getting a kind of an economical shot at the small and mid market.

You know, we have a, as I mentioned in my remarks, we have a pretty good opportunity in the existing customer base that we have. Also, you know, we really have a lot of white space in the mid and mass market. We're very hopeful, and I think we're ramping up. We should have a couple more partners. We have one on board now that we've worked with for many years. That's, I think, immediately accretive from an order book standpoint. You know, the plan is to get to, you know, kind of 8 to 10 over the next kind of 4 quarters. That's in progress as well. It's kinda internal, external, cleaning up the prior, you know, kinda contractual resi-regime.

All that's underway. It's not, it's really, you know, I would say normal operations, but we need to make sure we do that in a quality way. All that's underway, and I would expect that will have an impact on Q2, and then progressively, you know, thereafter, a more significant impact on the bookings rate.

Frank, thanks. I wanted to add one point with regards to the renewal activity. The renewal activity had no impact on the Q1 financial results. However, the completion of our first 3 renewals from early-stage customers by the end of this year should have a positive impact on our SaaS ARPU of about $0.05 per unit per month. That's pretty significant improvement, goes through to the bottom line, nice accretive impact to our profitability.

It also sets the stage for further SaaS ARPU improvements in the following years because those renewals have both escalation clauses built into them, as well as these customers expand across their portfolios, it'll have an improved or an increased impact as a result of more of their units being on the newer higher prices.

Appreciate all that. Then maybe just dovetailing on those legacy contracts, Daryl, the $0.05 uplift is nice to hear, but maybe if you could just maybe elaborate more broadly on approximately how many units those legacy contracts relate to, where the pricing stands on those, and just how you're thinking about the magnitude of what those renewal uplifts could look like, including on the 3 that you've gotten so far.

Yeah, well, the 3 on average have about a 33% increase on their original pricing. The primary impact is simply to bring those early customer contracts more in line with current market pricing. They receive large discounts when they originally signed because they were early adopters, would be point 1, and also these are relatively large customers, so they're going to enjoy the benefit of discounts based on their volume. Again, the notion is simply bring them more in line with current market pricing. We had very aggressive growth between the years 2019 and 2023. It's those units that are on our platforms that are really subject to these renewals.

Different customers have different lengths of subscription agreements, so we're really just now entering the first phase of these renewals. One last reminder that I'll provide there is that most of these customers, due to the size of their, due to the size of their portfolios, they rolled out deployments over multiple years. The reason why we don't see the impact of these renegotiations all at once is their own communities over a period of multiple years. Their individual community subscriptions will expire and then be renewed at these new higher prices. I would say just rough order of magnitude, we're talking about 1/3 of the current deployed units. About 900,000 in total, so abOut 300,000 are subject to these renewals.

Great. Just last one for me and before I'll hop back in the queue. Daryl, it looks like despite the sequential growth in installed units that ARR actually declined sequentially and SaaS ARPU declined sequentially. Anything to call out there in terms of drivers? Thanks.

I'd say the primary driver is two kind of counterbalancing items. One is we experienced some churn off of our Smart Operations solution that had a negative impact on SaaS ARPU of about $0.11. The addition of new deployed units mitigated about half of that reduction. We've, as a reminder, we've tended to experience higher churn on Smart Operations and virtually no churn off of the IoT portion of our solution set. We would expect that we'll continue to make up ground off of the Q1 losses through the continued deployment of new units as well as the impact of these renewal rates.

Great. Thanks for taking the questions.

Hello, and thank you for joining us today. My name is Kelly Reisdorf, Head of Investor Relations for SmartRent, Inc. I am joined today by our President and Chief Executive Officer, Frank Martell, and Daryl Stemm, Chief Financial Officer. Before the market opened today, we issued an earnings release and filed our 10-K with the SEC, both of which are available on the Investor Relations section of our website. Before I turn the call over to Frank, I would like to remind everyone that the discussion today may contain certain forward-looking statements that involve risks and uncertainties. Various factors could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including in our Annual Report on Form 10-Ks and Quarterly Reports on Form 10-Q. We undertake no obligation to provide updates regarding forward-looking statements made during this call, and we recommend that all investors review these reports thoroughly before taking a financial position in SmartRent, Inc. Also, during today's call, we will refer to certain non-GAAP financial measures. A discussion of these non-GAAP financial measures, along with a reconciliation to the most directly comparable GAAP measure, is included in today's earnings release. We would also like to highlight that our quarterly earnings presentation is available on the Investor Relations section of our website. I will now turn the call over to Frank Martell.

Thanks, Kelly, and good morning, everyone. 2025 marked an inflection point for SmartRent, Inc. Today, I am going to highlight a number of key takeaways from 2025, both operationally and financially, as well as provide comments on 2026 and our strategic plan, we are calling Vision 2028. In many ways, 2025 was a critical year for the company. Through the hard work and dedication of our team and the support of our customers, we made significant progress in virtually all areas of the business. Here are some of the more significant highlights from my perspective. First, the company spent significant time on organization development and improving the effectiveness of key workflows. Second, we expanded our executive leadership bench strength through the promotion of high-performing internal leaders as well as added domain expertise from outside the company. Third, we also expanded our go-to-market capabilities—people, process, and customer outreach—supporting the acceleration of our revenue growth. In addition, we invested in our hardware and software offerings with a focus on customer ROI and increasing our internal operating leverage. And finally, we reset our cost structure, which yielded an annualized cost savings number of over $30 million. From a financial point of view, the company executed against its commitments of returning to profitable revenue growth with positive run rates for cash flow and adjusted EBITDA. Some specific Q4 highlights include our total revenue growth was positive for the first time in seven quarters as we grew SaaS revenue by 13%. ARR grew to just under $62 million, which represents approximately 40% of the company's total revenue. Operating expenses were lower by 22%. We recorded positive adjusted EBITDA, and our net loss was significantly reduced from $11.4 million to $3.2 million. And then finally, we ended the year in great shape from a liquidity standpoint. Daryl will provide a more detailed review of our 2025 results in a few minutes. Looking forward to 2026, we expect to grow total revenues supported by a double-digit growth in ARR, which is made possible by the continuous expansion of our deployed unit footprint. In addition, we should continue to capture the benefits of productivity improvements through optimizing our workflows. We believe a combination of revenue growth and continued productivity benefits will produce positive run rates of adjusted EBITDA and free cash flow on a full-year basis. I will now focus the balance of my remarks today on outlining our strategic plan, which we call Vision 2028. Vision 2028 is built around two clear value-creation priorities. Number one is accelerating growth by reinforcing and expanding our competitive moat. And number two is increasing profitability through a more scalable and leverageable operating model. These priorities will be operationalized through five strategic pillars as follows. First, growing our installed base at a double-digit pace. Second, scaling a world-class go-to-market organization to facilitate increased revenue velocity. Third, deepening platform integration with increasing infusion of data, analytics, and AI, which offer expanded ROI for our customers and an elevated resident experience. Fourth, simplifying hardware architecture while investing in generation capabilities that increase insights and foster a more leverageable platform. And finally, continuing to strengthen our internal operating rigor to drive sustainable operating leverage and free cash flow. I will now spend a few minutes to discuss our focus with regards to the first pillar, which focuses on building scale and our competitive moat that underpins the unique value proposition of 890,000 rental units across the U.S. Additionally, our maintenance and leasing operations solutions support more than 1,200,000 units. Our IoT units are connected to well over 3,000,000 devices across roughly 3,500 properties. Our platform is a significant and critical component of our customers' daily property operations and resident workflows, delivering quantifiable ROI. This represents a significant competitive differentiator for SmartRent, Inc. We believe we are nearing an inflection point in terms of scale. Over the next four to five quarters, we are on a march to 1,000,000 installed units. As part of Vision 2028, we are targeting to grow our installed base at a double-digit compound annualized growth rate through 2028. And assuming our historical low churn rates, we believe this will yield a total installed base of over 1,200,000 units exiting 2028. Our expanded hardware footprint will generate additional software revenues from existing and new solution sets. These revenues should be onboarded at rates above our current average revenue per unit. This should yield an accelerating contribution from our software revenues, which we believe will result in higher margins for the company and more predictable revenue performance. An important benefit of our expanded installed base should be our ability to fund reinvestments in our solutions that capture advances in technology, which allows us to capture more insights and provide those outputs to our customers. We have included further details on Vision 2028 in our investor materials on our website. As our strategic plan unfolds, we will keep you updated on key areas of our progress. In closing, I want to acknowledge the dedication and excellence of the SmartRent, Inc. team. I also want to thank our shareholders for their support as we build a more valuable and durable company in line with our Vision 2028 strategy. We are committed to building something that matters and continuing our vision to bring smarter living and working to everyone. I will now turn the call over to Daryl to discuss our financials in more detail.

Thank you, Frank, and good morning. Today I will review the fourth quarter and full-year results, provide context on margins, cash flow, and working capital, and then offer my perspective on the company as we enter 2026. Total revenue for the fourth quarter was $36.5 million, an increase of approximately 3% from $35.4 million in 2024, representing our first quarter of year-over-year revenue growth in the last seven quarters. Hosted services revenue totaled $18.1 million and included $15.4 million of SaaS revenue and $2.7 million of non-cash hub amortization revenue. Hardware revenue was $12.5 million, up 20% year over year, and professional services revenue was $5.9 million. For the full year, total revenue was $152.3 million, down 13% from last year, reflecting our continued transition away from bulk hardware transactions that were not aligned with customer implementation timelines. For the full year, SaaS revenue was $57.8 million, up 12% year over year. As Frank mentioned, ARR now represents 40% of total revenue. This continued expansion of ARR reflects our growing installed base. Hosted services revenue includes non-cash hub amortization associated with non-distinct hubs sold in prior periods. Hub amortization totaled $2.7 million in 2025 as compared to $5.2 million from the prior-year quarter. Total revenue, less hub amortization, or what we refer to as core revenue, was approximately $33.8 million compared to $30.2 million in 2024, representing growth of approximately 12%. We believe core revenue is more reflective of the underlying volume of the business as it excludes non-cash revenue from hubs shipped in prior years. For the full year, hub amortization totaled $15.4 million compared to $21.6 million in 2024. Core revenue for the full year was approximately $136.9 million compared to $153.3 million in fiscal 2024, reflecting the company's continued transition away from bulk hardware transactions. Hub amortization revenue is expected to further decrease to less than $5 million in 2026. We believe separating this non-cash revenue provides clearer visibility into the underlying growth of the business. And now turning to margins. Total gross margin in the fourth quarter expanded approximately 990 basis points year over year to 38.6%. Hosted services gross margin increased to 75.7%, reflecting SaaS ARPU growth and operating leverage within the recurring model. Professional services gross margin improved significantly and was approximately breakeven in the fourth quarter, our second consecutive quarter of profitable professional services operations. Operating expenses in the fourth quarter were $18 million, down 22% year over year. For the full year, operating expenses were $88.9 million, down 13% year over year. These reductions reflect structural cost actions implemented in the second half of the year. Net loss improved to $3.2 million in the fourth quarter compared to $11.4 million in the prior-year quarter. For the full year, net loss was $600,000 compared to $33.6 million in 2024, primarily driven by a $24.9 million goodwill impairment charge recorded in 2025. Adjusted EBITDA improved by 103% to a profit of approximately $200,000 in the fourth quarter, compared to a loss of $7.4 million in the prior-year quarter. For the full year, adjusted EBITDA was a loss of $16.4 million compared to a loss of $9.9 million in 2024. We ended the year with approximately $105 million in cash and no debt under our $75 million credit facility. In the fourth quarter, we grew our cash balance by $4.5 million and achieved our goal of cash flow neutrality on a run-rate basis exiting the year. It is important to note that our business has cash flow seasonality, but we expect to be cash flow positive on an annual basis. Working capital improved year over year. Accounts receivable and inventory levels declined, primarily due to improved collection cycles and improvements in forecast, respectively. SaaS ARPU in the fourth quarter was $5.83, compared to $5.68 in the prior-year quarter, an increase of approximately 3%. On a full-year basis, SaaS ARPU increased approximately 1%. Units-booked SaaS ARPU in the fourth quarter was $7.64 compared to $8.49 in the prior-year quarter. For the full year, units-booked SaaS ARPU was $8.40 compared to $6.44 in 2024. This reflects changes in customer and product mix within new bookings. Turning now to outlook. We are seeing healthy customer engagement. We are seeing improved booking activity. We have a structurally lower cost base. And we have an increasing recurring revenue contribution. At the same time, we remain measured. Deployment timing variability and macro uncertainty warrant discipline. We have a growing deployed base that drives growth in recurring revenue and an improving margin profile. However, as Frank mentioned, we are on a march to a million installed units. We believe our expanded installed base sets us up for accelerated growth and profitability. We will now open for questions. Operator?

We will now begin the question and answer session. If you have registered for today's question and answer session, please dial in now. To ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Ryan Tomasello with KBW. Your line is open. Please go ahead.

Hi, everyone. Nice to see the 2028 targets. I guess, in terms of the unit deployment goals, how much of that is being driven by existing customers versus net new logos? And then in terms of the sales organization and installation—installation teams—how much wood is there still to chop in order to get that capacity built out to execute on these targets? Thanks.

Hi, Ryan. We will answer your question in reverse order. So in terms of the sales organization, as I mentioned, we are making a significant investment, roughly doubling the size of the sales organization. And with that, we are looking at potential partnerships with other firms for local reach, and expect that to materialize toward the end of this year. From my standpoint, we are penetrating additional customers. We have about 600 currently, which is plenty of opportunity. We tend to spend a lot of time on the top 20, obviously, but we are definitely looking to expand our reach into mid and mass market as we build the sales organization and the capability to do that effectively. I will let Daryl answer the longer-range assumptions.

Yeah. Thanks, Frank, and thanks for the question, Ryan. Historically, most of our short-term growth in unit deployments comes from existing customers. We are always looking to expand the customer base, but in this horizon that we are looking at for Vision 2028, I would expect that trend to continue. We have got plenty of growth opportunity from our existing approximately 600 customers. But as Frank mentioned, we are also expecting to address with renewed rigor the small and medium portion of the market.

Great. That is all very helpful. And then in terms of SaaS ARPU, I know you are targeting higher attach rates to expand ARPU in these targets. But any color you can give around the types of growth rates and overall CAGR you think is achievable in SaaS ARPU over the next three years?

Yeah. No guidance that we want to give you there, although you can tell from Frank's remarks that we are investing in our technology—customer-facing technology—so that we can expand our offerings. We do believe that it will have a positive impact on expanding our ARPU.

And then last one for me. And forgive me, you might have mentioned some of this in your prepared remarks. But for 2026, just any broad commentary on what you think is achievable from a revenue and EBITDA standpoint? And then over the course of the next few years through your 2028 targets, how you are thinking about driving operating leverage and what the ramp in EBITDA could look like?

Yes. So starting with 2026, I think we have given some—what I would refer to as soft guidance, no specific numeric guidance. But we expect to reach a million deployed units within four or five quarters. And I think that expanding our installed base remains our primary revenue driver. So you could model first off of the assumption of when we would reach a million. The other guidance that we have provided is that for the whole year, our expectation is to be adjusted EBITDA profitable as well as positive from a free cash flow basis.

Great. Thanks for taking the questions.

You are welcome.

There are no further questions at this time. This concludes today's call. Thank you all for attending. You may now disconnect.

Goodbye.