Item 2.05. Costs Associated with Exit or Disposal Activities.
On August 2, 2022, Latch, Inc. (the “Company”) announced that it had completed a reduction in force authorized by the Company’s board of directors on July 27, 2022 to create further operating efficiencies. The reduction in force impacts approximately 115 employees, or approximately 37% of the Company’s current full-time employees. The Company estimates that it will incur approximately $2.5 million to $3.5 million of total cash restructuring and related charges, primarily related to severance and benefit costs (excluding the impact of stock-based compensation), substantially all of which is expected to be incurred in the third quarter of 2022.
With respect to stock-based compensation, also as part of this reduction in force, the Company plans to modify a portion of the affected employees’ stock awards to allow a portion of the awards to vest that otherwise would have been forfeited. However, as a result of the reversal of previously recognized stock-based compensation expense for stock awards being forfeited and a reduction in the fair value of the awards vesting in connection with this reduction in force, the Company expects to recognize a net reduction of stock-based compensation of approximately $1 million to $2 million in the third quarter of 2022. This estimate may change due to future changes in the Company’s stock price.
The Company may incur additional expenses not currently contemplated due to events associated with the reduction in force. The charges that the Company expects to incur in connection with the reduction in force are estimates and subject to a number of assumptions, and actual results may differ materially.
Forward-Looking Statements
This Current Report on Form 8-K contains certain forward-looking statements within the meaning of the federal securities laws, including statements regarding adoption of the Company’s technology and products. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “would,” “will continue,” “will likely result” and similar expressions. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Forward-looking information includes, but is not limited to, statements regarding: the Company’s future products, performance and operations, and the related benefits to shareholders, customers and residents; the impact of the 2022 workforce reductions on the Company’s business; and the Company’s strategy. Many factors could cause actual future events to differ materially from the forward-looking statements in this document, including the Company’s ability to implement business plans and changes and developments in the industry in which the Company competes. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described in the “Risk Factors” section of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2022, and other documents filed by the Company from time to time with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and the Company assumes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law, including the securities laws of the United States and the rules and regulations of the SEC. The Company does not give any assurance that it will achieve its expectations.