Q4 2023 SmartRent Inc Earnings Call

Participants

Brian Ruttenbur; SVP, IR; SmartRent Inc

Lucas Haldeman; CEO & Founder; SmartRent Inc

Daryl Stemm; Chief Financial Officer; SmartRent Inc

Soham Bhonsle; Analyst; BTIG, LLC

Ryan Tomasello; Analyst; Keefe, Bruyette & Woods, Inc.

Tom White; Analyst; D.A. Davidson & Co.

Brett Knoblauch; Analyst; Cantor Fitzgerald

Presentation

Operator

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Smart Rand Fourth Quarter and Full Year 2023 financial results conference call. Today's conference is being recorded. (Operator Instructions) At this time, I would like to turn the conference over to Brian Ruttenbur, Senior Vice President of Investor Relations. Please go ahead.

Brian Ruttenbur

Hello, and thank you for joining us today. My name is Brian Ruttenbur, Senior Vice President, Investor Relations for smart rack. I'm joined today by Lucas Holliman, Chairman and CEO, and Darrel stem Chief Financial Officer, will be taking you through our results for the fourth quarter and full year 2023, as well as discussing guidance for 2024.
Before today's market opened. We issued an earnings release and filed our 10 K for the year ended December 31st, 2023, both of which are available on our Investor Relations section of our website, SMART Rent.com. Before I turn the call over to Lucas, I'd like to remind everyone that our discussion today may contain forward looking statements, including statements relating to our business strategy and our performance, future financial results and guidance. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to be materially different from any future results expressed or implied by such statements. These factors are discussed in our SEC filings, including our annual report on Form 10 K. These statements are based on our current assumptions and beliefs, and we assume no obligation to update them, except as required by law. We recommend that all investors review these reports thoroughly before taking a financial position in SmartRent Also during today's call, we refer to certain non-GAAP financial measures and other financial and operating metrics. Reconciliations of non-GAAP measures to the most directly comparable GAAP measure and further information related to guidance. Definitions and metrics are included in today's earnings release. We'd also like to highlight that a fourth quarter and full year earnings presentation is available on our Investor Relations section of our website.
And with that, let me turn the call over to Lucas to review our results.

Lucas Haldeman

Good morning, and thank you for joining our call. This past year has been a pivotal one for smart rent. As we continue our positive momentum as a leading provider of smart communities and smart operations solutions to the rental housing industry, we grew total revenue by 41% in 2023 compared to 2022. And SaaS revenue has a compounded growth rate of 75% since 2020.
Smart rental purpose-built technologies are used by 15 of the top 20 largest rental housing operators. And a year end, we had nearly 600 customers collectively managing over 7 million rental units. With more than 44 million managed rental units in the US, we believe the greenfield opportunity continues to be immense.
Our team has spent years developing the most comprehensive platform, and the result is that SmartRent now offers the largest breadth of integrated hardware and SaaS solutions in the marketplace. Two years ago, we announced our intent to become adjusted EBITDA profitable by the end of 2023. Since then, we have steadily improved quarterly operating results with consistent revenue growth, expanding margins and tight control of operating expenses.
As a result of these efforts, I'm pleased to share that in the fourth quarter, we reported adjusted EBITDA profitability. The achievement of those notable financial goal marks a new inflection point in SmartLens history. Adjusted EBITDA profitability was accomplished through deliberate strategic actions, shaping how we operate and by focusing on our three sustainable competitive advantages, namely purpose-built hardware, open API software and robust end to end implementation and support in previous quarters. We've highlighted these unique differentiators that set us apart, but we'd like to provide more detail about how and why they work together to create a holistic unrivaled solution that is deeply embedded in the customers' property management infrastructure.
First hardware, both the open hardware redesign under the alloys, smart home brand and the third-party hardware we integrate with our essential to powering our platform and for delivering on the value propositions that are meaningful for customers are offering seamlessly integrate with customers' existing property management systems, and we intentionally designed hardware to augment third party offerings. Our agnostic approach ensures we are able to provide remarkable and repeatable experiences for clients all while continuing to lead the way in innovation. Hardware is core to our business strategy and will remain an essential component of ongoing operations. For example, the recently launched Alloy's Smart Home Hub plus a significant upgrade over previous hubs, combining a thermostat and a hub into one device, which requires less hardware to install and maintain in the residential communities where Hub plus has been deployed, customers are seeing higher levels of connectivity due to Hub plus being hardwired into individual units. This creates a better experience for rental operators to maintain community and in-home functionality of smart devices, a smarter living experience for residents and a more efficient implementation process.
Additionally, the newest alloys, smart home leak sensors are designed to have a longer five to seven year battery life. Most customers request sensors to monitor potential leaks that significantly lowering maintenance and repair expenses at their properties. If you're a commercial operator, managing tens of thousands of rental units, the maintenance logistics or replacing batteries annually can quickly become a drag on NOI longer battery life results in fewer quarters and hundreds of hours saved on sending on-site team members into apartment homes to replace batteries as with other technology companies that build their own hardware.
Smartphone design hardware is fundamental to operations and enables us to integrate with third party products. Manufacturing SmartRent own hardware also gives us the opportunity to control cost, maintain rigorous quality standards and benefit from increased margins. Mixed software, our open platform not only powers alloys, smart home hardware, but also integrates with third party hardware and customers' property management software. In short, the agnostic nature of our software as a core competitive advantage. A common challenge in rental housing is app fatigue with operators having to run multiple applications to support their operations, smarter aggressiveness by offering interconnectedness with our single app platform, thereby reducing complexity and simplifying operations, dedication to streamlining and increasing efficiency for our customers and their residents is a key reason. We have historically experienced low churn in our IoT business.
For reference, net revenue retention in 2023 was 105%. SMRT software is designed to simplify the rental experience for both operators and residents. Our platform's capabilities have evolved since our inception. And today, we manage both workflow operations and resident experiences within a single app. For example, residents are able to report maintenance issues and submit work orders automatically finally into end implementation and support by managing the entire implementation process from initial site surveys to expert implementation and support, we enable customers and their residents to achieve maximum benefits. The typical implementation process requires customers to have multiple points of contact with limited oversight. We eliminate this and are the single phone call clients make.
We have excelled and taking on complex projects in the rental industry with more than 90% of our implementations in retrofit units. We should also note that customers are encouraged to upgrade their installed hubs and other smart home technology devices every five to seven years as part of their planning process internally we continue to improve logistics processes and are increasingly shipping new hardware to existing customers to upgrade new hubs and replace end-of-life devices, focusing on client satisfaction and educating them on how best to use their new solutions is key to creating outstanding experiences and smart operations that are sustainable in the long term.
In addition to competitive advantages, our commitment to expense control and reduction, while optimizing operations has established a solid financial foundation upon which we'll aim to continue to build in 2024.
We ended the year with a strong balance sheet of $216 million in cash, no debt and an undrawn credit facility of $75 million. During the second half of 2023, we added $18 million of cash to our balance. Our strong balance sheet, coupled with achieving adjusted EBITDA profitability while sustaining a high growth rate, gives us the opportunity to invest in our Company to maximize shareholder value to deliver sustainable growth while aiming to expand profit margins in 2024 and onward, we intend to make a significant investment to further build out our capabilities to deliver Community WiFi at scale by adding new team members and technology.
We estimate the total addressable market for multifamily community WiFi and IoT solutions on existing professionally managed properties in the U.S. could produce annual recurring revenue of $9 billion to $16 billion. We believe investing in Community WiFi now will enable us to deliver higher shareholder value while also capturing a sizable market share. Today, we also announced a $50 million stock repurchase program. Our Board and management team are constantly evaluating how to generate enhanced returns for our cash and believe that there is no better investment than in smart rent. In short, we remain extremely optimistic about prospects for growth in the coming years.
I will now turn the call over to Daryl to discuss the specifics of the 2023 results and the outlook for 2020 for.

Daryl Stemm

Thank you, Lucas. In March 2022, we stated on our earnings call, the plan to become adjusted EBITDA profitable by the end of 2023. Since then, we have incrementally improved quarterly operating results by delivering revenue growth, expanded margins and tightly controlling operating expenses.
Q4 marked another quarter of continued strong execution, and as Lucas pointed out, we achieved adjusted EBITDA profitability. Total revenue for the quarter was $60.3 million, up 4% from Q3 and up 49% from Q4 of last year. This was the second highest quarter of revenue in the Company's history following Q1 of 2023.
Revenue for calendar year 2023 totaled $237 million, up 41% from $168 million for 2022. By revenue stream, hardware revenue was $36.5 million, professional services was $6.7 million, and hosted services was $17.1 million for Q4 of 2023.
ARR increased to $46.2 million in Q4 from $43.3 million in Q3 and $32.3 million in Q4 of 2022. This was an increase of 7% sequentially and a 43% increase year over year that primarily resulted from increasing total units deployed to 720,000 and our expanded product line. SaaS ARPU was $5.50 in Q4, a 7% increase year over year.
As an integrated hardware and software company, the composition of revenue continues to evolve as our expanded product line is increasingly adopted. Hardware ARPU continues on an upward path and increased 28% sequentially in Q4 from Q3 to $730 per unit shipped. We believe this significant increase is sustainable in the long run as it includes the shipment of hardware attributable to six WiFi projects. However, we caution that we may experience short-term fluctuations in hardware RPU until WiFi deployments contribute more consistently to revenue.
For calendar year 2023, hardware ARPU increased 39% and professional services ARPU increased 32% year over year. Units shipped totaled 50,000 in Q4 and total units deployed increased to 720,000 with 37,000 units being deployed in the fourth quarter. Historically, units shipped and units deployed have tracked relatively closely. There are three primary reasons for the divergence we saw between units shipped and units deployed in 2023 first, single-family rental customers tend to purchase hardware and a nonlinear manner, stocking up inventory and then deploying the units over a longer period of time. Second, certain customers buy hardware in advance of deployment to beat price increases.
And third, as Lucas previously stated, some customers have commenced upgrade cycles. Hubs that are shipped to these customers are not counted as new units deployed as these hubs do not represent a net increase to the installed customer base. In other words, units deployed represent active units that are contributing to recurring SaaS revenue.
In Q4, we shipped approximately 29,000 hubs for upgrades. We've deployed more than 700,000 units over the last five years and believe that our shipment of units for upgrades will comprise a higher proportion of future business. Bookings for the quarter were approximately $40 million and there were approximately 42,000 new units booked, down 20% and 10%, respectively from the previous quarter.
The reduction in bookings is primarily attributable to two factors. First, we're working through backlog, and I believe that those customers will commence purchasing behavior when their backlog is exhausted. Second, we are seeing some deferrals as certain customers are planning to purchase IoT concurrently with Community WiFi. We remain encouraged by bookings ARR being above $5 million for the second quarter in a row, and bookings ARR ARPU exceeding $8 for the third consecutive quarter.
Since SaaS ARPU was $5.50 for the fourth quarter, we can expect SaaS ARPU to continue to increase as we deploy these booked units. Additionally, we experienced net revenue retention for 2023 of 105%. These metrics demonstrate how our efforts to cross-sell and upsell our suite of products are starting to flow through to the P&L, which we expect to drive our path to the expansion of SaaS revenue and ultimately greater shareholder value.
We're pleased with the level of interest that rental operators are expressing in connection with our community WiFi, but we expect the WiFi projects will have both longer sales cycles and longer project implementation time lines.
As I mentioned earlier, in the fourth quarter, we shipped hardware for six new WiFi projects that we believe will be completed in the first half of 2020 for operational improvements continued to drive gross margin expansion for hardware and hosted services. For the fourth quarter, total gross profit was $17 million compared to $13.5 million last quarter and $3.9 million a year ago.
Hardware margin increased to 27%, up from 23% last quarter and 15% a year ago and contributed $9.8 million of gross profit. Efficiencies in manufacturing, logistics and distribution continued to drive expanded margins and hardware. Hosted services contributed $11.4 million of gross profit and a hosted services margin increased to 67%, up from 64% last quarter and 60% a year ago. SaaS margins, a part of hosted services, improved to 76%, an increase from 71% a year ago.
For the calendar year 2023, total gross profit increased to $49.5 million from $1.3 million in 2022 and total gross margin improved to 21% from 1%. Professional services gross margin increased in Q4 as a direct result of the investment in technology initiatives over the past several quarters that have allowed our teams to be more efficient with installation and transform professional services to a more variable cost model.
We reduced losses in professional services by $1 million versus the third quarter and reduced losses by nearly $3 million compared to the same period a year ago. As we evolve the professional services model, we believe that we will have continued improvement throughout 2024 and anticipate reaching breakeven on a professional services margin basis by the end of 2024.
As a reminder, in the first quarter of 2022, we had an adjusted EBITDA loss of $23.1 million. Adjusted EBITDA for the quarter was a positive $743,000, an improvement from a loss of $5 million in Q3 and a loss of $14.1 million a year ago.
Total operating expenses were $22.8 million, a decrease of 3% from $23.5 million in Q3 and a decrease of 13% from $26.2 million a year ago. Put another way, we've reduced total operating expenses from 63% of revenue in Q1 of 2022 to 38% of revenue in the fourth quarter of 2023.
We provide important information related to business operations in the form of periodic SEC filings, earnings releases. These earnings calls and investor presentations on our website. For example, we've added new disclosures for a net revenue retention revenue by solution and a forward-looking table disclosing estimated revenue from amortization of non distinct hub revenue. We anticipate that financial disclosures will continue to evolve as our business evolves, but we remain committed to providing the right key performance indicators that allow you to assess company performance.
In this regard, I'd like to encourage listeners to review the fluctuation analysis included in the MD&A section of our Form 10-K, each of the three revenue streams, hardware professional services and hosted services include both rate and volume data. Also note that because of the divergence between new unit deployment and revenue growth, we do not believe that our historically disclosed committed unit metric will continue to be an effective indicator of performance as it's not contractually binding. Thus, we have not included it in this quarter's disclosures and do not plan to disclose it in future periods.
During calendar year 2023, our total cash balance decreased just $2 million from approximately $218 million at the end of 2022. On a sequential basis, our cash balance increased to $216 million from approximately $211 million at the end of Q3. The increase in cash this quarter is not a result of the ADI arrangement, but is primarily due to improved inventory management and better demand forecasting to reduce inventory levels as we gradually transition to ATI over the next year.
Our strong cash and balance sheet position allow us to deploy cash prudently to generate highly attractive returns for shareholders while maintaining sufficient liquidity for ample financial flexibility. Today, we announced the stock buyback program that allows us to repurchase as much as 50 million of common stock.
Additionally, as Lucas mentioned, we are investing to enhance Community WiFi and accelerate our ability to realize significant untapped opportunities from existing and potential new customers because of the strong customer demand we're seeing for Community WiFi in which we are addressing with our planned investment growth and profitability may be effected in the first half of this year.
Additionally, because of the synergies between Community WiFi and core IoT products, we've decided with several clients to defer planned first quarter IoT implementations until the installation of IoT can be completed alongside Community WiFi deployments. These decisions move the deployment of more than 10,000 units from the first quarter into later quarters this year. While Community WiFi sales cycles and deployments are significantly longer than our traditional offerings, we are confident that growth and profitability will rebound in the second half of the year.
We will continue to closely monitor demand for community Y-FI and carefully evaluate necessary investments to expand our offering and enhance long-term growth. Accordingly, guidance for Q1 and full year 2024 are as follows. Q1 guidance for revenue of $47 million to $53 million and adjusted EBITDA of a loss of $1 million to positive $250,000. Full year 2024 guidance for revenue is $260 million to $290 million and adjusted EBITDA profit of $5 million to $8 million.
I'll now pass the call back to Lucas for closing remarks.

Lucas Haldeman

Thank you, Daryl. The fourth quarter marked the achievement of adjusted EBITDA profitability for the first time in the Company's history through a combination of our team's hard work and dedication and leveraging our three unique differentiators from 2020 to the end of 2023, SMART's competitive positioning has strengthened, as evidenced by the growth in the metrics report. We've increased total revenue from $53 million to $237 million, a 46% compounded annual growth rate. ARR grew from $5 million to $46 million over the same time, a 75% CAGR. SaaS ARPU grew from $2.94 in Q4 2020 to $5.50 in Q4 2023. We grew total units deployed from 155,000 in 2020 with less than 150 customers to 720,000 with nearly 600 customers at the end of 2023.
In addition to our investment in community WiFi and $50 million stock repurchase program, in 2024 we remain focused on assessing additional opportunities to add enhanced value for prospects and existing clients, improve gross margins and expense control and optimize ongoing operations. We believe smart rent will continue to lead the rental housing industry as our smart home solutions not only address the needs of customers, but anticipate where the industry is headed. Our market-leading position has been built on our first mover advantage, scale and customer trust and will continue to be strengthened by innovative products and customer focus. We look forward to all that's on the horizon this year and beyond.
Thank you for participating on the quarterly SMRT call. We would now like to open the call for your questions.

Question and Answer Session

Operator

Thank you. (Operator Instructions) Soham Bhonsle, BTIG.

Soham Bhonsle

So just the first one, I wanted to understand a little bit know sort of what's embedded in the guidance range here. So it looks like you're guiding to a 20% decline in revenue in the first quarter and sort of breakeven profitability. But then your full year revenue and EBITDA guide would suggest sort of a steep ramp here past the first quarter. So if you can maybe just provide some detail on maybe the cadence for revenue and EBITDA and how you expect that to play out over the next few quarters on that is just what gives you confidence in sort of hitting the full year guide that would be great. Thanks.

Daryl Stemm

Thank you. Good question. This is Daryl. And I would say there are two primary reasons that give us confidence in the back half of the year one being our confidence in the WiFi demand. As we pointed out, they have a relatively these projects have a relatively long life sales cycle as well as implementation from a time line. One of the issues, if you will, that we're faced with on these projects is getting the fiber to the community, and there's often a couple of months delay and between the signing of the contract when we can even begin the project so that that would be a confidence builder, number one. Confidence builder number two is the upgrade cycle that we're beginning to experience. We shipped about 29,000 clubs in Q4 that were related to upgrades. And we believe that in the second half of the year, we should have at least 50,000 from upgrade hubs available for shipment and deployments. Those would be the two primary drivers for increased revenue and profitability on the back half of the year.

Soham Bhonsle

Okay. I guess on the on the WiFi piece, is there any way to sort of you noted that you have there's some deferral going on, but there's also perhaps some CapEx or spend going on? Is there any way to size what the guidance would have been if you didn't push for WiFi at this point?

Daryl Stemm

Well, we do know as we stated just moments ago that we've moved about a little over 10,000 units out of Q1 into later quarters of the year. So that would be the approximate point.

Lucas Haldeman

Yes, Sam, this is Lucas. I just add a little bit to that work. I think we're expecting some more of that in Q2. And while it's not ideal to have units move out of Q1 and Q2, really, if you look at the strength of the business, this is an incredibly positive thing that we're seeing. If we can take kind of a broader view of it, which is our hypothesis was that we would have a good time selling WiFi to customers who are also interested in IoT because we'd be able to do one construction project versus two.
And if you think about unoccupied unit and disruption of residence and construction going on around, you have not a fun, not fun to have that happen. And so while these are the projects are moving out of Q1 and Q2, I think it's really a net positive showing the momentum we're getting around our ability to sell and deploy WiFi and be really the only company that can do both the IoT and WiFi implementation at the same time.

Daryl Stemm

I think --

Soham Bhonsle

International -- go ahead.

Daryl Stemm

One other comment with regards to WiFi is that we did call out that we shipped some hardware in Q4 for six new WiFi projects that we expect to be fully completed by the end of the first half of this year, putting in Q4, I'll give you one more data point. We've also booked, but a lifetime project that should be we believe the beginning of a good, strong relationship with the customer for the back half of the year on both WiFi and IoT projects.

Soham Bhonsle

Okay, understood. And then just last one, wanted to ask you about the SaaS ARPU in your booking disclosure this quarter looks like it was up to $12 -- almost $12, which is almost 3x last year. So was that just something specific to the cohort that came in this quarter? Or is that something more sustainable? How should we think about that?

Daryl Stemm

I think that the -- good question. I think that that was a bit of an aberration caused by the mix of bookings that we had during the quarter. I believe that of the last two quarters, which have been in the $8 and $9 range are more indicative of what to expect going forward.

Operator

Ryan Tomasello, KBW.

Ryan Tomasello

Daryl, I think investors would appreciate it if you could provide some color on the breakdown of the revenue guide, particularly what you're modeling for SaaS revenue growth this year versus more lumpier hardware and implementation revenue. 4Q SaaS revenue growth was running at over 40%. Is that a reasonable sustainable pace through 2024 and just curious why not guide to that metric, given I assume that there's actually more visibility on that front than modeling the lumpy or hardware and implementation revenue?

Daryl Stemm

Well, good question. At two points. Number one, the certainly the existing part of our recurring revenue is eminently predictable and some but the actual Cadence related to some further deployments and do cause some have predictability issues with regards to software revenue. So it's not quite as easy as you might suspect, but I will give you one one piece of guidance around software revenue and that's that we do anticipate that it would be higher than the overall revenue growth rate.

Ryan Tomasello

And then a follow up on the ARPU metrics. Can you help us understand what assumptions, you're baking into the guidance across the different revenue buckets, hardware, professional services, SaaS and on SaaS ARPU, in particular, the $5.50 RPU this quarter has been, I'd say, relatively stagnant the last few quarters despite the acceleration in the bookings metrics. Some of that a function of the revenue mix and the nuances with the site plan revenue that's flowing through there. Just trying to understand why the SaaS ARPU component shouldn't be growing materially faster than what we're seeing. And again, just to sort of break down and maybe some of your assumptions on broader RPO metrics in the guidance.

Daryl Stemm

Okay. Thanks, Ryan. So with regards to the growth of our two, I would say that until until Y-FI becomes a significant contributor, what I would expect to see is incremental growth like we've experienced over the course of the last year. It's tough to move that ARPU number too rapidly because the base that that number's built off of that already installed 720,000 units.
So as we add 40,000 new units a quarter and we're adding them at $8, $9 per unit, it's going to just have an incremental impact on ARPU in future periods. The real needle mover and why one of the reasons why we're so excited about Y-FI is the economics have WiFi to us could basically have a two times impact on some other recurring revenue. And we're talking about give or take $15 or a unit per deployed unit and for WiFi.

Operator

Tom White, D.A. Davidson & Co.

Tom White

Two, if I could please. I guess first on professional services and specifically some of the cost structure and margin profile in that part of the organization. I guess first of all, -- how close are you guys to kind of fully rightsizing kind of the fixed cost base there? And then how should we think about maybe any lingering overhang from some of the older contracts you guys have talked about in the past, I think maybe have some volume based price concessions. And then I had a follow-up on WiFi.

Lucas Haldeman

Hey, Tom. It's Lucas. I'll go first on this one and then let Daryl add some color so that the lingering overhang, it's a good question, and we still have some of that. We're working through in Q1 and Q2, but we've largely worked through the bulk of it. So we're definitely winding that down to the first half of the year. And then on the professional services customers, I think we feel really good about where we have that coming into Q1. And as Daryl said in the prepared remarks, you will see that continue to trend the right right way through 2024.

Daryl Stemm

And I also want to add one other point, Tom, if you don't mind, which is we actually had some of our newer solutions like access control and the WiFi projects that we've completed to date actually have been completed at modest modest profit. So as those other solutions become more a prominent portion of our total revenue. And those will help as well as the additional investments in technologies and efficiencies that we have BILL, Inc.

Tom White

Okay, great. Thanks. Just one on WiFi, if I could you had think some large reach trialing. It was just hoping you could share kind of your updated or latest thinking about kind of how you think the timeframe between kind of a trial and presuming it goes well, sort of full deployment might look like, you know, over the coming years. And then just this dynamic where folks are kind of deferring some of the IoT implementations to wait for Y-FI. Curious whether that's a dynamic you can I don't know, sort of addressed over time, like is there any way to sort of divorce those two things or it's just given the fact that it's kind of breaking ground and it's a big construction project that's always going to be something to contend with as you rollout WiFi?

Lucas Haldeman

Yes, good question, Tom. And I think it's something we couldn't break apart, but we actually believe it's the right way to do these implementations. So we actually are in agreement with our customers and then sort of aligned to say the right way to do this is to do it all at once. And I think the only downside to that is that it slows down the IoT deployments. But I think if you look across what we're seeing in the marketplace that our land and expand we use are really lead with IoT, it's almost morphing to where we're leading with WiFi and sort of becoming the new beachhead.
And that's sort of the fundamental product that we're leading with. And then we're able to draft behind at IoT at access control at other products, as you're seeing from sort of the SaaS ARPU jump that we had, where we were successful at sort of cross selling on those. But really, we've talked about this now three quarters in a row like like WiFi is definitely very important to where we're going. And that's why we announced the investment that we're making, and it's why we're we remain excited about the back half of the year, as Harold commented on.
The only thing is that that is slow to get going. As I answer the first part of your question, most customers will run a pilot or a pilot for 60 to 90 days before deciding on the next projects once those pilots are completed and we start rolling out. It's a similar cadence to IoT where it can take three, four, five years to go from sort of not having anything at your in your portfolio to having portfolio wide deployment so that that's sort of the timing. Does that answer your questions on?

Operator

Brett Knoblauch, Cantor Fitzgerald.

Brett Knoblauch

And I think my question maybe if you could give me some idea of where the number of new units deployed you're expecting for this year? I know there's some seasonality and some are getting pushed back. But as we think into the full year, I guess what should we be expecting relative to what you did in 2023?

Daryl Stemm

Yes, Brent, we're not giving guidance on units deployed because of the divergence between revenue and units. We would invite you to please kind of we focus on revenue growth as opposed to unit growth. We grew revenue by 41% in 2023 relative to 2022. And our units deployed new units deployed in the course of 2023 was lower than the new units deployed in 2022. But in spite of that, we were able to grow our revenue by 41%, and we expect that divergence to continue, and which is why we've discontinued unit guidance.

Lucas Haldeman

I'd just add to that breadth, and I think we're still seeing strong demand for the IoT and that product. And we're continuing to make traction with our partners on that. So I think we're not we're not giving the number we're not guiding to it. I'm happy with the demand we're seeing in the marketplace for those products.

Brett Knoblauch

Got it. And then just from the units shipped versus deployed, I guess, relationship, should we expect maybe a similar performance in '24 as you did in '23 in terms of and I guess the number of units shipped outpacing the number of units fully?

Daryl Stemm

Yes, I would expect to see that, as I mentioned earlier, our expectation is that we should have at least 50,000 hub upgrades that we ship and deploy in 2024.

Brett Knoblauch

Got it. And then I guess on the recurring revenue duration, I think it was 2.6 years last or at the end of last year and it declined to 1.6 and I guess any insight into why the big decline in that duration?

Lucas Haldeman

Well, that's actually that's something we've been working through. And then it goes Brett, to making sure we're not locking in pricing for too long. So that's actually an intentional metric that we're trying to work into line to give ourselves the flexibility to not be locked in on on Fasson hardware pricing.

Brett Knoblauch

Got it. Thank you. And then maybe just one quick follow-up on the and our number one -- thanks for giving that. I think it's very helpful. I guess any sense to where that metric has been and where do you see that going over the long term, given it is a new metric as it goes now?

Daryl Stemm

No. We've just started to track that in the course of the last year, it's based on a cohort of some. Think of it as same-store same-store metric. And it's a based on the number of units from December of 2022.

Lucas Haldeman

But I'd just add. I think our expectation is we'll continue to see that grow knowing sort of what we're continuing to cross-sell and upsell and where we're at we're reselling additional products to existing customers. You'll see that same-store number kind of growth.

Operator

Soham Bhonsle, BTIG.

Soham Bhonsle

Hey, guys. Just one quick one on just around this sort of gap between shipped and deployed. I just want to understand, so I especially if you have are you having a decent chunk of upgrades this year? I think, Daryl, you said that it should produce a ship unit, but not a deployed unit. Is that number, is that right? Because in my view, if it's a new unit and then if you're using a professional services person to actually deploy it, then that should come through that line as well. So if you could just clarify how that actually flows through the P&L, that would be really helpful -- the upgrade units, please.

Daryl Stemm

Yes. So there you're correct in your assessment of where it's going to impact the P&L, it's going to be hardware revenue and depending on how it installed, it might also involve professional services. I can foresee some instances where where the customer may choose to install it themselves, perhaps on a turn some of the of the resident unit from so much by doing it this way and not adding it to the deployed units, total deployed units, we're able to give you a metric in the total deployed units that really is representative of if we were a B to C business, the number of subscribers that we have, the total deployed units really represents the number of units that are contributing to our recurring revenue. And I think that's a really important metrics for you.

Operator

And at this time, there are no further questions. I would like to turn the conference over to Lucas Haldeman for closing remarks.

Lucas Haldeman

Thank you, Audra, and they've you all for joining us for our Q4 call and look forward to talking to you soon and seeing some of you in person. Thanks a lot.

Operator

And this concludes today's conference call. Thank you for your participation. You may now --