Latch (LTCH +7.50%) has its foot in the door. Now it just need to kick things wide open. The fresh special purpose acquisition company hook-up -- TS Innovative Acquisitions completed its merger with the fast-growing provider of cloud-based access solutions for the rental market earlier this week -- didn't wait long to deliver its first financial report as a public company.
Latch delivered its first-quarter results after Wednesday's market close. It was impressive, even if the market's initial reaction wasn't very inspiring. We'll dive into the numbers of course, but we may as well start at the beginning. Your new apartment has an unusual lock that's a win for your landlord but also an even bigger benefit for you as a tenant. LatchOS is here. It's going to open doors in more ways than one.
Image source: Getty Images.
Knock knock
LatchOS bills itself as the first full-building enterprise software-as-a-service (SaaS) platform. Instead of a conventional key lock, Latch provides apartment landlords with a next-gen solution where a door can be opened remotely via a secure app.
Potential renters love new tech tools, and it's hard to beat LatchOS. If you're not home to let in a cleaning service or if your in-laws arrive early you can avert a crisis by unlocking your door from the mobile app. You can already imagine the lucrative implications if you happen to be in a building that allows you to rent out your place to third parties.
Landlords also love Latch. When a tenant moves or keys are lost there's traditionally a costly and burdensome rekeying process. LatchOS handles it all within the app. Earlier this year a new building in Maryland incorporated LatchOS to offer a self-service touring experience of available apartments for prospective residents. A building owner can save time and money without having to get real estate pros or landlords involved in showings.
It's not a surprise that LatchOS is popular. More than 1 in every 10 new apartments buildings are incorporating Latch products, and the ecosystem doesn't end at the front door. The LatchOS ecosystem is expanding to include intercom systems and smart home hubs that work seamlessly to give new renters a one-app solution to access the home of the future. Remote locks may be Latch's foot in the door, but 81% of the deals it's now signing include other LatchOS services.
Who's there?
Growth here isn't a knock-knock joke. Revenue soared 143% to hit $6.6 million in Wednesday's quarter covering the first three months of this year. Obviously $6.6 million is a pretty small number in absolute terms -- and we'll get cover that shortly when we dive into valuation -- but it's growing quickly.
Latch is laying down the seeds for headier growth down the line. Annual recurring revenue booked during the quarter was $38.9 million, 120% more than it scored a year earlier. Things are just starting to heat up. Latch sees $9 million to $10 million for the current quarter, a big step up sequentially. The $47 million to $51 million in revenue that it's eyeing for all of 2021 translates into top-line growth accelerating to 172% at the midpoint of that range with 67% of that revenue coming in the second half of this year.
There are now 368,994 individual home units on LatchOS, up 109% over the past year. Last month Latch entered the commercial office market, a no-brainer that naturally expands its addressable market.
Let's close on valuation. Latch isn't close to turning a profit at this stage of its growth cycle, but the revenue multiple isn't any easier on the eyes. The SPAC combination outlined earlier this year would result in 125.8 million shares outstanding, implying a market cap of $1.57 billion. Paying 32 times this year's revenue guidance is high, but there are slower-growing SaaS stocks fetching higher multiples.
Thumping the market from here will require expanding its reach. It has a strong value proposition to offer even for older apartment buildings looking for a high-tech makeover, and the push into office buildings bears watching. The upside may be limited in the near term until we see revenue, bookings, and guidance accelerate but Latch has all of the right ingredients as a ground-floor opportunity with its eyes on the penthouse elevator button.
