LTCH · Read the filing

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes of Latch, Inc. and its subsidiaries included elsewhere in this Form 10-K. Some of the information contained in this discussion and analysis contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth in Part I, Item 1A. “Risk Factors,” actual results may differ materially from those anticipated in these forward-looking statements. Unless the context otherwise requires, references in this subsection to “we,” “our,” “Latch,” “DOOR” and the “Company” refer to the business and operations of (i) Latch Systems, Inc. (formerly known as Latch, Inc.) and its consolidated subsidiaries prior to the Business Combination and (ii) Latch, Inc. (formerly known as TS Innovation Acquisitions Corp.) and its consolidated subsidiaries following the consummation of the Business Combination.

For a comparison of our financial condition and results of operations for the years ended December 31, 2023 and December 31, 2022, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”).

Overview

Latch is a technology company delivering an integrated ecosystem of hardware, software and services designed to enhance operations and experiences within buildings, primarily serving the multifamily rental market. In August 2025, we rebranded as DOOR, although our legal name remains Latch, Inc.

Our core offering is built around the DOOR Platform, which powers and manages our suite of smart access control devices (including locks, readers and intercoms) and smart home devices and integrates with other connected devices within a building.

We provide solutions that streamline building management for property owners and operators, offer modern convenience and security for residents and simplify interactions for visitors and service providers. While our foundation remains smart access control, we are actively expanding the DOOR Platform and our device integrations to encompass broader smart home solutions, managing devices such as sensors, thermostats and lighting. This ongoing expansion leverages our established platform to create more connected and efficient buildings as we lay the groundwork for a building intelligence platform, automating and streamlining building operations, including work order management and automation, property maintenance and unit inspections and repairs.

Our customers, which include real estate developers, builders, owners and property managers in the United States and Canada, typically purchase our hardware devices (directly or indirectly through our channel partner network) and directly license our SaaS platform. Residents interact with the DOOR Platform through the DOOR App. Through the DOOR App, residents access common areas and unlock residential doors, provide guest access, manage smart home devices and book services.

Our professional services offerings are integral to ensuring successful deployment of the DOOR Platform and ongoing support for our customers and their residents. This includes connecting our multifamily property customers with our partners for installation of Latch and third-party smart access and smart home hardware, ensuring that solutions are implemented efficiently and correctly.

Complementing our multifamily installation capabilities, our HelloTech business provides a scalable, nationwide network of skilled independent technicians. HelloTech connects these service providers with residents and property managers seeking a wide range of on-demand technical services, such as TV mounting and smart home device installation and set-up, as well as broader home services, such as furniture assembly, handyman services and home cleaning.

Additionally, we offer a comprehensive property management service in and around Boston, Massachusetts.

We operate in one operating and reporting segment.

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Key Business Metrics

We are presenting software revenue (prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”)), total revenue (GAAP), net loss (GAAP) and Adjusted EBITDA (non-GAAP) as key business metrics, as we believe each of those metrics is important in measuring our performance, identifying trends affecting our business, formulating business plans and making strategic decisions that will impact our future operational results.

Our key business metrics are as follows for the periods presented (in thousands):

Year ended December 31,

GAAP Measures:

Non-GAAP Measure:

Adjusted EBITDA

To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we have presented in this Form 10-K Adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similarly titled measures presented by other companies.

We define Adjusted EBITDA as our net loss, excluding the impact of the following items, if applicable: (i) depreciation and amortization expense, (ii) net interest income or expense, (iii) provision for income taxes, (iv) change in fair value of warrant liability, trading securities, or derivative instruments, (v) restructuring costs, (vi) transaction-related costs, (vii) net impairment of intangible assets, (viii) non-ordinary course legal fees and settlement reserves, (ix) stock-based compensation expense and (x) gain or loss on extinguishment of debt. The most directly comparable GAAP measure is net loss. We believe excluding the impact of these items in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance. We monitor, and have presented in this Form 10-K, Adjusted EBITDA because it is a key measure used by our management and Board to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. We believe Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we include in net loss. Accordingly, we believe Adjusted EBITDA provides useful information to investors, analysts and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance.

Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net loss, which is the most directly comparable financial measure calculated and presented in accordance with GAAP. In addition, the expenses and other items that we exclude in our calculations of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from Adjusted EBITDA when they report their operating results.

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In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of Adjusted EBITDA as a tool for comparison. The following table reconciles Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP (in thousands):

Year ended December 31,

Depreciation and amortization 7,202 7,201

Provision for income taxes 2 30

Change in fair value of warrant liability (159) (230)

Transaction-related costs — 1

Impairment of intangible assets, net(3) 2,849 —

Non-ordinary course legal fees and settlement reserves(4) 7,376 10,405

(1)As a result of significant discounts provided to our customers on certain long-term software contracts paid in advance, the Company has determined that there is a significant financing component related to the time value of money and has therefore broken out the interest component and recorded it as a component of interest income, net on the accompanying Consolidated Statements of Operations and Comprehensive Loss. Interest income, net includes interest expense associated with the significant financing component of $3.5 million and $4.6 million for the years ended December 31, 2024 and 2023, respectively.

(2)The Company does not anticipate incurring any restructuring costs during the year ending December 31, 2025. See Note 21. Restructuring,in Part II, Item 8. “Financial Statements.”

(3)See Note 2. Summary of Significant Accounting Policies - Intangible Assets, Net in Part II, Item 8. “Financial Statements.” The Company has not previously recorded an impairment of intangible assets.

(4)For 2024, the amounts primarily represent legal fees related to the Stockholder Lawsuits and the SEC Investigation. While the Company is involved in various litigation and legal disputes in the ordinary course of its business, the Company believes the non-ordinary course legal fees and settlement reserves included in our calculation of Adjusted EBITDA do not represent normal operating expenses. See Note 14. Commitments and Contingencies,in Part II, Item 8. “Financial Statements.” These costs are included within general and administrative on the accompanying Consolidated Statements of Operations and Comprehensive Loss.

(5)See Note 17. Stock-Based Compensation,in Part II, Item 8. “Financial Statements.”

Components of Results of Operations

Revenue

Hardware Revenue. We generate hardware revenue primarily from the sale of our portfolio of devices for our smart access and smart home solutions. We sell hardware to customers, which include real estate developers, builders, building owners and property managers, directly or through our channel partners, who act as intermediaries, installers or wholesalers. The Company recognizes hardware revenue when there is evidence a contract exists and control has been transferred to the customer. The Company provides warranties that its hardware will be substantially free from defects in materials and workmanship, generally for a period of one or two years for electronic components depending on the hardware product, and five years for mechanical components. The Company determines in its sole discretion whether to replace or refund warrantable devices.

Software Revenue. We generate software revenue primarily through the license of our SaaS over our cloud-based platform on a subscription-based arrangement. Subscription fees vary depending on the features selected by customers. SaaS arrangements generally have term lengths between one and ten years. The SaaS provided by the Company are considered stand-ready performance obligations where customers benefit from the services evenly throughout the service period. Revenue is recognized ratably over the subscription period beginning when or as control of the promised services is transferred to the customer.

Professional Services Revenue. We generate professional services revenue in three primary ways: (i) by facilitating project-based hardware installation and activation services for enterprise customers, (ii) through fees generated by technology and

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home services performed for residents and consumers, and (iii) through property management services performed by DPM for its multifamily building customers.

We facilitate hardware installation and activation services to select customers. The revenues associated with these services are recognized over time based on a percentage of installation performed and completed and represent a transfer of services to a customer under contract.

Through our HelloTech platform, a network of independent contractors provides in-home technology services such as installation, repair, troubleshooting and technical support. Orders placed through the HelloTech platform are recognized as revenue as services are completed over time. We also offer a subscription service through the HelloTech platform that includes discounted home services and other technical support such as 24/7 online support, home technology checkups, and antivirus and password manager software support. Subscription revenues are recognized ratably over the subscription period.

DPM’s property management activities include operating DPM customers’ buildings, which involves maintenance and repair, construction supervision, leasing and administrative services. Property management service revenues are recognized ratably over the service period.

Cost of Revenue

Cost of hardware revenue consists primarily of product costs, including manufacturing costs, duties and other applicable importing costs, shipping and handling costs, packaging costs, warranty costs, assembly costs and warehousing costs, as well as other non-inventoriable costs, including personnel-related expenses associated with supply chain logistics and direct deployment and outsourced labor costs. We expect hardware cost of revenue to move in-line with our hardware revenue. Our hardware costs have been and may continue to be impacted by any supply chain constraints, shipping cost volatility and changes in import tariffs.

Cost of software revenue consists primarily of outsourced hosting costs, other outsourced cloud-based service costs and personnel-related expenses associated with monitoring and managing outsourced hosting service providers.

Cost of professional services revenue consists primarily of (i) third-party installation labor costs and parts and materials associated with deployment of our hardware, (ii) labor costs associated with HelloTech independent technicians and credit card fees, and (iii) costs related to third-party property service providers.

Cost of revenue excludes depreciation and amortization shown in operating expenses.

Operating Expenses

Operating expenses consist of research and development, sales and marketing, general and administrative and depreciation and amortization expenses. As part of a July 2023 reduction in force (the “July 2023 RIF”), we reduced headcount, resulting in the forfeiture of equity grants and the associated recognition of negative stock-based compensation expense. During the Suspension Period, we have not granted any RSUs. However, we expect to resume granting RSUs pursuant to the S-8 Registration Statement once we are current in our SEC filings. Any such grants will increase the Company’s stock-based compensation expense.

R&D Expenses. R&D expenses consist primarily of personnel and related expenses for our employees working on our product, design and engineering teams, including salaries, bonuses, benefits, payroll taxes, travel and stock-based compensation. Also included are non-personnel costs such as amounts paid to our third-party contract manufacturers for tooling, engineering and prototype costs of our hardware products, fees paid to third-party consultants, R&D supplies and rent.

Sales and Marketing Expenses. Sales and marketing expenses consist primarily of personnel and related expenses for our employees working on our sales, customer success, deployment and marketing teams, including salaries, bonuses, benefits, payroll taxes, travel, commissions and stock-based compensation. Also included are non-personnel costs such as marketing activities (trade shows and events, conferences and digital advertising), professional fees, rent and customer support.

General and Administrative Expenses. General and administrative expenses consist primarily of personnel and related expenses for our executive, legal, human resources, finance and IT functions, including salaries, bonuses, benefits, payroll taxes, travel and stock-based compensation. Additional expenses included in this category are non-personnel costs such as legal fees, rent, professional fees, audit fees, bad debt expense and insurance costs.

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Depreciation and Amortization Expenses. Depreciation and amortization expenses consist primarily of depreciation expenses related to investments in property and equipment and internally-developed capitalized software.

Other Income, Net

Other income, net consists of interest expense associated with the significant financing component of our longer-term software contracts, interest expense associated with our debt financing arrangements, interest income on highly liquid short-term investments, gain or loss on extinguishment of debt and gain or loss on change in fair value of derivative liabilities, warrant liabilities and trading securities.

Interest income, net is summarized as follows:

Year ended December 31,

Income Taxes

The provision for income taxes consists primarily of income taxes related to foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on our deferred tax assets as we have concluded that it is more likely than not that the deferred assets will not be utilized.

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Results of Operations

The following table and period-to-period comparisons of operating results summarize our Consolidated Statements of Operations and Comprehensive Loss data and are not necessarily indicative of results for future periods.

Comparison of years ended December 31, 2024 and December 31, 2023

Year ended December 31,

(in thousands, except share and per share data) 2024 2023 $ Change % Change

Revenue

Cost of revenue(1)

Operating expenses

Depreciation and amortization 7,202 7,201 1 N.M.

Impairment of intangible assets, net 2,849 — 2,849 N.M.

Other income, net

Change in fair value of warrant liability 159 230 (71) (30.9) %

Provision for income taxes 2 30 (28) (93.3) %

Other comprehensive income (loss)

Foreign currency translation adjustment 8 (7) 15 (214.3) %

Net loss per common share:

Basic and diluted net loss per common share $ (0.37) $ (0.72) $ 0.35 (48.6) %

Weighted average shares outstanding:

(1)Exclusive of depreciation and amortization shown in operating expenses below.

N.M.: Not meaningful

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Revenue

Revenue increased by $11.7 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase was driven by a $10.6 million increase in professional services revenue and a $2.5 million increase in software revenue, partially offset by a $1.5 million decrease in hardware revenue. The increase in professional services revenue was attributable to $8.3 million in revenue from HelloTech and $2.4 million of revenue from DPM, both of which were new sources of revenue in 2024. Theincrease in software revenue reflects the continued growth in subscriptions as a result of increases in delivered hardware units. While hardware shipments increased in 2024 compared to 2023, hardware revenue decreased due to the impact of the Restatement, which shifted a higher level of revenue from previous periods into 2023 compared to 2024.

Cost of Revenue

Cost of revenue decreased by $1.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was primarily a result of an $8.8 million decrease in hardware costs, partially offset by a $7.8 million increase in professional services costs. The decrease in hardware costs of $8.8 million was driven by (i) a$9.2 million decrease in expense for excess and obsolete reserves and (ii) a $0.4 million reduction in supply-chain expense, partially offset by (iii) a $2.2 million reduction in inventory purchase commitments liability during 2023. While hardware shipments increased in 2024 compared to 2023, hardware cost of revenue also decreased due to the impact of the Restatement, which shifted a higher level of cost from previous periods into 2023 compared to 2024. The increase in professional services costs was attributable to (i) $5.4 million from HelloTech, (ii) $1.5 million from DPM and (iii) $1.0 million in higher direct deployments.

Research and Development Expenses

Research and development expenses decreased by $16.5 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was primarily due to: (i) $11.2 million decrease in personnel-related expenses, comprised of $5.8 million of decreased compensation expense primarily due to higher capitalization of development costs and $5.4 million of decreased stock-based compensation expense; (ii) $2.2 million decrease in restructuring costs; (iii) $1.7 million decrease in software license expense; (iv) $0.8 million decrease in other research and development expenses and (v) $0.3 million decrease in rent and lease expense. These decreases were partially offset by a $0.4 million increase in professional and consulting fees.

Sales and Marketing Expenses

Sales and marketing expenses decreased by $2.8 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was primarily due to: (i) $1.3 million decrease in restructuring costs; (ii) $1.1 million decrease in software license expense; (iii) $0.8 million decrease in professional and consulting fees; (iv) $0.7 million decrease in personnel-related expenses and (v) $0.3 million decrease in travel expense. These decreases were partially offset by: (i) $1.1 million increase in marketing expense related to HelloTech and (ii) $0.3 million increase in customer support expense.

General and Administrative Expenses

General and administrative expenses decreased by $21.7 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was primarily due to: (i) $13.3 million decrease in personnel-related expenses, comprised of (a) $9.2 million in expense related to the HDW Acquisition incurred in 2023 and the repurchase of certain of Mr. Siminoff’s shares in 2024, (b) $2.3 million reduction of stock-based compensation expense and (c) $1.8 million of decreased compensation expense; (ii) $9.0 million decrease in professional and consulting fees comprised of (a) $7.2 million decrease in costs related to the Investigation, SEC Investigation and Restatement, (b) $2.3 million decrease in litigation expenses and (c) $1.7 million in lower fees related to outsourced management, partially offset by (d) $2.5 million increase in audit fees in 2024; and (iii) a $0.5 million decrease in restructuring costs. These decreases were partially offset by a $0.4 million increase in insurance related expense and $0.5 million increase in bad debt expense.

Depreciation and Amortization Expenses

Depreciation and amortization expenses remained flat at $7.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. Amortization expense increased by $0.5 million in 2024 related to intangible assets, which

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was offset by: (i) $0.3 million decrease in property and equipment depreciation expense and (ii) $0.2 million decrease in internal use depreciation expense.

Total Other Income, Net

Total other income, net decreased by $0.9 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease was primarily due to $1.9 million lower interest income related to lower cash and investments in 2024 and a $0.3 million increase in realized losses on the sale of marketable securities. These decreases were partially offset by a $1.3 million reduction in interest expense related to the significant financing component of long-term software contracts and a $0.4 million reduction in interest expense related to debt, as the Promissory Notes (defined below) were paid off in early 2024.

Liquidity and Capital Resources

We have incurred losses since our inception. Prior to the Closing of the Business Combination, our operations were financed primarily through net proceeds from the issuance of redeemable convertible preferred stock and convertible notes, as well as borrowings under our term loan. We received approximately $450.0 million in cash proceeds, net of fees and expenses funded in connection with the Closing, which included approximately $192.6 million from the sale of approximately 19.3 million newly-issued shares of common stock in connection with the Business Combination. To date, the Company’s principal sources of liquidity have been the net proceeds received as a result of the Business Combination and payments received from our customers.

As of September 30, 2025 and December 31, 2024, the Company’s unrestricted cash and cash equivalents and current and non-current available-for-sale securities were approximately $44.1 million and $75.4 million, respectively. The Company’s available-for-sale securities investment portfolio is primarily invested in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. The Company’s investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer.

As of September 30, 2025 and December 31, 2024, the Company also had approximately $29.2 million and $30.5 million in net inventory, respectively.

Prior to December 31, 2023, the Company (i) received $19.3 million of proceeds from the sale of a maturing available-for-sale security and (ii) reinvested the proceeds by purchasing an equal amount of new securities prior to such date. The Company uses trade-date accounting and, as such, the new securities position of $19.3 million is included in the balance of available-for-sale securities on the accompanying Consolidated Balance Sheet as of December 31, 2023, and a liability of $19.3 million presented as investment purchases payable is included in accrued expenses on the accompanying Consolidated Balance Sheet as of December 31, 2023. The funds were deducted from the Company’s account in early January 2024. Accordingly, the sum of the Company’s cash and cash equivalents as of December 31, 2023 was $19.3 million higher than it would have been had the funds been deducted from the Company’s account prior to year end. See Note 2. Summary of Significant Accounting Policies - Cash and Cash Equivalents,andNote 11. Accrued Expenses, in Part II, Item 8. “Financial Statements.”

Our short-term liquidity needs have primarily included working capital for salaries, including sales and marketing and research and development, as well as component inventory purchases from our contract manufacturers. To better align staffing and expense levels with sales volumes and the macroeconomic environment and create operating efficiencies, we conducted the July 2023 RIF in order to streamline our business operations, reduce costs and complexities in the business and create additional operating efficiencies. In connection with the July 2023 RIF, we incurred $5.8 million in restructuring costs (excluding the impact of stock-based compensation).

Beginning in the second quarter of 2022 and continuing through the date of this Form 10-K, we have incurred, and may continue to incur, significant professional fees, primarily consisting of legal, forensic accounting, management consulting and related advisory services as a result of the Investigation and the SEC Investigation, as well as accounting related consulting services, independent registered accounting firm fees and advisory services related to the Restatement and Financial Statement Review. Additionally, we have incurred significant costs in connection with the Stockholder Lawsuits. See Note 14. Commitments and Contingencies, in Part II, Item 8. “Financial Statements.” Such litigation involves significant defense and other costs and, if decided adversely to us or settled, has resulted or could result in significant monetary damages or

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expenditures. Although we maintain insurance coverage in amounts and with deductibles that we believe are appropriate for our operations, our insurance coverage does not cover all claims that have been or may be brought against us.

In connection with the HDW Acquisition, in July 2023 the Company issued to HDW’s stockholders as merger consideration $22.0 million aggregate principal amount of unsecured promissory notes (the “Promissory Notes”). The Promissory Notes accrued paid-in-kind interest at a rate of 10% per annum and were scheduled to mature on July 3, 2025, unless earlier accelerated in connection with an event of default (including certain events of delisting from Nasdaq) or change of control of the Company. On April 26, 2024, the Company repaid the Promissory Notes in full without penalty. The Company paid an aggregate of $23.9 million in principal and accrued interest to the holders of the Promissory Notes.

We contract with third parties to manufacture our products. During the normal course of business, we and our contract manufacturers procure components based upon a demand plan. During the year ended December 31, 2022, we materially reduced our original demand plan and started engaging in discussions with our contract manufacturers regarding our obligation to purchase the inventory based on our original demand plan. As of December 31, 2024 and December 31, 2023, the Company had unfunded non-cancellable purchase commitments of zero and $0.6 million, respectively. See Note 11. Accrued Expenses.

Near-Term Liquidity Position

As mentioned above in Item 1A. Risk Factors, “The presence of various risks and uncertainties associated with the Company’s liquidity position may adversely affect its ability to sustain its operations,”the following risks and uncertainties associated with the Company’s liquidity position may adversely affect its ability to sustain its operations as of the Filing Date:

•The continued incurrence of significant expenses related to legal and other professional services in connection with the SEC Investigation and the possibility that the SEC may levy civil penalties or fines against the Company;

•Potential expenditures associated with defending, negotiating or resolving the service provider demand described in Note 14. Commitments and Contingencies, in Part II, Item 8. “Financial Statements;”

•Unexpected expenditures related to the Stockholder Lawsuits;

•The incurrence of significant expenses related to other legal or regulatory proceedings, whether actual or threatened;

•The failure of the Company to achieve its revenue expectations, including as a result of:

◦Pricing compression for the Company’s products;

◦Market adoption of the DOOR application;

◦The success of the HelloTech business;

◦The impact of elevated interest rates on the Company’s potential customers, who may eliminate or delay expenditures for the products or services the Company offers; and

◦Market perception of the Company and its offerings;

•Costs of revenue and operating expenses exceeding the Company’s expectations;

•The Company’s failure to maintain the liquidity ratio required by the Loan Agreement with Customers Bank;

•The Company’s inability to fully leverage its prepaid inventory; or

•The catastrophic loss of inventory due to theft, natural disaster or otherwise.

Due to the risks and uncertainties described above, the Company continues to monitor its liquidity position. The Company recognizes the challenge of maintaining sufficient liquidity to sustain its operations and remain in compliance with the liquidity ratio required by the Loan Agreement. However, notwithstanding its liquidity position as of the Filing Date, and while it is difficult to predict its future liquidity requirements with certainty, the Company currently expects it will be able to generate sufficient liquidity to fund its operations over the 12 months beyond the Filing Date.

In response to the risks and uncertainties described above, the Company may attempt to secure additional outside capital. However, the Company has not sought any commitments of additional outside capital and can provide no assurance it will be able to secure any outside capital in the future at all, or on terms that are acceptable to the Company. Additionally, the Company’s securities are currently traded on the OTC Expert Market. Because of applicable restrictions, there is a minimal public market for the Company’s securities, and the Company’s ability to raise additional capital may be impaired because of the less liquid nature of the over-the-counter markets. The Company also plans to continue to closely monitor its cash flow forecast and, if necessary, may implement certain incremental cost savings measures to preserve its liquidity. See Note 21. Restructuring, in Part II, Item 8. “Financial Statements.”

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Other significant factors that affect our overall management of liquidity include certain actions controlled by management such as capital expenditures and acquisitions. See Note 12. Leases, Note 13. Debt and Note 14. Commitments and Contingencies, in Part II, Item 8. “Financial Statements.”

Commitments and Contractual Obligations

We are obligated to make payments as part of certain contracts that we have entered into during the normal course of business. Following the Property Management Acquisitions, in February 2024 we entered into a three-year advisory agreement with a partner pursuant to which the partner provides DPM with certain management and advisory services related to DPM’s property management business. Pursuant to such agreement, we are required to pay the partner $0.5 million annually. As of December 31, 2024, the Company had a remaining obligation of $1.1 million under the advisory agreement.

Indebtedness

Revolving Credit Facility

On July 1, 2021, the Company entered into a revolving credit facility, which was subsequently amended in May 2022, with a credit limit of $6.0 million with no stated maturity date. Installment plan agreements were executed for each financing request, which included the interest rate. The revolving credit facility had no financial or other covenants. As of December 31, 2023, no amount was outstanding under the revolving credit facility, which the Company cancelled in January 2023.

Promissory Notes

As discussed above, in July 2023 in connection with the HDW Acquisition, the Company issued to HDW’s stockholders as merger consideration $22.0 million aggregate principal amount of Promissory Notes. The Promissory Notes accrued paid-in-kind interest at a rate of 10% per annum and were scheduled to mature on July 3, 2025, unless earlier accelerated in connection with an event of default (including certain events of delisting from Nasdaq) or change of control of the Company. As of December 31, 2023, the Company concluded that it was virtually certain the Promissory Notes would become payable within the upcoming 12 months due to the Company’s then-anticipated delisting from Nasdaq, which was an event of default with respect to the Promissory Notes. Consequently, the Company reclassified the debt obligation as current as of December 31, 2023, despite the event of default not yet occurring. On April 26, 2024, the Company repaid the Promissory Notes in full without penalty. The Company paid an aggregate of $23.9 million in principal and accrued interest to the holders of the Promissory Notes.

Term Loan with Customers Bank

On July 15, 2024, following the closing of the HelloTech Merger, Latch Systems and HelloTech, as the Borrowers, entered into the Loan Agreement with Customers Bank. Pursuant to the Loan Agreement, Customers Bank issued the Borrowers the New Loan, a term loan in the principal amount of $6.0 million. Because the New Loan replaced the Prior Loan, the Loan Agreement did not result in the Borrowers receiving any additional loan proceeds. Interest is payable on the New Loan at a rate equal to the greater of (a) the prime rate published in The Wall Street Journal or (b) 6.0%, and the Maturity Date is July 15, 2029.

The Borrowers were only required to pay interest on the New Loan monthly until January 15, 2025. Thereafter, the Borrowers are required to pay equal monthly installments of principal plus accrued interest until the Maturity Date. There is no penalty for prepayment of the New Loan.

Pursuant to the Loan Agreement, the Borrowers have granted Customers Bank security interests in substantially all of the Borrowers’ assets, other than intellectual property. HelloTech is required to maintain an operating account with Customers Bank with a sufficient balance to support monthly payments. Additionally, the Borrowers are collectively required to maintain a liquidity ratio of at least 4.00, tested monthly, which is calculated as the quotient of unrestricted cash and cash equivalents of the Company and its subsidiaries (subject to certain limitations with respect to cash of foreign subsidiaries), divided by all outstanding indebtedness owed to Customers Bank.

The Loan Agreement contains various covenants that, among other things, limit the Borrowers’ ability to:

• engage in certain asset dispositions;

• permit a change in control;

• merge or consolidate;

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• incur indebtedness or grant liens on its assets;

• declare or pay dividends, distributions or redemptions;

• make loans or investments; and

• engage in certain transactions with affiliates.

If an event of default exists under the Loan Agreement, Customers Bank will be able to accelerate the maturity of the New Loan and exercise other rights and remedies. Events of default include, but are not limited to, the following events:

• failure to pay any principal or interest within three business days of the due date;

• failure to perform or otherwise comply with the covenants and obligations in the Loan Agreement, subject, in certain instances, to certain grace periods;

• bankruptcy or insolvency events involving the Borrowers; or

• the rendering of judgments against a Borrower that remain undischarged, unvacated, unbonded, unsatisfied or unstayed for a certain period.

As of December 31, 2024, the Company was in compliance with the covenants under the Loan Agreement.

On July 15, 2024, in a private placement concurrent with the Company’s entry into the Loan Agreement, the Company issued a warrant to Customers Bank to purchase 1,000,000 shares of the Company’s common stock. The Bank Warrant has an exercise price of $1.25 per share, was exercisable upon issuance and will expire six years from the date of issuance, or July 15, 2030.

Cash Flows

The following table sets forth a summary of our cash flows for the years ended December 31, 2024 and 2023 (in thousands):

Year ended December 31,

Net cash used in operating activities $ (75,406) $ (65,586)

Net cash provided by investing activities 72,886 50,479

Net cash used in financing activities (22,000) —

Effect of exchange rates on cash 48 (46)

Net change in cash and cash equivalents $ (24,472) $ (15,153)

Operating Activities. Net cash used in operating activities increased by $9.8 million in 2024 compared to 2023. The increase resulted from (i) a decrease in accrued expenses of $49.4 million primarily due to the $19.3 million accrual of an investment security in 2023, which was subsequently settled in 2024, resulting in an equal reduction of accrued expenses in 2024, (ii) an increase in net inventories of $20.1 million, (iii) a decrease in deferred revenue of $4.4 million, (iv) an increase in accounts receivable of $4.3 million and (v) a $4.2 million decrease of other current and non-current liabilities. These uses of cash were partially offset by (i) a decrease in net loss of $35.3 million after adjusting for non-cash items, (ii) a decrease in prepaid expense and other current assets of $27.3 million, (iii) a $6.0 million increase in accounts payable and (iv) a decrease in other non-current assets of $3.8 million.

Investing Activities. Net cash provided by investing activities increased by $22.4 million in 2024 compared to 2023 due to (i) a $106.9 million decrease in purchases of available-for-sale securities, offset by (i) a decrease in the proceeds from sales and maturities of available-for-sale securities of $70.4 million, (ii) a decrease of $9.0 million in cash acquired through business acquisitions, (iii) a $4.6 million increase in capitalization of internally-developed software costs and (iv) an increase of $0.4 million in purchases of property and equipment.

Financing Activities. For the year ended December 31, 2024, net cash used in financing activities primarily consisted of the $22.0 million repayment of the Promissory Notes. The Company did not conduct any financing activities during the year ended December 31, 2023.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of December 31, 2024 or 2023 that had, or were reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to investors.

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Critical Accounting Estimates

Our consolidated financial statements, which include estimates, have been prepared in accordance with GAAP. Our critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our consolidated financial condition or results of operations. In making these determinations, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. It is reasonably likely that changes in these estimates could occur from period to period and result in a material impact on our consolidated financial statements. A summary of each of these critical accounting estimates follows.

Stock-Based Compensation

We record stock-based compensation expense related to stock options based upon the award’s grant date fair value. We estimate the fair value of stock options using the Black-Scholes-Merton or Monte Carlo option-pricing model depending on the terms of the award. Both option-pricing models require estimates of highly subjective assumptions, which affect the fair value of each stock option.

The risk-free interest rate assumption is based upon observed interest rates for constant maturity U.S. Treasury securities consistent with the expected term of our stock options.

When using the Black-Scholes options pricing model, the expected term of stock options represents the period of time the stock options are expected to be outstanding based on the “simplified method.” Under the “simplified method,” the expected term of an option is presumed to be the mid-point between the vesting date and the end of the contractual term. We use the “simplified method” due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected term of the stock options.

Since we have minimal trading history of our common stock, the expected stock price volatility was derived from the average historical stock volatility of several unrelated public companies within our industry that we consider to be comparable to our business over a period equivalent to the expected term of the awards.

The assumptions used in calculating the fair values of stock option grants represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. If material changes in these assumptions occur, they could have a material impact on our stock-based compensation expense.

Inventory Valuation

We regularly monitor inventory quantities on hand and in transit and reserve for excess and obsolete inventories using estimates based on historical and projected sales trends, specific categories of inventory and age of inventory. If actual conditions or product demands are less favorable than our assumptions, additional inventory reserves may be required.

Net inventories not expected to be sold according to a one year forecasted sales projection are classified as other non-current assets on the accompanying Consolidated Balance Sheets. Inventory on hand that exceeds a three year forecasted sales projection is recorded as an excess and obsolete inventory reserve. This reserve is comprised of inventory greater than can be used to meet future needs (excess) or for which the product is outdated or otherwise not expected to be sold (obsolete).

We also review our inventory to ensure that its carrying value does not exceed its net realizable value (“NRV”), with NRV based on the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal and transportation. Each of these estimates requires management to make subjective and complex judgments. When our expectations indicate that the carrying value of inventory exceeds its NRV, we estimate the amount by which carrying value exceeds NRV and record additional cost of revenue for the difference. Should our estimates used in these calculations, such as sales forecasts, estimated selling prices or disposal costs, change, additional write-downs may occur.

Goodwill

Goodwill represents the excess of purchase consideration over the fair value of identifiable net assets acquired in a business combination. We evaluate goodwill and indefinite-lived intangible assets for impairment annually, as of December 31 of each year, or more frequently whenever events or circumstances make it more likely than not that an impairment may have occurred. These events or circumstances could include a significant change in general economic conditions, deterioration in industry environment, changes in cost factors, declining operating performance indicators, legal factors, competition, customer engagement, changes in the carrying amount of net assets, sale or disposition of a significant portion of a reporting

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unit or a sustained decrease in stock price. Operating as a single reporting unit, the Company’s entire goodwill balance is subject to this assessment.

Management evaluates whether events or circumstances have occurred that may affect the estimated useful life or the recoverability of the remaining balance of goodwill and other identifiable intangible assets. If the events or circumstances indicate that the remaining balance may be impaired, the impairment is measured based upon the difference between the carrying amount and the fair value of the goodwill or intangible asset.

According to ASC 350, Intangibles – Goodwill and Other (“ASC 350”), the fair value of a reporting unit is the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. Quoted market prices in active markets are typically the best evidence of fair value and shall be used as the basis for the measurement, if available. The Company and a third-party valuation specialist collectively concluded the income valuation approach (discounted cash flow method) was the appropriate methodology.

To determine the reporting unit’s fair value per ASC 820, Fair Value Measurement (“ASC 820”), the valuation specialist considered both entity-specific information and observable market information under the fair value hierarchy in ASC 820, and changes in, or additions to, available information may affect the assumptions we use in estimating fair value. The analysis relied on significant assumptions, including: expected future revenue growth rates, profit margins, discount rate, terminal growth rate and the selection of guideline public companies. The analysis was performed leveraging inputs that were both known and knowable as of such date.

At December 31, 2024 and December 31, 2023, we had $30.2 million and $25.3 million of goodwill, respectively, and $2.6 million and $4.8 million, of intangible assets, net, respectively, on the accompanying Consolidated Balance Sheets. The HDW Acquisition, Property Management Acquisitions and HelloTech Merger resulted in the recognition of intangible assets, primarily consisting of developed technology, customer relationships, trade names and goodwill, on the accompanying Consolidated Balance Sheets. The purchase price of each transaction was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the respective acquisition dates. Significant assumptions used in valuing the identifiable intangible assets included projected revenue growth rates, expected profitability and appropriate discount rates. The excess of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Goodwill represents, in part, the value of expected synergies between the combined operations and the value of the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset.

2024 Goodwill Analysis

The Company performed its annual impairment test of goodwill, foregoing a quantitative assessment before considering qualitative factors. The estimated fair value (“Equity FV”) is calculated as the Company’s business enterprise value (“BEV”), as determined using an income based valuation methodology, plus (i) cash and marketable securities, less (ii) debt, plus (iii) non-operating assets, net. To assess the validity of a company’s BEV, ASC 350 recommends a reconciliation to market capitalization value, net of net cash (“Market BEV”). However, the Company’s Market BEV is impacted by the low trading volumes and price volatility of the Company’s common stock, which was trading on the OTC Expert Market as of the valuation date, compounded by the lack of available public information due to the Company’s non-current filing status. As a result, the Company’s Market BEV is negative. Therefore, the Company does not believe a reconciliation of Market BEV to BEV would provide meaningful information.

The Company considered various other metrics to assess the validity of its BEV calculation and selected the Company’s cash position, net of debt (“Net Cash Position”), which the Company believes a market participant would view as an appropriate benchmarking metric.

This fair value analysis requires significant assumptions, as noted above. The Company believes the assumptions and estimates made in the above-discussed impairment test are reasonable and appropriate. Different assumptions and estimates, however, could materially impact the Company’s financial results, and accordingly, Equity FV. For instance, different assumptions regarding the Company’s anticipated performance could result in an impairment charge, which would decrease operating income and result in lower asset values on the accompanying Consolidated Balance Sheets.

As of December 31, 2024, the Company determined its BEV was $68.5 million and its Equity FV was $135.7 million, which exceeded the carrying value of $111.2 million by $24.5 million, or 22.1%, indicating that no impairment was necessary as of December 31, 2024.

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To further assess the consistency of the Company’s BEV calculation with market participant expectations, the Company conducted an analysis of the financial projections used in the calculation of BEV. As part of this analysis, the Company’s projected annual revenue growth was significantly reduced and profit margins were adjusted to reflect the inter-quartile range of guideline public companies. This analysis supported the conclusion that Company-specific risks were appropriately addressed by the Company’s BEV calculation. The adjusted BEV produced by this analysis was in line with the above-referenced BEV of $68.5 million, further supporting the Company’s conclusions that Equity FV exceeded the carrying value of equity as of December 31, 2024 and that no impairment existed as of such date.

The results of the quantitative assessment indicated no impairment. Accordingly, the Company did not record any non-cash impairment of goodwill on the accompanyingConsolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2024.

2023 Goodwill Analysis

In conducting our annual impairment test of goodwill as of December 31, 2023, the Company determined its Equity FV to be $204.0 million, which exceeded the carrying value of $169.1 million by $34.9 million, or 20.6%. Because the Equity FV exceeded the carrying value, no impairment was recorded as of December 31, 2023.

We performed a reconciliation of our market capitalization to our implied total equity value and determined that the Company’s market capitalization as of December 31, 2023 was $118.1 million, which is approximately 73% less than the Equity FV of $204.0 million. The Company attributes this significant difference to various factors, including low trading volume, stock price volatility, net cash position as of the measurement date and the lack of information available to the public due to the Company’s non-current filing status.

We performed a sensitivity analysis on the impairment test described above by applying two separate adjustments while holding all other assumptions constant. First, we reduced the selected terminal growth rate in the discounted cash flow analysis from 3% to 2%. Second, we reduced the selected guideline public company multiples from 0.40x next fiscal year (“NFY”) revenue and 0.30x NFY+1 revenue to 0.30x and 0.20x, respectively. The sensitivity analysis, while not predictive in nature, indicated a fair value of $192.5 million, exceeding the carrying value by $23.4 million, or 14%, confirming no goodwill impairment as of December 31, 2023.

Business Combinations

We account for business combinations using the acquisition method of accounting, in which the purchase price is allocated to the assets acquired and liabilities assumed and recorded at their estimated fair values at the date of acquisition. Management is required to make significant assumptions and estimates in determining the fair value of the assets acquired, particularly the intangible assets. Purchased intangible assets are primarily comprised of acquired trade names and customer relationships that are recorded at fair value at the date of acquisition. We utilize third-party valuation specialists to assist us in the determination of the fair value of the intangibles. The fair value of acquired trade names is determined using the relief-from-royalty method, which relies on the use of estimates and assumptions about projected revenue growth rates, royalty rates and discount rates. The fair value of customer relationships is determined using the multi-period excess earnings method, which relies on the use of estimates and assumptions about projected revenue growth rates, customer attrition rates, profit margins and discount rates. Intangible assets are recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method. Determining the useful lives of intangible assets also requires management to make various assumptions and is inherently uncertain. There is a measurement period of up to one year in which to finalize the fair value determinations, and preliminary fair value estimates may be revised if new information is obtained during this period.

Litigation

Latch is subject to various legal proceedings, investigations and claims. Latch routinely assesses the likelihood of any adverse judgments or outcomes of these matters, as well as ranges of probable losses. A determination of the amount of the accruals required, if any, for these contingencies is made after analysis of each known issue. The analysis, which involves the advice of counsel, includes consideration of various factors such as the amount and timing of any potential exposure, interpretations of applicable laws, regulations or contractual terms, the likelihood or status of proceedings, the merits of the arguments, negotiations or discussions with the applicable counterparties and results of similar fact patterns experienced by the Company or third parties. Accruals are subject to change based upon changes in the above factors. Certain of the accrued expenses on the accompanying Consolidated Balance Sheet as of December 31, 2024 associated with the Stockholder Lawsuits are based

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upon settlement amounts agreed to between the applicable parties that remain subject to court approval. However, in the event court approval does not occur, the expense amounts are subject to change.

Recent Accounting Pronouncements

See Note 2. Summary of Significant Accounting Policies, in Part II, Item 8. “Financial Statements” for information about recent accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.

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Item 8. Financial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 243) 65

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 67

Consolidated Balance Sheets as of December 31, 2024 and 2023 68

Notes to Consolidated Financial Statements 72

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

Latch, Inc.

Olivette, Missouri

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Latch, Inc. (the “Company”) as of December 31, 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year then ended (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Transactions

As disclosed in Note 2 to the consolidated financial statements, the Company’s total revenue was $56.63 million for the year ended December 31, 2024. The Company recognizes revenue (i) at a point in time upon transfer of control for hardware sales, (ii) over the term of the subscription period beginning when control of the promised service is transferred to the customer for software sales, and (iii) over the period services are provided for professional services.

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We identified the auditing of the accuracy and existence of hardware, software and professional services revenue transactions as a critical audit matter. Auditing the accuracy and existence of each revenue stream was especially challenging due to the audit effort in performing procedures related to testing the accuracy and existence of the hardware, software and professional services revenue transactions given the significance of net revenue and the large volume of transactions.

The primary procedures we performed to address this critical audit matter included:

–Evaluating the accuracy and existence of revenue transactions, on a sample basis, by obtaining and inspecting customer contracts and comparing to supporting documentation to assess the appropriateness of the transactions.

–Recalculating sales prices on a sample basis based on the terms and conditions of underlying contracts.

Annual Goodwill Impairment Testing

As disclosed in Note 2 to the consolidated financial statements, goodwill is assessed for impairment annually, or more frequently if indicators arise. The Company's quantitative evaluation of goodwill for impairment involves the comparison of the fair value of the reporting unit to its carrying value. Fair value was calculated as the Company’s business enterprise value (“BEV”), plus (i) cash and marketable securities, less (ii) debt, plus (iii) non-operating assets, net. The Company used the income approach to develop and calculate the BEV.

We identified certain assumptions used in determining the fair value of the Company’s BEV for the quantitative impairment test as a critical audit matter. The principal consideration for our determination is the significant judgment used to evaluate certain assumptions, specifically (i) expected future revenue growth rates for discrete annual periods identified in the BEV model, (ii) projected operating expenses, and (iii) the selected discount rate. Auditing these assumptions involved especially challenging auditor judgment and effort, including the extent of specialized skills and knowledge required.

The primary procedures we performed to address this critical audit matter included:

–Utilizing personnel with specialized knowledge and skill with valuation to assist in evaluating the reasonableness of the selected discount rate.

–Testing the expected future revenue growth rates for discrete annual periods using historical company performance and analysis of guideline public company data.

–Evaluating management’s estimate of projected operating expenses utilizing assumptions based on the Company’s historical results, Company actions taken to reduce costs as of the measurement date, and analysis of guideline public company data.

We have served as the Company's auditor since 2025.

/s/ BDO USA, P.C.

St. Louis, MO

November 5, 2025

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Latch, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Latch, Inc. and subsidiaries (the “Company”) as of December 31, 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows, for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

New York, New York

March 26, 2025 (November 5, 2025, as to Note 3 and the correction of basic and diluted net loss per share as discussed in Note 16).

We began serving as the Company’s auditor in 2020. In 2025 we became the predecessor auditor.

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Latch, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share amounts)

Assets

Current assets

Prepaid expenses and other current assets 30,523 34,757

Internally-developed software, net 10,748 9,757

Liabilities and Stockholders’ Equity

Current liabilities

Current portion of long-term debt 1,314 22,000

Long-term debt 4,515 —

Other non-current liabilities 2,251 2,215

Commitments and contingencies (see Note 14)

Stockholders’ equity

Treasury stock (1) —

Accumulated other comprehensive income 21 48

Total liabilities and stockholders’ equity $ 196,424 $ 294,432

(1)Amount presented as of December 31, 2023 includes $19.3 million of cash required for a purchase of securities executed during the year ended December 31, 2023 but that was not deducted from the Company’s accounts until January 2024. See Note 2. Summary of Significant Accounting Policies - Cash and Cash Equivalents and Note 11. Accrued Expenses.

(2)Shares issued and outstanding as of December 31, 2024 and December 31, 2023 exclude 738,000 shares subject to vesting requirements held by TS Innovation Acquisitions Sponsor, L.L.C. (the “Sponsor”) related to the 2021 business combination (the “Sponsor Shares”).

See accompanying notes to the consolidated financial statements.

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Latch, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

Year ended December 31,

Revenue

Cost of revenue(1)

Operating expenses

Depreciation and amortization 7,202 7,201

Impairment of intangible assets, net 2,849 —

Other income, net

Change in fair value of warrant liability 159 230

Provision for income taxes 2 30

Other comprehensive income (loss)

Unrealized (loss) gain on available-for-sale securities (35) 1,515

Foreign currency translation adjustment 8 (7)

Net loss per common share:

Basic and diluted net loss per common share $ (0.37) $ (0.72)

Weighted average shares outstanding:

(1)Exclusive of depreciation and amortization shown in operating expenses.

See accompanying notes to the consolidated financial statements.

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Latch, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

(in thousands)

Shares Amount

Tax withholdings on settlement of equity awards (659) — — — — — —

Foreign translation adjustment — — — — (7) — (7)

Unrealized gain on available-for-sale securities — — — — 1,515 — 1,515

Tax withholdings on settlement of equity awards (1,770) — — — — — —

Repurchase of restricted common stock (15,260) — 1 (1) — — —

Foreign translation adjustment — — — — 8 — 8

Stock-based compensation — — (331) — — — (331)

Unrealized loss on available-for-sale securities — — — — (35) — (35)

(1)Shares issued and outstanding exclude 738,000 Sponsor Shares subject to vesting requirements.

See accompanying notes to the consolidated financial statements.

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Latch, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

Year ended December 31,

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities

Depreciation and amortization 7,202 7,201

Change in fair value of warrant liability (159) (230)

Realized loss on available-for-sale securities 1 —

Unrealized loss on marketable securities 91 —

Loss on disposal of fixed assets 189 —

Impairment loss on intangible assets, net 2,849 —

Impairment loss on long-lived assets — 697

Provision for expected credit losses, net of recoveries (144) (927)

Provision for credit losses on contract assets (134) 134

Stock-based compensation expense (580) 18,171

Changes in assets and liabilities (excluding effects of acquisition)

Prepaid expenses and other current assets 4,717 (22,553)

Other non-current assets 685 (3,075)

Other current liabilities (1,841) 366

Other non-current liabilities 43 2,039

Net cash used in operating activities (75,406) (65,586)

Investing activities

Purchase of available-for-sale securities (20,293) (127,179)

Business acquisitions, net of cash acquired (950) 8,085

Purchase of property and equipment (766) (327)

Capitalized internally-developed software (6,141) (1,516)

Net cash provided by investing activities 72,886 50,479

Financing activities

Repayment of unsecured promissory notes (22,000) —

Net cash used in financing activities (22,000) —

Effect of exchange rates on cash 48 (46)

Net change in cash and cash equivalents (24,472) (15,153)

Cash and cash equivalents

Supplemental disclosure of cash flow information

Cash paid during the year for:

Income taxes $ 4 $ 11

Supplemental disclosure of non-cash investing and financing activities

Net assets acquired as part of business acquisitions $ 2,067 $ 4,221

Debt assumed/issued as part of business acquisitions $ 6,000 $ 22,000

Common stock issued for HDW Acquisition $ — $ 15,627

See accompanying notes to the consolidated financial statements.

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Latch, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

1.DESCRIPTION OF BUSINESS

Latch, Inc. (referred to herein, collectively with its subsidiaries, as “Latch,” “DOOR” or the “Company”) is a technology company delivering an integrated ecosystem of hardware, software and services designed to enhance operations and experiences within buildings, primarily serving the multifamily rental market. In August 2025, the Company rebranded as DOOR, although its legal name remains Latch, Inc.

The Company’s revenues are derived primarily from operations in North America. The Company’s operations consist of one reportable segment.

In May 2019, the Company incorporated Latch Taiwan, Inc., a wholly-owned subsidiary, in the state of Delaware. In October 2020, the Company incorporated Latch Insurance Solutions, LLC, a wholly-owned subsidiary, in the state of Delaware. In September 2021, the Company incorporated Latch Systems Ltd, a wholly-owned subsidiary, in England and Wales.

On June 4, 2021, the Company consummated the previously announced merger pursuant to that certain Agreement and Plan of Merger, dated as of January 24, 2021 (the “TSIA Merger Agreement”), by and among the Company (formerly known as TS Innovation Acquisitions Corp. (“TSIA”)), Latch Systems, Inc. (formerly known as Latch, Inc. (“Legacy Latch”)) and Lionet Merger Sub Inc., a wholly-owned subsidiary of TSIA (“Merger Sub”), pursuant to which Merger Sub merged with and into Legacy Latch, with Legacy Latch becoming a wholly-owned subsidiary of the Company (the “Business Combination” and, collectively with the other transactions described in the TSIA Merger Agreement, the “Transactions”). In connection with the consummation of the Transactions (the “Closing”), the Company changed its name from TS Innovation Acquisitions Corp. to Latch, Inc. The “Post-Combination Company” following the Business Combination is Latch, Inc. In August 2025, Latch Systems, Inc. changed its name to DOOR Systems, Inc. (referred to as “Legacy Latch,” “Latch Systems” or “DOOR Systems,” as the context requires).

In July 2023, the Company completed its acquisition of Honest Day’s Work, Inc. (“HDW”) in order to acquire HDW’s technology assets to accelerate the development of the Company’s platform, enable the Company to offer resident services and incorporate HDW’s team members (the “HDW Acquisition”). In connection with the HDW Acquisition, the Company formed two subsidiaries, one of which was the surviving entity of the HDW Acquisition and was renamed Honest Day’s Work, LLC.

In January 2024, in connection with the acquisition of a property management business, the Company formed Door Property Management, LLC (“DPM”). In June 2024, in connection with the HelloTech Merger (as defined and further described below), the Company formed a subsidiary into which HelloTech, Inc. (“HelloTech”) merged as the surviving entity. HelloTech is a service platform delivering on-demand, last-mile installation, setup and connected device support. The HelloTech platform, in combination with the technology Latch acquired in the HDW Acquisition, supports the Company’s professional services offering.

Effective November 1, 2023, the Company relocated its headquarters to St. Louis (Olivette), Missouri. From 2023 through 2024, the Company operated offices in Denver, Colorado, New York, New York, Los Angeles, California, Boston, Massachusetts, Argentina and Taiwan.

Investigation and Restatement

During the quarter ended June 30, 2022, the audit committee of the Company’s board of directors (the “Board”) commenced an investigation (the “Investigation”) of certain of the Company’s key performance indicators and revenue recognition practices, including the accounting treatment, financial reporting and internal controls related thereto. Following the Investigation, the Company completed a comprehensive review of its previously issued financial statements (the “Financial Statement Review”). The Company identified errors related to, among other items: (i) revenue recognition on hardware and software sales, (ii) revenue recognition and billing on software licenses, (iii) recognition of various expenses, and (iv) errors in certain key performance indicators, including “bookings” and related metrics. As a result of the Investigation and Financial Statement Review, the Company restated certain of its financial statements (the “Restatement”) in its Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”).

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Latch, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Liquidity Position

The Company has incurred losses since the Company’s inception. Prior to the Closing of the Business Combination, the Company’s operations were financed primarily through net proceeds from the issuance of the Company’s redeemable convertible preferred stock and convertible notes, as well as borrowings under the Company’s term loan. The Company received approximately $450.0 million in cash proceeds, net of fees and expenses funded in connection with the Closing, which included approximately $192.6 million from the sale of approximately 19.3 million newly-issued shares of common stock in connection with the Business Combination.

As of December 31, 2024 and 2023, the Company’s unrestricted cash and cash equivalents and available-for-sale securities were approximately $75.4 million and $179.5 million, respectively. The Company’s available-for-sale securities investment portfolio is primarily invested in highly rated securities, with the primary objective of minimizing the potential risk of principal loss.

Historically, the Company’s short-term liquidity needs have primarily included working capital for salaries, including sales and marketing and research and development, as well as component inventory purchases from the Company’s contract manufacturers. Beginning in the second quarter of 2022 and continuing through 2025, the Company has incurred, and may continue to incur, significant professional fees, primarily consisting of legal, forensic accounting, management consulting and related advisory services as a result of the Investigation and the SEC Investigation (as defined below), as well as accounting related consulting services, independent registered accounting firm fees and advisory services related to the Restatement and the Company’s comprehensive financial statement review. Additionally, the Company has incurred significant costs in connection with various pending litigation. Such litigation involves significant defense and other costs and, if decided adversely to the Company or settled, has resulted or could result in significant monetary damages or expenditures. Although the Company maintains insurance coverage in amounts and with deductibles that it believes are appropriate for its operations, its insurance coverage does not cover all claims that have been or may be brought against it.

In light of the Company’s liquidity position described above, the Company may attempt to secure additional outside capital. However, the Company has not sought any commitments of additional outside capital and can provide no assurance it will be able to secure any outside capital in the future at all, or on terms that are acceptable to the Company. Additionally, the Company’s securities are currently traded on the OTC Markets Group Inc.’s (“OTC”) Expert Market (the “OTC Expert Market”). Because of applicable restrictions, there is a minimal public market for the Company’s securities, and the Company’s ability to raise additional capital may be impaired because of the less liquid nature of the over-the-counter markets.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

Principles of Consolidation

The consolidated financial statements include the accounts of Latch, Inc. and its wholly-owned subsidiaries. All intercompany transactions have been eliminated in consolidation.Certain prior period amounts have been reclassified for consistency with the current period presentation. These reclassifications would not have a material effect on the reported financial results.

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expense during the reporting period. Significant estimates are used when accounting for stock-based compensation, inventory valuation, goodwill and intangible asset impairments, business combinations and litigation. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. These estimates are based on information available as of the date of the consolidated financial statements; actual results could differ from those estimates.

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Latch, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash and cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value. As of December 31, 2024 and 2023, cash consisted primarily of funds held in the Company’s checking accounts, money market funds and commercial paper. The Company considers these money market funds and commercial paper to be Level 1 financial instruments.

In addition, the Company’s cash and cash equivalents are maintained at financial institutions in amounts that exceed federally insured limits. To date, the Company has not recognized any losses caused by uninsured balances.

Prior to December 31, 2023, the Company (i) received $19.3 million of proceeds from the sale of a maturing available-for-sale security and (ii) reinvested the proceeds by purchasing an equal amount of new securities prior to such date. The Company uses trade-date accounting and, as such, the new securities position of $19.3 million is included in available-for-sale securities on the accompanying Consolidated Balance Sheet as of December 31, 2023, and a liability of $19.3 million presented as investment purchases payable is included in accrued expenses on the accompanying Consolidated Balance Sheet as of December 31, 2023. The funds were deducted from the Company’s account in early January 2024. Accordingly, the sum of the Company’s cash and cash equivalents as of December 31, 2023 was $19.3 million higher than it would have been had the funds been deducted from the Company’s account prior to year end. See Note 11. Accrued Expenses.

Marketable Securities

The Company classifies its fixed income marketable securities as available-for-sale based on its intentions with regard to these instruments. Accordingly, marketable securities are reported at fair value, with all unrealized holding gains and losses reflected in stockholders’ equity. If it is determined that an investment has an other-than-temporary decline in fair value, the Company recognizes the investment loss in other income, net on the accompanying Consolidated Statements of Operations and Comprehensive Loss. The Company periodically evaluates its investments to determine if impairment charges are required.

Accounts Receivable, Net and Contract Balances

The Company classifies its right to consideration in exchange for deliverables as either a receivable or a contract asset.

Accounts Receivable, Net

A receivable is a right to consideration that is unconditional. The Company recognizes accounts receivable when the right to consideration is unconditional, such that only the passage of time is required before payment is due. The Company extends credit based on an evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts outstanding longer than the contractual payment terms are considered past due. The fair value of accounts receivable approximates book value due to the short-term nature of the payment terms. Accounts receivable are stated at net realizable value, which represents the face value of the receivable less (i) an allowance for expected credit losses and (ii) a reserve for returns (see “—Revenue Recognition”).

The opening and closing balances of accounts receivable, net is as follows:

Balance at beginning of the year $ 6,001 $ 7,026

The Company recognizes an accounts receivable allowance based on estimates of expected credit losses. The Company estimates the total expected credit loss over the lifetime of the receivables using historical loss data and by applying a loss-rate method using relevant available information from internal and external sources, including historical write-off activity, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for changes in economic conditions. When certain amounts are deemed uncollectible, those balances are reserved in full.

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Latch, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

The allowance for expected credit losses is measured on a pooled basis when similar risk characteristics exist. When assessing whether to measure certain financial assets on a pooled basis, the Company considers various risk characteristics, including the financial asset type, size and historical or expected credit loss pattern. The Company has considered customer identity, customer type and product lines and determined that further segmentation of the accounts receivable would not yield a materially different credit loss allowance. The Company only segments its receivables based on the age of the outstanding balance.

As of December 31, 2024 and 2023, the allowance for expected credit losses contains an estimate of credit losses for any outstanding invoices. The Company generally does not require any security or collateral to support its receivables.

The following table represents a roll-forward of the Company’s allowance for expected credit losses:

Year Ended December 31,

Balance as of beginning of period $ 496 $ 2,537

Provision for expected credit losses 482 1,378

Write-offs charged against the allowance (258) (1,114)

Balance as of end of period $ 96 $ 496

Contract Balances

The Company enters into contracts with its customers, which may give rise to contract assets (unbilled receivables) and contract liabilities (deferred revenue) due to timing differences between revenue recognition and billing.

Contract assets (unbilled receivables) represent amounts for which the Company has recognized revenue for contracts that have not yet been invoiced to customers where there is a remaining performance obligation. For hardware contracts, customers are billed after shipment of the hardware, with payment typically due within 45 days of the receipt of the invoice. For software contracts, customers are typically billed in advance of services on either an annual or monthly basis over the contract term. Payment is due within 30 days of the receipt of the invoice. For installation contracts, customers are billed after the service has been performed, with payment typically due within 30 days of the receipt of the invoice.

The Company recognizes contract assets (unbilled receivables) when the performance obligation precedes the invoice date, which is generally the case for the Company’s installation contracts. The Company estimates and recognizes its expected credit losses on unbilled receivables. The Company presents its contract assets (unbilled receivables) net of any expected credit losses within prepaid expenses and other current assets on the accompanying Consolidated Balance Sheets.The opening and closing balances of contract assets (unbilled receivables) are as follows:

Balance at beginning of the year $ 5,942 $ 942

The difference between the opening and closing balances of the Company’s contract assets (unbilled receivables) primarily results from timing differences between the Company’s performance and the customer’s payment as well as the number of active installation projects.

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Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

The Company records contract liabilities (deferred revenue) when the Company bills customers in advance of the performance obligations being satisfied, which is generally the case for the Company’s software contracts. The opening and closing balances of contract liabilities (deferred revenue) were as follows:

The difference between the opening and closing balances of the Company’s contract liabilities (deferred revenue) primarily related to a shift from multi-year contracts billed upfront to contracts billed on an annual basis resulting in less deferred revenue being added upon invoice date.

The Company recognized $13.1 million and $14.1 million of prior year deferred software revenue during the years ended December 31, 2024 and 2023, respectively.

Contract liabilities (deferred revenue) consisted of the following:

Total non-current deferred revenue $ 21,282 $ 28,742

Inventories, Net

Inventories, net consist of raw materials, finished goods and channel inventory and are stated at the lower of cost or net realizable value with cost being determined using the average cost method. Finished goods are purchased from contract manufacturers and component suppliers. Hardware shipped to channel partners is considered channel inventory until there is evidence a contract exists and control has passed to the customer.

The Company periodically assesses the valuation of inventory and writes down the value for estimated excess and obsolete inventory to their net realizable value based upon estimates of future demand and market conditions, when necessary. Net inventories in excess of one year of historical sales are classified as other non-current assets on the accompanying Consolidated Balance Sheets. Inventory on hand that exceeds a three year forecasted sales projection is recorded as an excess and obsolete inventory reserve. This reserve is comprised of inventory greater than the amount that can be used to meet future needs (excess) or for which the product is outdated or otherwise not expected to be sold (obsolete).

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are recorded at cost and primarily consist of insurance receivables, prepaid inventory, unbilled receivables and other various payments that the Company has made in advance for goods or services to be received in the future.

Insurance receivables are collected from third-party insurance providers for covered litigation matters once applicable retentions or deductibles have been satisfied. Prepaid inventory charges are incurred to secure the production of inventory prior to delivery. Upon delivery of the inventory, these amounts are reclassified from prepaid inventory to the appropriate inventory accounts on the accompanying Consolidated Balance Sheets. Unbilled receivables are recognized when the Company (i) provisions software access, (ii) provides services or (iii) ships hardware, in each case in advance of billing.

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Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation.Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows:

Useful lifein years

Office furniture 5

Computers and equipment 3 - 5

Vehicles 5

Leasehold improvements 10

The Company capitalizes the cost of pre-production tooling that it owns. Pre-production tooling that the Company will not own or that will not be used in producing products under long-term supply arrangements, including the related engineering costs, is expensed as incurred.

Internally-Developed Software, Net

The Company capitalizes certain development costs incurred in connection with its internally-developed software (including specific software upgrades and enhancements when it is probable the expenditures will result in additional features and functionality). These capitalized costs are primarily related to software that is hosted by the Company and the firmware in the Company’s devices. Costs incurred in the preliminary stages of development are expensed as incurred. Once a project has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the application is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing, at which time amortization of the capitalized software begins. The Company also capitalizes costs related to specific software upgrades and enhancements when it is probable the expenditures will result in additional features and functionality. Internally-developed software is amortized on a straight-line basis over its estimated useful life, generally three to five years.

When the Company determines that a planned feature is discontinued or will not be implemented, costs are expensed. Maintenance costs are also expensed as incurred.

Goodwill

Goodwill represents the excess of purchase consideration over the fair value of identifiable net assets acquired in a business combination. The Company evaluates goodwill for impairment annually, as of December 31 of each year, or more frequently whenever events or circumstances make it more likely than not that an impairment may have occurred. These events or circumstances could include a significant change in general economic conditions, deterioration in industry environment, changes in cost factors, declining operating performance indicators, legal factors, competition, customer engagement, changes in the carrying amount of net assets, sale or disposition of a significant portion of a reporting unit or a sustained decrease in stock price. Operating as a single reporting unit, the Company’s entire goodwill balance is subject to this assessment.

Fair Value Determination

According to Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”), the fair value of a reporting unit is the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. Quoted market prices in active markets are typically the best evidence of fair value and shall be used as the basis for the measurement, if available. The Company and a third-party valuation specialist collectively concluded the income valuation approach (discounted cash flow method) was the appropriate methodology.

To determine the reporting unit’s fair value per ASC 820, Fair Value Measurement (“ASC 820”), the valuation specialist considered both entity-specific and observable market information under the fair value hierarchy in ASC 820, and changes in, or additions to, available information may affect the assumptions the Company used in estimating fair value. The analysis relied on significant assumptions, including: expected future revenue growth rates, profit margins, discount rate, terminal growth rate and the selection of guideline public companies. The analysis was performed leveraging inputs that were both known and knowable as of such date.

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Latch, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

At December 31, 2024 and December 31, 2023, the Company had $30.2 million and $25.3 million of goodwill, respectively, and $2.6 million and $4.8 million of intangible assets, net, respectively, on the accompanying Consolidated Balance Sheets. The HDW Acquisition, Property Management Acquisitions and HelloTech Merger resulted in the recognition of intangible assets, primarily consisting of developed technology, customer relationships, trade names and goodwill, on the accompanying Consolidated Balance Sheets. The purchase price of each transaction was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the respective acquisition dates. Significant assumptions used in valuing the identifiable intangible assets included projected revenue growth rates, expected profitability and appropriate discount rates. The excess of consideration transferred over the fair value of the net assets acquired is recorded as goodwill. Goodwill represents, in part, the value of expected synergies between the combined operations and the value of the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset.

2024 Goodwill Analysis

In conducting the annual impairment test of goodwill, the Company performed a quantitative assessment before considering qualitative factors. To determine the fair value, the estimated fair value (“Equity FV”) is calculated as the Company’s business enterprise value (“BEV”), as determined using an income based valuation methodology, plus (i) cash and marketable securities, less (ii) debt, plus (iii) non-operating assets, net. To assess the validity of a company’s BEV, ASC 350 recommends a reconciliation to market capitalization value, net of net cash (“Market BEV”). However, the Company’s Market BEV is impacted by the low trading volumes and price volatility of the Company’s common stock, which was trading on the OTC Expert Market as of the valuation date, compounded by the lack of available public information due to the Company’s non-current filing status. As a result, the Company’s Market BEV is negative. Therefore, the Company does not believe a reconciliation of Market BEV to BEV would provide meaningful information.

2023 Goodwill Analysis

In conducting the annual impairment test of goodwill as of December 31, 2023, the Company determined its Equity FV to be $204.0 million, which exceeded the carrying value of $169.1 million by $34.9 million, or 20.6%. Because the Equity FV exceeded the carrying value, no impairment was recorded as of December 31, 2023.

The Company performed a reconciliation of the Company’s market capitalization to its implied total equity value and determined that the Company’s market capitalization as of December 31, 2023 was $118.1 million, which is approximately 73% less than the Equity FV of $204.0 million. The Company attributes this significant difference to various factors,

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Latch, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

including low trading volume, stock price volatility, net cash position as of the measurement date and the lack of information available to the public due to the Company’s non-current filing status.

Business Combinations

The Company accounts for business combinations using the acquisition method of accounting, in which the purchase price is allocated to the assets acquired and liabilities assumed and recorded at their estimated fair values at the date of acquisition. Management is required to make significant assumptions and estimates in determining the fair value of the assets acquired, particularly the intangible assets. Purchased intangible assets are primarily comprised of acquired trade names and customer relationships that are recorded at fair value at the date of acquisition. The Company utilizes third-party valuation specialists to assist it in the determination of the fair value of the intangibles. The fair value of acquired trade names and developed technology is determined using the relief-from-royalty method, which relies on the use of estimates and assumptions about projected revenue growth rates, royalty rates and discount rates. The fair value of customer relationships is determined using the multi-period excess earnings method, which relies on the use of estimates and assumptions about projected revenue growth rates, customer attrition rates, profit margins and discount rates. Intangible assets are recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method. Determining the useful lives of intangible assets also requires management to make various assumptions and is inherently uncertain. There is a measurement period of up to one year in which to finalize the fair value determinations, and preliminary fair value estimates may be revised if new information is obtained during this period.

Intangible Assets, Net

Intangible assets, net are recorded at their estimated fair value at the date of acquisition and are amortized over their estimated useful lives using the straight-line method. Intangible assets are typically classified as Level 3 measurements within the fair value hierarchy.

Intangible assets, net consisted of the following:

Customer relationships 595 —

Non-compete 10 —

Licenses 4 4

Less: accumulated amortization (696) (679)

Total intangible assets, net $ 2,584 $ 4,791

Total amortization expense related to intangible assets was $1.0 million and $0.5 million for the years ended December 31, 2024 and 2023, respectively.

The estimated useful life of the intangible assets is as follows:

Useful life in years

Developed technology 6 - 10

Domain names 3 - 13

Customer relationships 15 - 20

Non-compete 3

Licenses 5

The Company performed an impairment test for the year ended December 31, 2024. As a result of this impairment test, the Company concluded that the carrying value of the James ride sharing application, which the Company acquired in connection

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Latch, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

with the HDW Acquisition, exceeded its estimated fair value. The Company recorded a non-cash impairment charge of $2.8 million, which was included in impairment of intangible assets, net on the accompanying Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2024. The charge was primarily driven by a decline in projected revenues as a result of the change in strategy following the HelloTech Merger.

Total intangible impairment expense was zero for the year ended December 31, 2023.

Leases

The Company accounts for its leases in accordance with Accounting Standards Codification (“ASC”) Topic 842, Lease Accounting (“ASC 842”). ASC 842 requires that leases be evaluated and classified as operating or finance leases for financial reporting purposes. The Company did not have any finance leases or subleases as of December 31, 2024 and 2023.

The Company determines if an arrangement contains a lease at contract inception. As part of the lease determination process, the Company assesses several factors, including, but not limited to, whether there is a right to control and direct the use of the asset and whether the other party has a substantive substitution right. As the Company’s leases generally do not have identical or nearly identical contract provisions, the Company accounts for each of its leases at the contract level.

The Company recognizes a right-of-use (“ROU”) asset and lease liability at the lease commencement date and thereafter. ROU assets represent the right to use an underlying asset for the term of the lease, and lease liabilities represent the obligation to make lease payments throughout the term of the lease. The lease terms include any renewal options and termination options that the Company is reasonably assured to exercise, if applicable.

The Company’s leases do not provide an implicit rate; therefore, the Company uses its incremental borrowing rate (“IBR”) based on the information available at the lease commencement date in determining the present value of future payments for those leases. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of comparable value to the ROU asset in a similar economic environment. IBR therefore reflects what the Company “would have to pay,” which requires estimation when no observable rates are available or where the applicable rates need to be adjusted to reflect the terms and conditions of the lease. In calculating its IBR, the Company considers observed debt rates and the significant financing component of longer-term software contracts. The Company’s leases are generally not sensitive to changes in IBR due to their relatively short terms.

ROU assets resulting from operating leases are recorded within other non-current assets, and lease liabilities from operating leases are recorded within current liabilities and non-current liabilities, on the accompanying Consolidated Balance Sheets. The lease liability is calculated as the present value of the remaining future lease payments over the lease term, including reasonably assured renewal options.

The Company has made the policy election to not separate lease and non-lease components for any of its leases within its existing classes of assets. The Company will evaluate this election for any new leases involving a new underlying class of asset. The Company has also made the policy election to not recognize a lease liability or ROU asset for any leases with a term of 12 months or less. These lease payments are recognized on a straight-line basis over the lease term.

The Company has evaluated lease renewal options on a contract-by-contract basis to determine whether specific circumstances would result in the conclusion that any options are reasonably certain to be exercised. Generally, the Company does not enter into lease arrangements where the option to renew or terminate a lease is controlled by the lessor.

Rent expense is allocated among cost of revenue, research and development, sales and marketing, and general and administrative, based on the use of the underlying leased property.

Revenue Recognition

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its agreements, the Company performs the following steps: (i) identify contracts with customers; (ii) identify performance obligations; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognize revenue when (or as) the Company satisfies each performance obligation.

A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account in ASC 606 and its related amendments (collectively known as ASC 606, Revenue from Contracts with Customers). Revenues are recognized when control of the promised goods or services is transferred to a customer in an amount that

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Latch, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

reflects the consideration that the Company expects to receive in exchange for those services. The Company currently generates its revenues from three primary sources: (1) sales of hardware devices, (2) licenses of software products, and (3) professional services.

Performance Obligations

The Company enters into contracts that contain multiple distinct performance obligations: hardware, software and professional services. The hardware performance obligation is the delivery of hardware. The software performance obligation allows the customer access to the software during the contracted-use term when the promised service is transferred to the customer. The professional services obligation includes the activation and installation of hardware, the performance of services by independent technicians through the HelloTech platform and DPM’s performance of property management services. The Company has determined that the hardware, software and professional services are individual distinct performance obligations because they can be and generally are sold by the Company on a standalone basis, and because other vendors sell similar technologies and services on a standalone basis.

For each performance obligation identified, the Company estimates the standalone selling price, which represents the price at which the Company would sell the good or service separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price, taking into account available information such as market conditions, historical pricing data and internal pricing guidelines related to the performance obligations. The Company then allocates the transaction price among those obligations based on the estimation of standalone selling price. The transaction price is determined within the terms of the contract. Historically for software revenue, the Company determined a significant financing component exists, as described below.

Hardware

The Company generates hardware revenue primarily from the sale of its portfolio of devices. The Company sells hardware to customers, which include real estate developers, builders, building owners and property managers, directly or through its channel partners, who act as intermediaries, installers or wholesalers. The Company recognizes hardware revenue when there is evidence a contract exists and control has been transferred to the customer. The Company has determined that control transfers to a customer when hardware is shipped, as the Company’s standard delivery terms are Free on Board (“FOB”) Shipping Point. Certain customers may request FOB Destination, in which case control transfers to the customer upon delivery to the requested destination.

The Company generally provides warranties that its hardware will be substantially free from defects in materials and workmanship for a period of one or two years for electronic components depending on the hardware product, and five years for mechanical components. The Company determines in its sole discretion whether to replace or refund warrantable devices. The Company determined these warranties are not separate performance obligations as they cannot be purchased separately and do not provide a service in addition to an assurance the hardware will function as expected. The Company records a reserve as a component of cost of hardware revenue based on historical costs of replacement units for returns of defective products. For the years ended December 31, 2024 and 2023, the reserve recorded for hardware warranties was approximately 3% and 2%, respectively, of cost of hardware revenue. The Company also provides certain customers a right of return for non-defective product, which is treated as a reduction of hardware revenue based on the Company’s expectations and historical experience. For the years ended December 31, 2024 and 2023, the allowance for returns resulted in a recovery of revenue by $0.5 million and $0.1 million, respectively.

Software

The Company generates software revenue primarily through the license of its software-as-a-service (“SaaS”) cloud-based platform to customers on a subscription-based arrangement. Subscription fees vary depending on the features selected by customers as well as the term. SaaS arrangements generally have term lengths of one, two, five or ten years and include a fixed fee generally paid in advance, annually or monthly. When significant discounts were provided to customers on the longer-term software contracts paid in advance, the Company has determined that there is a significant financing component related to the time value of money and therefore has recorded the interest expense in interest expense, net on the accompanying Consolidated Statements of Operations and Comprehensive Loss. The interest expense related to the significant financing component is recorded using the effective interest method, which has higher interest expense at inception and declines over time to match the underlying economics of the transaction. The amount of interest expense related to this component was $3.5 million and $4.6 million for the years ended December 31, 2024 and 2023, respectively.

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Latch, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

The SaaS licenses provided by the Company are considered stand-ready performance obligations where customers benefit from the services evenly throughout the service period. Revenue generally is recognized ratably over the subscription period beginning when or as control of the promised services is transferred to the customer.

Professional Services

The Company generates professional services revenue in three primary ways: (i) by facilitating smart access hardware installation and activation to multifamily building customers, (ii) through fees generated by installation and other services performed through the HelloTech platform, and (iii) through property management services performed by DPM for its multifamily building customers.

The Company provides smart access hardware installation and activation services to select customers. The revenues associated with these services are recognized over time based on a percentage of the installation completed and represent a transfer of services to a customer under contract.

Through the HelloTech platform, a network of independent contractors provides in-home technology services and support such as installation, repair and troubleshooting. Orders placed through the HelloTech platform are recognized as revenue as services are completed over time. Customers may purchase a HelloTech subscription for discounted in-home services. Subscriptions revenues are recognized ratably over the subscription term.

DPM’s property management services include operating DPM customers’ buildings, which involves maintenance and repair, construction supervision, leasing and administrative services, typically pursuant to a property management agreement with an annual term. Property management service revenues are recognized ratably over the service period.

Disaggregation of Revenue

The following table provides information about disaggregated revenue from customers into the nature of the products and services provided, and the related timing of revenue recognition:

Year ended December 31,

Point-in-time revenue:

Period-of-time revenue:

Hardware installation and activation services 7,375 7,447

HelloTech in-home services 8,313 —

Property management services 2,390 —

Deferred Contract Costs

The Company capitalizes commission expenses that are incremental to obtaining customer software contracts. Costs related to the initial signing of software contracts are amortized over the average customer life, which has been estimated to be ten years based upon contract duration, including renewals and extensions. Amounts expected to be recognized within one year of the balance sheet date are recorded as deferred contract costs, current and are included in prepaid expenses and other current assets on the accompanying Consolidated Balance Sheets; the remaining portion is recorded as deferred contract costs, non-current and is included in other non-current assets on the accompanying Consolidated Balance Sheets. Amortization expense is included in sales and marketing expense on the accompanying Consolidated Statements of Operations and Comprehensive Loss.

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Latch, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

The following table represents a roll-forward of the Company’s deferred contract costs:

Additions to deferred contract costs 1,338

Amortization of deferred contract costs (416)

LTCH US Equity

LTCH · 10-K · period ended 2024-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data.

LTCH US Equity☆

LTCH · 10-K · period ended 2024-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data.

LTCH US Equity