SmartRent, Inc. Fair Value Disclosure
NOTE 3. FAIR VALUE MEASUREMENTS AND FAIR VALUE OF INSTRUMENTS
The following tables display the carrying values and fair values of financial instruments.
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As of |
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December 31, 2024 |
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December 31, 2023 |
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Assets on the Consolidated Balance Sheets |
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Carrying Value |
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Unrealized |
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Fair |
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Carrying |
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Unrealized Losses |
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Fair |
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Cash and cash equivalents |
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Level 1 |
|
$ |
142,482 |
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$ |
- |
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$ |
142,482 |
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$ |
215,214 |
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$ |
- |
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$ |
215,214 |
|
Restricted cash |
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Level 1 |
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- |
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- |
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- |
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495 |
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- |
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|
495 |
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Total |
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$ |
142,482 |
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$ |
- |
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$ |
142,482 |
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$ |
215,709 |
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$ |
- |
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$ |
215,709 |
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The Company reports the current portion of restricted cash as a separate item in the Consolidated Balance Sheets and the non-current portion is a component of other long-term assets in the Consolidated Balance Sheets.
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As of |
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December 31, 2024 |
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December 31, 2023 |
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Liabilities on the Consolidated Balance Sheets |
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Carrying |
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Fair |
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Carrying |
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Fair |
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Acquisition earnout payment |
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Level 3 |
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$ |
1,760 |
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$ |
1,760 |
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$ |
4,250 |
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$ |
4,250 |
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Total liabilities |
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$ |
1,760 |
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$ |
1,760 |
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$ |
4,250 |
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$ |
4,250 |
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In December 2021, the Company purchased all of the outstanding equity interests of iQuue, LLC ("iQuue"). The Company reports the current portion of the acquisition earnout payment as a component of other current liabilities in the Consolidated Balance Sheets and the non-current portion is a component of other long-term liabilities on the Consolidated Balance Sheets. Earnout payments related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The changes in the fair value of the Company's Level 3 liabilities for the years ended December 31, 2024 and 2023 are as follows.
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As of |
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December 31, 2024 |
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December 31, 2023 |
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Balance at beginning of period |
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$ |
4,250 |
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$ |
5,540 |
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Payment of earnout in connection with the iQuue acquisition |
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(1,530 |
) |
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(1,702 |
) |
Change in fair value of earnout |
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(960 |
) |
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412 |
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Balance at end of period |
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$ |
1,760 |
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$ |
4,250 |
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The fair value of the earnout payment is measured on a recurring basis at each reporting date. The following inputs and assumptions were used in the Monte Carlo simulation model to estimate the fair value of the earnout payment as of December 31, 2024 and December 31, 2023. During the year ended December 31, 2024, the Company determined there was a $960 decrease in the fair value of the earnout, primarily due to a decrease in the forecasted units expected to be deployed during the earnout period. During the year ended December 31, 2023, there was a $412 increase in the fair value of the earnout, primarily due to a decreased payment term as the Company approached the payment date. The Company recorded these adjustments in general and administrative expense on the Consolidated Statement of Operations and Comprehensive Loss. The following table sets forth the weighted-average assumptions used to estimate the fair value of the earnout payment as of December 31, 2024 and December 31, 2023.
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As of |
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December 31, 2024 |
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December 31, 2023 |
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Discount Rate |
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12.30 |
% |
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10.50 |
% |
Volatility |
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40.00 |
% |
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|
42.00 |
% |
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About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.