Latch, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue decreased 18.9% year-over-year to $14.1 million for the three months ended September 30, 2026, driven by lower hardware shipments and professional services installation activity.
• Software revenue increased 18.1% year-over-year to $6.3 million, representing continued subscription growth.
• Gross profit was $7.8 million, with gross margin expanding to 55.2% from 44.3% in the prior-year period.
• Operating expenses totaled $28.0 million, including a $13.6 million non-cash goodwill impairment charge and $1.2 million in restructuring costs; non-GAAP operating expenses were $13.2 million, a 6.0% decrease year-over-year.
• Net loss was $20.5 million, compared to $6.6 million in the third quarter of 2025, primarily due to the goodwill impairment charge.
• Adjusted EBITDA loss (non-GAAP) improved 17.7% year-over-year to $3.8 million.
• Net cash used in operating activities for the nine months ended September 30, 2026, was $11.8 million, a 58.2% decrease from $28.1 million in the prior-year period.
• As of September 30, 2026, the company held $22.9 million in cash, cash equivalents, and restricted cash.
• Deferred revenue (current and non-current) totaled $24.4 million ($12.4 million current, $11.9 million non-current) as of September 30, 2026, compared to $26.4 million at December 31, 2025.
• Long-term debt increased to $5.0 million as of September 30, 2026, from $3.3 million at December 31, 2025.

Guidance and Future Outlook:

• The company aims to achieve positive cash flow by the second half of 2027.
• The restructuring plan is expected to generate $10 million to $12 million in annualized operating cost savings.
• Cash utilization is expected to improve further in the fourth quarter of 2026, with acceleration throughout 2027 as restructuring benefits are realized.
• Additional cash flow improvements are anticipated from the renewal of long-term software contracts, subscription growth, and expanded software offerings.
• The outlook incorporates the $1.0 million civil penalty associated with the SEC settlement.

Business Segments and Product Lines:

• OpenDOOR Platform: Officially launched in September 2026 as an SDK and developer platform; EliseAI announced as the first public partner, with integrations also supported for Della and Cybersuite X.
• AI and Automation: AI integration has nearly quadrupled engineering development output, shifting release cycles from every two weeks to twice weekly; new DOOR OS capabilities include Smart Keys, Work Orders, and time-limited access roles.
• Hardware: Revenue was $3.1 million for the quarter, with a gross margin of 19.7% compared to 23.7% in the prior-year period.
• Professional Services: Revenue was $4.7 million for the quarter.
• Property Management: The company completed the sale of assets of its DOOR Property Management business on October 30, 2026, as part of an exit from property management operations.

Market and Competitive Landscape:

• The company reports significant interest from potential integration partners following the public launch of OpenDOOR.
• Industry adoption of "Building Intelligence" is validating the company's strategy.
• The company is focusing resources on higher-margin offerings and exiting non-core operations to sharpen its focus on the Building Intelligence platform.

Risks and Challenges:

• The company faces a forward-looking statement safe harbor restriction for three years following an SEC cease-and-desist order entered on October 1, 2026.
• Risks include the ability to implement business plans, realize anticipated cost savings from restructuring, and achieve positive cash flow within the anticipated timeframe.
• Potential risks include unexpected delays, difficulties, or expenditures, and the ability to comply with SEC settlement terms.
• The company recorded a $13.6 million non-cash goodwill impairment charge reflecting market-participant assumptions differing from internal operating plans.

Management Commentary and Tone:

• CEO David Lillis emphasized a continued focus on driving profitability, streamlining operations, and building a sustainable company.
• Management stated they are "leaning into what we do best" and exiting non-core operations to focus on higher-margin offerings.
• The tone indicates confidence in the restructuring plan's progress and its ability to accelerate the path to profitability.
• Management highlighted that AI-assisted development has significantly increased productivity and reduced the cost structure.

Other Key Points:

• The company reached a settlement with the SEC in October 2026 without admitting findings, involving a $1.0 million civil monetary penalty payable in four quarterly installments.
• A reduction in force commenced in August 2026 and is expected to be completed in the fourth quarter of 2026.
• Sponsor shares (738,000) held by TS Innovation Acquisitions Sponsor, L.L.C. were forfeited and cancelled on June 4, 2026.
• The company's shares trade on the OTC Markets under the symbol "LTCH."
• The company is transitioning its name and branding to "DOOR" as the Building Intelligence company.