Latch's Broken Business Model Analyzed

***** ******** ***** ** ******, **** has ********, ***** ** *** *********** Latch *** **** ** *** *** and "******" *******.

** **** ****, ** ******* **** those ******** ***, *** **** ******** to ******** ******** ***** **** ** Brivo *** *******, *** *** ****** future ******** ** ***** ******* **** them.

*************, *****'* *** ** *** *** low ******** ** *** ****** ** cash ** *** ******, *** ****** of **** ** ** ******* *** the ****** ** ********* ******* ********. Layoffs *** ******.

******: ** **** ***** ********** ****,***** ********* ****** *** *** *********.

Fundamental ********

*****'* *********** ******** *** ** ************ from * *********** *******:

• **** $*.* ******* *** ********* (*** of ** ****)
• ** ***** * ***** ** *** per **** / "*****" **** ** offset *** ******** ****** **** ***** incurs.
• *** ********* ******** **** ** ~$*** million **** ****, ~*** ***.
• ** *** ** *********** ******* ** $373.7 *******

*** ***** ***** ***** * ***** of ***** ******* ****** ********* ******* versus ****** ******** ****** *** *********** expenses:

*****'* ************** **** ** *** *** large / ********* *** *** ****** of *** *** ******* ** ******. For *******, ***** ******** ** *** ~$5.5 ******* ** *** **** **** (started *** **** ** $*.*** *******, and **** ** *** *** **** at $**.* *******) ***** ** ********* relative ** *** ****** ** ** spending ************* *** ****** ** ********.

Hardware ***** ******

**** ******** ******** **** ********* ****** operational ****** ** ********** **** ******** gross ******* ** *** ******** **** sell (*.*., *****, *******).***** **** ***.

******** ***** ******* ********* ****** *** burn **** ** ****** *** **** operational ******** ***** * **** ******** is ******** *** ***.

*******, **** ****, ***** **** ~$*.* million ******* ******** (*******: ~$**.* *******, cost ~$**.* *******). **** ******* (** 2022), ***** **** $*.* ******* (*******: ~$9 *******, **** - $** *******).

2 ***** ** *** ** ******* ******** ******

*****'* ******** ****** *** ********** ******** due ** *** **** ***** ** hardware ***** ** ******** *******. *** unit (** ****** ** ***** ***** it), ***** ***** ~$*** ** ******** and ********* ~$** ** ******** / annual ********* *******. *******, ***** ** losing ~$*** *** **** ******* ********. For *******, ** *** ******** ** months, ***** ********* *** ** $*.* million (**** $*.* ******* ** $*.* million) *** **** **** ***** **** selling ******** (-$*.* *******, ******** ******* - $**.* *******, ******** **** - $44.6 *******).

*** **** ** *****'* ******** ***** not ****** ********* *****, *** *****'* hardware ****** **** *** *** **** back, ** * ***-**** *****, *** 2 ***** *****, ******* ******* ******** on *****'* ********.

** ** ******** ** ***** *** Verkada, ** *** *** ** **** analysis, **** ** ********** *** **** on *** ******** ****** *** *** high ***** ** ******** ** ********, demonstrating ******* *********** ******** **** *****'* model.

Top **** ******* **********

***** ***** *** ******** ******** ***** margins, ******* ** *****'* ***-**** ******* numbers *** ** ********** (*.*., **** revenue *** $**.* ******* *** *****-******** of **** **** **** ******** ***** margin ******** *****).

"Bookings" **********

********, ***** ***** **** ****** *********** "bookings" ** **** **** ****** "****** revenue", *.*. "***** ******** ** $***.* million" ** *** *** ** ****. This *** ***** **********, ** ***** glance, ***** *** ******* ** (*) selling ******** ** * ****, (*) bookings ******** *********, *** (*) ******** not ********** **** ******* ** *** pace **** ***** / *********.

ARR **** $*.* *******

**** ******* **** *** ***** ** how **** ****** ********* ******* (***) the ******* *********. ***** *** *** payments *** *****'* ******** ******** **** has ~**% ***** *******. *** *** work *** ****** ** ******** ***** aim ** ***** ** ****-**** ********* of ****** ******** ******.

*** ******* ** **** *** ** so *** - **** $*.* ******* at *** *** ** ** ****:

** **** * ***** ** *** low **** **, *** ******* *** was $*** ******* *** ** ************* ***** **** ****(***** **** *** ***** ** **** group, **** ******). ********, ***** ********* average $** ******* ** *** *** ARR *** *******, ***** ***** ** generating **** **** $* *******.

**** ******* ******* ** ***** *********, Latch's $*.* ******* ******* *** ******** to *** ******* **** $*** ******* cash **** ********** **** **** ***** how *** ** ******* *** ******* is. * $*.* ******* *** ***** be **** ** **** ********** ** the ******* *** **** ******* $** million * **** *** ** $***+ million, **** *** ******* *** *** much **** *** *** ********* ******* that **** *** *******.

Even ******** ******* *** * *****, **** **** **** ****'* ********* ********

**** ** *** ******* ***** **** double *** *** ***** **** *** 4 ***** (*.*., *** ** ****), Latch's *** **** ***** ** **** than **** *** *******'* ********* ******** are ** **** *** **** **** (~$200 *******). **** **,****************** - $** *******, **** - $24 *******, **** - $** *******, 2025 - $** *******, **** - $192 ******* ** ~$*** ******* ********* expenses **** ****.

** **** ** **** **** *** Latch ** **** *** ** **** problem.

Downgraded ************ ~**%

***** ****** *** ******* *** ***** growth **** ** **** ********* ** months ***. *** *******, **** ************** *** **** ** ******* ****, **** *** ************ *** $** million ** *** ******** ******* *** 2022. ***, ********* *************** **** ******** ******* ** "$**.* million ** $**.* *******." ******, ***** revenue ************ *** **** ~**%.

Cash ****** ********

***** *****'* *** ********** ********** ** this *****'* ******** **** **** **** had * "***** ****** ****", *** problem ** *** **** *** **** proven ***** (*.*., ******* *** ******* downgraded ************), ** ***** **** **** cash, **** **** * *** ****.

** *** ******** ****, ** ***** abstractly, ** **** *** ******* *** $335 ******* ** **** *** ********** securities (*.*., *** ** ********* ********** easily ** ****) ** ** *** end ** ** ****. ** *** investor ***** **** ** ******* ***** to **** *** ******* ****** ** currently (*** * **** ****).

*****, ***** **** **** ******* *** of ***** *************** ******* **** ** *** ***** they *** ** *** ****-********* ** 2022 ***** *** *** **** **** in ********* ********** ** $**.* ******* (i.e., * ***** ** * ******** of **** ** * * $**.* million = $***.* *******).

***** ** **** ***** ** **** risk *** ** ******* ***** **** things ** ******** ****:

• ****** ***** ***** ************ ********* **** from ******** ** ******* ** *********** projects ***** ******** ** *** ***** term. **** ******** ********, **** *** that ******* *** **** ****.
• ********** *** *********** *** *** ** 2nd *** ***-***** ******** *** * topic ** *** *** ********'* ****. The **** ******** ***** *****, *** less ***** ***** ***** ** ******* hardware ***** ****.
• **** *** **** ** *********** ******** increases. *** *******, ** ****, *********** expenses **** ~***%, **** ~$** ******* to ~$*** *******. ** ***** ****** grow *** **** ******, ** *** at ***** *** ** ******** *** burn **** **** *** ************* **** organizational *****.

Flat *********

***** ***** *** ******* *** ******** count ** *** **** * *****, for *** **** *** ****** *****'* headcount *** **** ******* ****:

***** ** ***** ****** ********* *** roughly ** ********** ****** ** ******* those *******, ********* ** * ****** of ***** ****** ****** **** ******** sales *********.

Layoff ****

* ****** ***** *** **** ***** to ******* *****'* ********* ******:

• *** ******* *** ***** ****** ********** in ************ ******** / *** ******.
• *** ******* *** ~*** ********* *** less **** $** ******* ** ***.
• *** ******* *** ~** *********** ***** is ** ******** ****** *** *** low ******** *******.
• *** ******* *** ***** ** ***** that ** *** **** ******* ******** at * ****.
• ** *** ******* ****** ****** *** burn **** ** ******* ******* *** profits, *** ******* ** **** **** cutting *********** ********, *** ******* ******* by *** ** *********.

******: ** **** ***** ********** ****,***** ********* ****** *** *** *********.

Brivo **********

** ********, ***** ********* *********** ******** gross ******* *** *** ********* ******** well ** **** **** *** ******* generation, * ***** ******** ** *****. The ***** ***** ********** *** **** difference ** ******* ******* *** *** organizations:

** ******** *****'* ******** ***** ******* to ** ~**% ***** ** *** company's ***** ***** ****** *********** (~**%) and *** *** ******* ******** *** software ***** (~$** *** ~$** ******* respectively). **% ******** ***** ******* *** good *** *** ************ ************* *** physical ******** *************. ** ********, *****'* hardware ***** ******* "********" ** **** -20% ** ** ****, ********* ***** than *****.

********, *****'* ****** **** ********* ******** are ~$** *******, ****** ***** **** Latch ***** *** ******** ******* (~$** million) *** ******** ***** ******* (~ positive $** *******) *** ********* ****** than *****'*.

**** *** *** **** ** *****'* CEO *** *** ***** ** (*********) differentiate ***** **** ********* **** *****,******:

we **** **** ******* ***** ******* ** *** ******** ******* ******** -- the electronic IoT devices that go into the buildings and connect the buildings to the cloud. And so that's allowed us to grow basically with our own gross margin fueling that growth. So when you look at last year with greater than 25% growth, we're not chewing up VC money, we're *** ******* ** ** *****. ****'* ******** ****** **** **'** ******, so to speak, and doing our growth that way. That's a big difference from most ** *** ***** that are going out there or have gone out there. The targets are usually burning * ***** **** ** ****. **** ** ***** ******* **** ***** **** **********, which we have. And so from a financial performance standpoint, I would say bigger gross margins than almost any other target you're likely to see out there, a history of profitability, and a history of growth without the consumption of outside capital [emphasis added]

Verkada **********

******* ********* *** **** ******* ** its ******** ***** *** *** **** software ******* *** ****.

***** ******* ** *** ****** (***), our ******** ** **** *******'* ******** profit ******* *** ***********. **** *********** (indoor ***** *****) ******* ******* *** being **** ** $***+. ***** ******* has ****** ***** **** ************ ******* (mainly *** *****-**-*******), ***** *** ***** cost ********* ** *******, ** *** certain **** ******* ** ********** ******* on **** *****.

****, ******* ** ********** *** **** software ******* *** **** **** - at $***+ ******** (**** ************** ******** heavy ********* **** ***** ****** $*** MSRP), ******* ***** **** ***** ** generating.

* ***** ********** ** ** ***** sold *** *******, ******* ** **** significantly ***** ** *****. *** *******, Latch ** ******* ~**,*** ***** *** quarter *** *** ***,*** ***** ******** as ** *** *** ** **. Last ****, ******* ********** ** ***,***+ ******** ******** ** **** **,*** ***** per *******.

***, ******* ******** ***** **** *****, Verkada *** **** ******* ********** *** more *********** (***+ ** ~**). ******* has * ******** ****** ********* ********** because (*) ** ***** ***** ******* hardware *** (*) *** *********** ******** are *** ****** ** **** **** its ******* *** ***** ****** ********** than *****.

Outlook *** *****

*** ******* ** ***** ** ****. The *********** ******** **** ***** ******** model (**** *********, ********* ******** *** out ** ***** ** *** ********** and ******** ****** *** *** ** scale ** ******** ******* **********) **** the ******* *** * ********* ********* in *** **** ******.

***** **** *** ******* **** *******, they ***** **** ~$*** ******* **** and, *******, *** ***** ********** ***** problems (*.*.,*** *** ***** ****** *** *** the *** *********** *******). **** **** ** **** *** next **** ** ********* ********, ******* more *********** **** **** ** ** about *** ***,**** ************, *** ** *** ****** *** face ** *** *******.

** ***** ** ********* ** ***** did *** ******* * *********** ****** in *** **** ****. *** ******* / *** *** **** *** *** company ***** ** ****** **** * new *** *** * ***** ***** for *** **********.

**********, ***** *** ******* *** **** become * ********** *******. **** ** mind **** ***** ***** ** *** a ********** ****** *******, *** **** years, ***** *** ********** ** **** itself *** *** ********** * *** com ******* ****** ************* ******* ** 1999,******* $** ******* ** ****,** ***** ***** *** **** *** just $** ********** ** *** ***** ****** *** $800 *******.

Outlook *** *********** ****** ******

** ***** **** ***** ***** *** potential *** *********** ********** ** ****** and *** *****-***** ****** ******* ********** software. ** *** *** ** *** decade, ** ** **** ****** **** this **** ** *** ****.

*** ******* ******** ** *** *** who **** **** **** ****** *** norm. *** ******, ** ********* *** for *****'* *********, ** **** ******** hundreds ** ******** ** ******* ** try ** ******** *** ****** ******* is *********.