Latch’s accounting inaccuracies appear to be worse than previously revealed.
The struggling smart-lock startup said this week that “internal control deficiencies” and revenue-recognition errors rendered audited financial statements from 2019 and 2020 unreliable, Crain’s reported.
The disclosure comes five months after a similar warning by the Tishman Speyer–backed, Chelsea-based firm about its 2021 and early 2022 results.
An investigation by Latch’s board found errors regarding how the firm recognized revenue, including that management failed to assess whether sales were collectible and that employees hadn’t disclosed “relevant terms” negotiated with customers.
“The errors and issues are subject to further analysis as the company completes the restatement process,” the firm said in a regulatory filing.
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Latch said it would file amended financial statements “as soon as reasonably practicable.” It did not respond to the publication’s request for comment.
The disclosure comes weeks after Latch said that co-founder and CEO Luke Schoenfelder stepped down earlier this month. The firm’s interim CFO and chief accounting officer also departed.
Schoenfelder remains an adviser and is expected to collect more than $700,000 in severance, the firm said. AlixPartners’ Jason Keyes was named interim CEO.
Founded in 2014, Latch started in the multifamily sector with products allowing tenants access to their homes via smartphone app rather than a physical key.
The firm then turned to the office market, replacing some functions traditionally handled by the front desk. Latch launched a pilot program in New York City at the Empire State Building, Brookfield Place and Rockefeller Center to test a service that could reduce wait times in lobbies.
The company raised $126 million in 2019 through a Series B funding round in which Tishman Speyer and Brookfield Properties participated. It valued the company at $454 million. Today Latch’s market capitalization is about $143 million.
Latch went public in 2021 by merging into TS Innovation Acquisitions Corp, a special purpose acquisition company founded by Tishman Speyer’s Rob Speyer, who is a shareholder and board member.
The firm said it raised $453 million in cash from the public offering and was valued at $1.5 billion. Latch predicted at the time that revenue would increase from $18 million in 2020 to $877 million by 2025. But its projections have not panned out and the stock now trades on the Nasdaq stock exchange for less than $1 per share, down from a high of nearly $17 in 2021.
Last year, investors started aggressively selling after Latch shares dropped in value and a lockup period ended. The firm let go of more than half its staff over three rounds of layoffs.
— Pat Ralph