LTCH.OIDLatch, INC
10-Q: Latch (DOOR) Q2 2025: Revenue Up, Losses Narrow Amid Rebrand
Sentiment:
Quarterly Report
Latch, now rebranded as DOOR, reported a significant increase in total revenue and a narrowed net loss for the second quarter and first half of 2025, driven by professional services growth, despite ongoing internal control weaknesses and legal proceedings.
Delay expectedThe 2021 Registration Rights Agreement does not provide for any penalties connected with delays in registering the Company's common stock.Approximately 0.1 million and 0.3 million Restricted Stock Units (RSUs) vested during the six months ended June 30, 2025, and the year ended December 31, 2024, respectively, but were not released upon vesting due to the suspension of the S-8 Registration Statement.
Better than expectedNet loss significantly decreased by 53.7% for the three months and 37.5% for the six months ended June 30, 2025, compared to the prior year periods.Total revenue increased by 47.3% for the three months and 39.5% for the six months ended June 30, 2025, driven by strong growth in professional services.Adjusted EBITDA improved by 24.3% for the three months and 4.7% for the six months ended June 30, 2025, indicating a positive trend in operational performance.General and administrative expenses saw a substantial reduction of 65.0% for the three months and 52.3% for the six months ended June 30, 2025, reflecting cost discipline.
Summary
- Total revenue for the three months ended June 30, 2025, increased by $6.1 million (47.3%) to $19.055 million compared to $12.938 million in the prior year period.
- Total revenue for the six months ended June 30, 2025, increased by $9.9 million (39.5%) to $34.829 million compared to $24.973 million in the prior year period.
- Net loss for the three months ended June 30, 2025, decreased by $9.088 million (53.7%) to $(7.849) million compared to $(16.937) million in the prior year period.
- Net loss for the six months ended June 30, 2025, decreased by $11.475 million (37.5%) to $(19.099) million compared to $(30.574) million in the prior year period.
- Adjusted EBITDA for the three months ended June 30, 2025, improved by $1.830 million (24.3%) to $(5.689) million compared to $(7.519) million in the prior year period.
- Adjusted EBITDA for the six months ended June 30, 2025, improved by $0.641 million (4.7%) to $(12.955) million compared to $(13.596) million in the prior year period.
- Cash and cash equivalents decreased to $46.727 million as of June 30, 2025, from $70.203 million as of December 31, 2024.
- Professional services revenue saw a substantial increase of $5.562 million (238.4%) for the three months and $9.785 million (208.7%) for the six months ended June 30, 2025, primarily due to the HelloTech merger and property management acquisitions in 2024.
- General and administrative expenses decreased by $10.9 million for the three months and $14.9 million for the six months ended June 30, 2025, mainly due to reduced legal and settlement fees, RSU expense, audit fees, and consulting fees.
- The company rebranded from Latch, Inc. to DOOR in August 2025, with its primary operating entity, Latch Systems, Inc., changing its name to DOOR Systems, Inc.
- Material weaknesses in internal control over financial reporting, including 'Tone at the Top,' control environment, risk assessment, control activities, information and communication, and monitoring activities, continue to exist as of June 30, 2025.
Sentiment
Score: 6
Explanation: The company shows significant improvements in revenue growth and reduced losses, alongside a positive trend in Adjusted EBITDA. However, persistent material weaknesses in internal controls, ongoing legal and regulatory challenges, and a declining cash balance temper the overall positive sentiment.
Positives
- Total revenue increased by 47.3% for the three months and 39.5% for the six months ended June 30, 2025, demonstrating strong top-line growth.
- Net loss significantly narrowed by 53.7% for the three months and 37.5% for the six months ended June 30, 2025, indicating improved operational efficiency.
- Adjusted EBITDA improved by 24.3% for the three months and 4.7% for the six months ended June 30, 2025, reflecting a positive trend in core operating performance.
- Professional services revenue surged by 238.4% for the three months and 208.7% for the six months ended June 30, 2025, largely due to successful integration of 2024 acquisitions (HelloTech merger and property management acquisitions).
- General and administrative expenses decreased substantially by 65.0% for the three months and 52.3% for the six months ended June 30, 2025, driven by reductions in legal fees, RSU expense, audit fees, and consulting fees.
- Net cash used in operating activities decreased by $21.2 million for the six months ended June 30, 2025, compared to the prior year, indicating improved cash management and reduced burn rate.
- The company expects to fund its operational cash requirements for at least 12 months from the date of this Form 10-Q, suggesting adequate short-term liquidity.
Negatives
- Despite improvements, the company continues to incur significant net losses, with $(7.849) million for Q2 2025 and $(19.099) million for YTD Q2 2025.
- Cash and cash equivalents decreased by $23.476 million during the six months ended June 30, 2025, reflecting continued cash usage.
- Hardware revenue decreased by 2.7% for the six months ended June 30, 2025, compared to the prior year period.
- Software revenue growth was modest at 4.4% for the three months and 3.4% for the six months ended June 30, 2025.
- Research and development expenses increased by 51.5% for the three months and 41.3% for the six months ended June 30, 2025, due to higher compensation and third-party expenses.
- Sales and marketing expenses increased by 84.3% for the three months and 62.6% for the six months ended June 30, 2025, primarily related to HelloTech operations and digital marketing.
- The company continues to have material weaknesses in its internal control over financial reporting, which management has not yet fully remediated or validated.
- Ongoing legal proceedings, including derivative litigation and a service provider demand, continue to incur significant costs and potential liabilities.
- The company is cooperating with an ongoing SEC investigation into issues related to key performance indicators and revenue recognition practices.
- The company's securities are delisted from Nasdaq and trade on OTC Markets Group Inc.'s Expert Market, resulting in limited liquidity and depressed trading prices.
Risks
- Ability to remediate identified material weaknesses in internal control over financial reporting and the timing of such remediation.
- Performance of the company's stock, particularly given limited liquidity and depressed trading prices due to delisting from Nasdaq.
- Uncertainty regarding whether common stock and warrants will remain on the OTC Expert Market or be listed on other OTC markets.
- Developments in pending stockholder class action and derivative complaints or other legal proceedings.
- Regulatory disputes and governmental inquiries, including the ongoing SEC Investigation.
- Risks related to privacy and data protection laws, privacy or data breaches, or loss of data.
- Impact of changes in consumer spending patterns, preferences, economic conditions, crime, weather, demographic trends, and employee availability.
- Increases in component costs, long lead times, supply shortages, and other disruptions to the supply chain.
- Delays in construction timelines at customer building sites.
- Any defects in new products or enhancements to existing products.
- Ability to continue to develop new products, services, and innovations to meet evolving customer demands.
- Ability to hire, retain, manage, and motivate employees, including key personnel.
- Impact of workforce reductions on business, financial condition, and results of operations.
- Ability to improve operating and financial results and attain profitability.
- Compliance with laws and regulations applicable to the business.
- Impact of macroeconomic conditions on the business, suppliers, and customers.
- Ability to upgrade and maintain information technology systems.
- Ability to create, acquire, and protect intellectual property.
- Ability to successfully identify, complete, integrate, and realize synergies from acquisitions, including retaining key personnel.
- Potential adverse impact of any future acquisitions, including increased risks, poor performance, or unexpected costs.
Future Outlook
Based on the current business plan, the company expects to be able to use its current cash and cash equivalents and available-for-sale securities to fund operational cash requirements for at least 12 months from the date of this Form 10-Q. The company expects to resume granting Restricted Stock Units (RSUs) pursuant to the S-8 Registration Statement once it is current in its SEC filings, which will increase stock-based compensation expense. The company is also actively expanding the DOOR Platform and device integrations to encompass broader smart home solutions, laying the groundwork for a building intelligence platform to automate and streamline building operations.
Management Comments
- Management continues to focus on cost discipline, inventory management and liquidity preservation as it seeks to reduce operating cash usage.
- Management believes that the condensed consolidated financial statements and related financial information included in this Form 10-Q fairly present in all material respects the Company's financial condition, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with GAAP, despite material weaknesses in internal control over financial reporting.
Industry Context
The company, now rebranded as DOOR, operates in the smart access and smart home solutions market, primarily serving the multifamily rental sector. Its strategy involves expanding its cloud-based SaaS platform (the DOOR Platform) to integrate more smart home devices and evolve into a building intelligence platform. The HelloTech acquisition provides a scalable network for in-home technology services, complementing its core offerings. The property management acquisitions further deepen its presence in the multifamily market, offering comprehensive services. This expansion aligns with broader industry trends towards integrated smart building solutions and increased demand for convenience and efficiency in residential and commercial properties.
Comparison to Industry Standards
- NA
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Interim Chief Executive Officer | NA | Mr. Keyes | January 2023 | To improve tone from executive management and reinforce commitment to integrity. |
| Interim Chief Financial Officer | NA | Mr. Landy | January 2023 | To improve tone from executive management and reinforce commitment to integrity. |
| Chief Executive Officer | Mr. Keyes (interim) | Present Chief Executive Officer | June/July 2023 | Establishment of a new leadership team. |
| Chief Financial Officer | Mr. Landy (interim) | Present Chief Financial Officer | June/July 2023 | Establishment of a new leadership team. |
| Chief Strategy Officer | Jamie Siminoff | NA | December 31, 2024 | Mutual agreement to step down and transition to an advisory role. |
| Advisory Services (Jamie Siminoff) | NA | NA | May 2025 | Termination of advisory services by the Company. |
| Chief Strategy and Legal Officer | NA | Present Chief Strategy and Legal Officer | February 2025 | Appointment following completion of the Restatement. |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Internal Control Remediation | Hired finance and accounting professionals with appropriate experience and training. | Ongoing | Aimed at developing, maintaining, and improving accounting policies, procedures, and internal controls. |
| Internal Control Remediation | Provided and continue to provide training for employees regarding internal control responsibilities. | Ongoing | Enhances employee understanding and execution of internal controls. |
| Internal Control Remediation | Reinforced communication between sales, accounting, and finance departments, including establishing controls for finance approval of non-standard terms. | Ongoing | Improves accuracy and timeliness of accounting for sales transactions and revenue recognition. |
| Internal Control Remediation | Updated operative sales contracts to clarify that no transactional terms exist outside signed agreements and no oral agreements are valid, requiring legal department approval. | Ongoing | Reduces ambiguity and potential for misstatement in revenue recognition. |
| Internal Control Remediation | Developed an intranet for employees with organizational chart, company-wide policies, Code of Ethics, Whistleblower Policy, and anonymous reporting hotline access. | Ongoing | Enhances transparency, ethical conduct, and access to governance resources. |
| Internal Control Remediation | Actively reviewing, reevaluating, and improving the Sarbanes-Oxley compliance program. | Ongoing | Strengthens overall compliance, governance, risk assessment, and control testing. |
| Internal Control Remediation | Reestablished an enterprise risk committee, meeting regularly. | Ongoing | Improves oversight and management of enterprise-wide risks. |
| Internal Control Remediation | Enhanced procedures to perform an updated, comprehensive enterprise risk assessment. | Ongoing | Better identification and analysis of risks, particularly those identified in the internal investigation. |
| Internal Control Remediation | Implemented an internal control compliance software. | Ongoing | Assists with ongoing monitoring of control performance, streamlines internal control management, and enhances reporting. |
| Internal Control Remediation | Developed and continue to develop internal control documentation over financial processes and related disclosures. | Ongoing | Provides clear guidelines and evidence for control operation and effectiveness. |
| Internal Control Remediation | Revised policies and procedures related to the revenue recognition process, including assessment, approval matrix, and exception handling. | Ongoing | Aims to ensure revenue is recorded at the correct amount and in the correct period. |
Legal Proceedings
- Schwartz v. Latch, Inc., et al. (securities class action): The parties agreed to a settlement of $1.95 million, which was paid in November 2025 and approved by the court in December 2025. The company does not expect insurers to contribute.
- In re Latch Inc. Derivative Litigation (consolidated Manley and Gottlieb actions): The company is negotiating a potential settlement and has accrued $0.2 million for expenses as of June 30, 2025. The company intends to vigorously defend against the allegations.
- Service Provider Demand: The company is in discussions with a service provider regarding a demand for $6.8 million in payment under a prior agreement. The company has accrued this amount as of June 30, 2025, believing a settlement is probable, but does not believe the service provider is entitled to the fees.
- SEC Investigation: The company is cooperating with an ongoing SEC investigation into issues related to key performance indicators and revenue recognition practices that led to a prior restatement. The duration or outcome of the investigation, or whether an enforcement action will be brought, cannot be predicted.
Related Party Transactions
- The company had $0.1 million of receivables due from customers who are also stockholders and directors (or affiliates) as of June 30, 2025.
- For the three months ended June 30, 2025, the company generated $0.002 million in hardware revenue, $0.05 million in software revenue, and $0.2 million in services revenue from these related-party customers.
Stakeholder Impact
- Shareholders: Experience limited liquidity and depressed trading prices due to delisting from Nasdaq and trading on the OTC Expert Market. Face risks from ongoing legal proceedings and the SEC investigation. May benefit from future RSU grants once SEC filings are current.
- Employees: Have undergone workforce reductions and personnel changes. New leadership team appointments aim to improve the control environment. Training is being provided to enhance internal control responsibilities.
- Customers: Benefit from the expansion of the DOOR Platform to broader smart home solutions and the availability of HelloTech in-home services and property management services. Potential for improved service quality as internal controls are strengthened.
- Creditors (Customers Bank): Hold a term loan secured by substantially all of the company's assets (excluding intellectual property) and benefit from covenants, including a minimum liquidity ratio of 4.00.
- Service Providers: One service provider has a demand for $6.8 million in payment, which is currently under dispute and negotiation.
Next Steps
- Continue remediation efforts for identified material weaknesses in internal control over financial reporting.
- Resume granting Restricted Stock Units (RSUs) once current in SEC filings.
- Evaluate the impact of the private company acquisition on the fair value of the investment in future reporting periods.
- Evaluate the impact of recently issued accounting standards (ASU 2023-06, ASU 2023-09, ASU 2024-03, ASU 2025-06) on consolidated financial statements.
- Continue to design and implement control activities to mitigate risks and test their operating effectiveness.
- Conduct an annual review and assessment of revenue recognition-related controls and information technology system configurations.
Key Dates
| Date | Description |
|---|---|
| 2021-06-03 | Latch, Inc. 2021 Incentive Award Plan approved by TSIA stockholders. |
| 2021-06-04 | Public warrants converted into warrants to purchase common stock of the Company. |
| 2021-06 | Company filed a registration statement on Form S-1 for registrable securities. |
| 2022-08-10 | Company suspended use of its registration statement on Form S-8. |
| 2023-01-11 | Schwartz v. Latch, Inc., et al. securities class action complaint filed. |
| 2023-01 | Messrs. Keyes and Landy appointed interim Chief Executive Officer and interim Chief Financial Officer. |
| 2023-02-15 | Manley v. Latch, Inc., et al. derivative action filed. |
| 2023-03 | SEC Staff contacted the Company regarding an investigation into KPIs and revenue recognition practices. |
| 2023-04-24 | Scott Schwartz appointed lead plaintiff in the Schwartz action. |
| 2023-05-15 | Stock restriction agreement dated with Mr. Siminoff. |
| 2023-07-03 | Closing of the acquisition of Honest Days Work, Inc. (HDW). |
| 2023-07-13 | Gottlieb v. Latch, Inc., et al. derivative action filed. |
| 2023-06 | New leadership team, including present CEO and CFO, hired and sales department restructured. |
| 2023-08-01 | Manley Action and Gottlieb Action consolidated under In re Latch Inc. Derivative Litigation. |
| 2023-10 | FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SECs Disclosure Update and Simplification Initiative. |
| 2023-12 | FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. |
| 2024-01-01 | Number of shares reserved for future issuance under the 2021 Plan increased by 8,810,007 shares. |
| 2024-02 | Company entered into a three-year advisory agreement with a partner for DPM's property management business. |
| 2024-06-21 | Merger with HelloTech, Inc. completed. |
| 2024-07-15 | Company entered into an Amended and Restated Loan and Security Agreement with Customers Bank and issued a Bank Warrant. |
| 2024-09-27 | Company filed a motion to transfer the Schwartz action to the United States District Court for the Southern District of New York. |
| 2024-11-05 | Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC. |
| 2024-11-13 | Motion to transfer Schwartz action denied. |
| 2024-11-18 | Mr. Siminoff and the Company entered into a Separation and Advisory Agreement and Release (Siminoff Agreement Date). |
| 2024-12 | Parties agreed in principle to a settlement in the Schwartz action for $1.95 million. |
| 2024-12-31 | Mr. Siminoff stepped down as Chief Strategy Officer. |
| 2025-01-01 | Number of shares reserved for future issuance under the 2021 Plan increased by 8,241,264 shares. |
| 2025-01-15 | Payments under the Loan became equal monthly installments of principal plus accrued interest. |
| 2025-02 | Appointment of present Chief Executive Officer, Chief Financial Officer, and Chief Strategy and Legal Officer. |
| 2025-05 | Company terminated Mr. Siminoff's Advisory Services and repurchased 0.8 million Advisory Shares. |
| 2025-06 | Parties filed a final stipulation of settlement in the Schwartz action. |
| 2025-06-30 | End of the current quarterly reporting period. |
| 2025-07 | Funds for investment purchases were deducted from the Company's account. |
| 2025-08 | Company rebranded as DOOR. |
| 2025-09 | FASB issued ASU 2025-06, Intangibles Goodwill and Other Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. |
| 2025-11 | Company paid the $1.95 million settlement amount for the Schwartz action. |
| 2025-12 | Schwartz action settlement approved by the court. |
| 2025-12-31 | Outstanding principal of the Loan was $4.8 million. |
| 2026-01-21 | 164,257,801 shares of common stock outstanding. |
| 2026-01-23 | Filing date of this Quarterly Report on Form 10-Q. |
| 2026-12-31 | Original expected Advisory End Date for Mr. Siminoff. |
| 2027-06-30 | Potential effective date for FASB ASU 2023-06 if SEC does not remove overlapping requirements. |
| 2027-12-15 | Effective date for FASB ASU 2024-03 for interim periods within annual reporting periods beginning after this date; Effective date for FASB ASU 2025-06 for fiscal years beginning after this date. |
| 2029-07-15 | Maturity Date of the term loan with Customers Bank. |
| 2030-07-15 | Expiration date of the Bank Warrant. |
Recommendation
holdWhile the company demonstrated significant improvements in revenue growth and a narrowed net loss, along with an improved Adjusted EBITDA, several critical factors warrant a 'hold' recommendation. The persistent material weaknesses in internal control over financial reporting, the ongoing SEC investigation, and pending derivative litigation introduce substantial uncertainty and potential liabilities. Furthermore, the stock's delisting from Nasdaq and trading on the OTC Expert Market severely limit liquidity and price discovery. The positive operational trends are encouraging, but the unresolved governance and legal issues, coupled with a declining cash balance, suggest a cautious approach until these fundamental risks are more clearly resolved and sustained profitability is demonstrated.
Keywords
Latch, DOOR, Smart Access, Smart Home, SaaS, Property Management, HelloTech, Multifamily, SEC Filing, 10-Q, Financial Results, Internal Controls, Legal Proceedings, Rebranding
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