Q1 2022 Matterport Inc Earnings Call

[music].

Hello, and welcome to the matter of Fortis, Inc. Fiscal 2022 first quarter results conference call.

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Please note today's event is being recorded.

Now I'll turn the call sorry to Hog, Kim Vice President of Investor Relations. Mr. Kim. Please go ahead.

Thank you before we begin I'd like to remind you that today's call contains forward looking statements and the pacing of the federal securities laws, including but not limited to statements regarding <unk> future financial results and management's expectations and plans for the business.

These forward looking statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from those discussed in today's call.

Additional information regarding the risks and uncertainties that could cause actual results to differ from forward looking statements can be found in our filings with the SEC.

Any forward looking statements made on this call speak only as of today and that question is no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.

Today's call May include discussion of non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures.

Reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP measure can be found in today's earnings deck, which is available on the company's website.

On today's call are RJ, Pittman, Chairman and Chief Executive Officer of airports, and JJ <unk> Chief Financial Officer.

Now I would like to turn it over to Orange HBK.

Thanks, Sue and good afternoon, everyone and thank you for joining us today I'm excited to share our first quarter financial results with you we had another strong quarter delivering on our product strategy market expansion and key results.

Total revenue for the quarter was $28 $5 million.

$1 million above the top end of guidance and we delivered over $17 million and subscription revenue up 24% from a year ago.

We reported strong operating metrics with our subscriber base growing 70% to over 562 thousands subscribers with.

With spaces under management, increasing 49% to seven 3 million spaces.

We believe we are still in the early stages of capturing this expansive market opportunity and our diverse enterprise end markets continue to thrive amidst the challenges of today's macro environment.

The number of industry, leading companies that are embedding matter port into their daily workflows to manage their real estate assets online is bigger than ever and expanding internationally.

In fact, 22% of the Fortune 1000 users matter for today.

These businesses are discovering that matter port reduces operating expenses with every digital twin.

Critical to companies everywhere, and especially so in a constrained global economy.

With each quarter, our total addressable market continues to grow.

Real estate is the largest asset class in the world now valued at an estimated 327 trillion.

Up from 230 trillion in recent years, driven by rising property values and more than 15000, new buildings completed every day.

The Bill World is a growing market ready for Digitization.

<unk> is the clear market leader with over $7 million digital twins for buildings in 177 countries comprising more than 22 billion square feet of digitized space.

And cortex, our AI software engine automatically generates thousands more digital twins everyday.

This software breakthrough enabled matter port to create a new level of precision and fidelity for digital twins that even the most demanding enterprises and building operators can trust.

Our unique technology delivers the gold standard for dimensional the accurate photo realistic <unk> digital twins that now anyone can create with just the smart phone in their pocket.

Our rapid pace of innovation continues to lead the industry aimed at driving rapid adoption and ease of use for customers working with any type of building our space.

We are in the early stages of real estate digital transformation and matter Port is leading the way.

We havent, saying it matter port comfort the digital twin state for the platform because once you capture a digital twin of your space. Our platform delivers many value added services tools and property insights that provide immediate cost savings and operational efficiencies for the space.

Data driven decisions and remote facilities management virtual inspections and group collaboration in a virtual property save customers significant time and money.

In a tight labor market with rising rates and high commodity prices. It makes more sense than ever to go digital with your real property assets.

It's never been easier and more cost effective to create a digital twin and.

In fact, many customers choose the easy button with matter port capture services to conveniently schedule a technician professionally capture your property with our online service.

Over the past several years <unk> has been steadily expanding its market opportunity beyond U S. Residential real estate to include additional growth verticals, such as commercial real estate travel and hospitality architecture engineering, and construction industrial and the public sector.

After.

Our diverse end markets enabled matter port to grow steadily amidst the challenging global economy.

And as the world starts to emerge from the pandemic the return to business and personal travel has sharply boosted the outlook for the travel hospitality industry in the second half of the year.

Matter part has become an invaluable solution for hotels nightly rentals and even the airlines themselves to promote accommodations and streamline air travel.

Our recent innovation.

The access motorized Mount works together with any smartphone collect property managers airbnb hosts and landlords increased bookings by more than 12% when they provide customers with an accurate virtual tour of their properties to better plan their stake.

While property managers get a more convenient way to manage their properties online for virtual space planning inspections operations and maintenance.

We see comparable traction and impact across our other end markets are enterprise customers are becoming more confident in the power of our digital twins and are scaling with matter port and bringing new spaces online every day.

This is fueled by the volume of real property are central to running these global corporations custom.

Customers like Vmware, Colliers, Healthtrust, Reckitt, Perry Ellis and Orange theory.

All recognize the power of Digitization and have recently joined our platform.

Next I'd like to provide an update to three strategic initiatives that demonstrate how our customers are incorporating matter port into their enterprise workflows to achieve compelling new operating efficiencies.

These are capture platform and our Geo expansion efforts.

Then I'll hand, the call over to J D. Fay to discuss our financial results for the quarter in more detail.

Capturing ubiquity is a critical initiative for the company. It was designed to enable precision <unk> capture from any type of camera for any type of space.

Today customers can choose from a broad array of offerings.

That suit their needs starting with a range of powerful capture devices, including the matter part pro two camera and a variety of third party devices.

Two a one click on demand professional service and.

And an easy DIY solution using just the smartphone in their pocket.

Smartphone capture is an important part of our go to market strategy and it continues to drive adoption across SMB mid market and enterprise.

Many of our fortune 1000 customers have embraced smartphone capture to quickly to value at our solution with a simple free software download capable of digitizing an entire building.

Last quarter, we introduced matter port access to make smartphone capture even easier faster and more precise.

Access is a revolutionary motorized Mount that works with a smartphone to capture <unk> digital twins of any physical space.

Place a smartphone in the cradle and our software handles the rest.

Matter Port access became available in April and quickly sold through our initial allocations worldwide.

Early days, but we've seen very strong demand and an enthusiastic response from our customers so far.

Matter Port access is great for professionals small business and even bigger jobs enterprise.

Enterprise companies across our verticals are turning to access to deploy an easy cost effective way to capture high fidelity digital twins at multiple building locations with their own employees using their own smartphones and customers love it.

<unk> is a top four insurance claims adjusting firm in the United States.

<unk> recently deployed matter port access to quickly document insurance claims using the power of our digital twin.

Adjusters reduced their time spent in the field improving total claims cycle time by 15%.

In increased new customer acquisition by 200% with the convenience of matter port access and their own smartphone.

Adjusters are able to streamline complex claims when multiple digital twins are required.

As a result, <unk> completes their assessments faster and with greater accuracy and consistency.

And considering the cloud and independent London based real estate group specializing in sales rentals and property management is deploying matter port access to their employees and agents to quickly create a high fidelity digital twin for each of their listings and publish it online for the clients in just minutes.

Atkinson the cloud is able to reduce in person visits by 50% because clients are able to determine in advance whether the home was right for them by exploring the digital twin as often as they like anytime day or night.

This accelerates the process to reach highly qualified buyers, while doubling the visitors to the online listing.

Next I'd like to provide an update on our platform strategy matter Port is the leading spatial data platform that helps companies bring their buildings online to design build promote and managed properties.

<unk> <unk> capture technology turns buildings into data, enabling partners and third party developers to extend the power of our digital twin the integrations and vertical market add ons like to the floor plans space planning tools insurance claims management tools and more.

The power of our platform enables customers to get more out of their digital twins using advanced technologies from some of the best companies in the industry.

An important add on we introduced to the platform last year as matter port them file.

To open matter ports platform to the entire design build and operate community.

Building information modeling or Bim brings together all of the information about every component of the building into one place.

Project stakeholders can include information about behavior performance materials cost and more all within the Bim models.

With the introduction of matter <unk> been filed last year, we enabled teams to jumpstart their bim projects in half the time at a fraction of the conventional cost of survey and creating as built documentations, all while decreasing bid modeling costs.

Importing <unk> files into Autodesk construction cloud pro core and other software applications as a snap, making it faster easier and more cost effective than ever to visualize and utilized as built designs.

Retail planners architects real estate and construction managers have told us how excited they are to use the matter for bim file to dramatically speed up the time required to clan measure and renovate their existing facilities.

In Q1, we introduced <unk> for enterprise.

A new offering is designed to meet the needs of enterprise customers that are looking to take them data a step further to produce analytics and key insights about a building and a business friendly reporting format.

Then for enterprises designed to unlock data driven business decisions and help teams better understand the operating environment in a building or across a group of buildings.

For example, with the tap of a button facilities managers can quickly locate and determined how many fluorescent lights existed in office that need to be retrofitted with led bulbs.

To enhance the offering our capture services team is also developing specialized capture processes to ensure the critical assets unique to each facility are digitized with maximum precision for future analysis in the digital realm.

And for Enterprise is your digital backbone for the built environment.

The warehouse group is the largest retailer in New Zealand with more than 100 stores currently piloting matter port and been for enterprise to bring spatial intelligence to the forefront of their retail planning business.

Using matter part they are able to identify every centimetre of shelf space and use location intelligence to plan and maximize product placement in store Isle layouts, with greater precision speed and efficiency.

This in turn activates data driven decision, making to improve sales layout and workforce efficiency.

Matter Port solutions are specifically designed to help our customers reach their business goals.

<unk> for enterprise allows retailers like the warehouse group to quickly analyze and better utilize every square foot of the store to maximize sales and improve operating efficiencies.

Finally, I'd like to share an update on the progress, we're making with Geo expansion.

<unk> is a global company with digital twins in 177 countries around the world.

The built world is widely distributed and the largest property markets can be found in the U S Asia and Europe and these markets are steadily maturing.

All three regions represent significant multibillion dollar market opportunities for Digitization and we have successfully entered the top markets with a proven playbook that has been honed over the years.

As part of our growth plan, we have increased our focus and execution in all three regions to more deliberately capture the growth opportunity in the international market.

We are developing a meaningful presence in some of the largest international markets in the world, including Singapore, Japan, China, and Brazil, along with much of Western Europe .

Our enterprise business includes many multinational customers that look to standardize on matter port for all of their locations around the world.

Extending our global reach every quarter.

Here are three examples from around the globe.

Damian Shipyard group is a Dutch owned Shipbuilding company with operations in 120 countries.

After the decision was made to standardize on matter Port work, both division deployed matter Port edits, Netherlands headquarters and major shipyards in China, Turkey and Vietnam.

With access to a <unk> space in the planning stage customers can examine the layout and placement of equipment and request modifications if desired.

Once the ship design is finalized Damon shares its digital twin internally with their service department, enabling them to gain better understanding of the vessel when it is completed and deliver.

Finally, Damian is using matter port to build a three D archive of all of the projects that has delivered to customers since the solutions deployment.

The archive is particularly useful for supporting periodic vessel overhauls equipment upgrades and knowledge transfer with long time employees retire or leave the company.

China is the largest property market in the world with more than $3 billion commercial and residential spaces ready to be digitized.

During the quarter, we announced that Midland Holdings, one of the largest residential real estate brokerages in greater China.

We will become the first brokerage in the region to use matter port digital twins for its entire portfolio of properties.

Midland Holdings was the first publicly listed real estate group in Hong Kong and they have over 600 branches and nearly 8000 employees.

Using matter Port the company will provide its customers with immersive digital twins to better explore and purchase homes across the network with properties in China, Hong Kong and Macau, while also helping their employees realize significant operational improvements and cost savings with have realistic.

Lastly, Brazil is home to the largest property market in South America and also one of the largest in the world with more than 500 million physical spaces.

During the first quarter, we expanded our presence in the Brazilian market with two of the top industry partners to bring matter port to the enterprise market for architecture engineering and construction.

Glenda Lini post CTO and the Minto is a leading technology distributor.

The sales network extending across 85% of Brazil.

Par's part of the <unk> group is the largest it services network in Latin America, representing companies, such as Adobe and Autodesk in Brazil.

These partners are capable of driving scale of adoption across the country, while helping matter port reach new customers and expand our business across industries in this pivotal market.

Matter Port access Bim for enterprise and our expanding global business are the results of our disciplined growth plan and focused execution. We are off to a great start in 2022, and I look forward to updating you throughout the year.

I will now turn it over to J D Fe, who will discuss our financial performance for the first quarter of 'twenty two.

Thank you RJ I am delighted to report that our Q1 was another solid quarter for matter port delivering record first quarter revenue of $28 $5 million.

This is $1 million above the top end of our guidance range for the quarter.

We delivered record subscription revenue of $17 1 million.

Up 24% from the year ago quarter.

In addition, our annual recurring revenue grew to a record $68 6 million for the quarter.

The growth of subscription revenue results in more of our revenue becoming recurring with high gross margin.

Subscription non-GAAP gross margin was 75% in the quarter, which was more than 2400 basis points higher than the corporate gross margin this quarter.

We had another outstanding quarter of customer acquisition with total subscribers, increasing 70% year over year to a record 562000.

At the end of the first quarter, we had 504000 free subscribers and 58000 paid subscribers.

Subscription revenue grew to 60% of total revenue in the first quarter compared to 51% in the year ago period.

Subscriptions are core to our growth strategy and we leveraged the other revenue lines product services and license to continue to build subscribers and subscription revenue over time.

Our subscribers continue to increase their spend with us as well our net dollar expansion rate was 107% in Q1.

We saw exceptionally strong expansion with our enterprise customers in the first quarter on a combined basis. This strength was largely offset by unusually low expansion in our small and medium business customers in the first half of the quarter.

The small and medium business customer cohort, which started the year off tentatively influenced by volatility in the macroeconomic environment recovered to historical trends by the end of the quarter.

License revenue was less than $100000 in the quarter as we have moved another solution to the subscription revenue line.

I had previously discussed that our application programming interface and software development kits, enabling metaphor data to be integrated into customers' enterprise applications.

Presented as license revenue.

Our strategy with licensing involves establishing product market fit with lighthouse customers and then adjusting the go to market approach to offer the solution on a subscription basis.

We are pleased that for the second year in a row, we have been able to execute this strategy successfully.

Now offering enterprises.

Dk integration as a subscription service beginning in the first quarter.

Our product revenue was $7 $4 million in the quarter compared to $8 2 million in the year ago period.

While the business continues to be constrained by the supply chain challenges that we have been highlighting for the past couple of quarters.

We're still able to deliver a 12% sequential increase in product revenue from Q4.

We also ended the first quarter with a near record backlog of open orders the.

The demand for our high definition commercial grade pro two cameras remains very strong much higher than we can supply.

For the go forward periods, we are working to mitigate the impact of supply constraints for the pro two camera.

With not only our procurement efforts, but also the launch of matter port access and showing customers how to use the phone in their pocket with this inexpensive motor mounts.

We are also elevating our capture services offering with both enterprises and small customers to enable them to quickly and cost effectively capture their spaces, even without purchasing a device.

Accordingly services revenue for the first quarter was $4 million.

48% increase year on year.

Capture services continues to see strong growth as enterprise customers are beginning to take full advantage of this offering.

Enterprise customers can get onto our platform quickly and at scale leveraging the existing installed base of service providers, who already own approach you and other compatible cameras.

Capturing services also allows us to provide end to end solutions to large enterprises, including customization of matter of course spaces like the warehouse group in New Zealand RJ referenced earlier.

In App purchases, which provide our customers additional digital assets, such as schematic floor plans and scanned beam files.

<unk> continued to contribute strong sequential growth in services revenue.

Moving onto gross margin our total non-GAAP gross margin for the first quarter was 51%.

While subscription margin remains relatively stable quarterly volatility at the aggregate level.

Largely from product revenue as well as the magnitude of extremely high margin, but episodic license transactions.

Our subscription gross margin was 75% consistent with the prior year's gross margin.

Subscription gross margin remained strong as we continue to make enhancements to our technology platform, while we grow our spaces under management.

As we have noted before we expect subscription gross margin to vary by 100 to 200 basis points from quarter to quarter as we continue to invest in building out our subscription platform.

Product gross margin was 2% as compared to 40% a year ago.

As we have discussed in our recent conference calls product gross margin continues to be impacted by higher costs to lock in supply as well as added freight costs to expedite materials for production.

On a sequential basis. However, we were able to improve margin by 1300 basis points. This was primarily due to better overhead cost recoveries on higher volume shipments in the quarter.

Reviewing non-GAAP operating expenses in Q1 research and development expenses were $12 1 million.

Up from $5 9 million in the prior year period.

Spending level was as planned and is primarily attributable to investments in head count to increase our product development capabilities and throughput.

SG&A expenses were $29 $5 million as compared to $12 6 million a year ago.

The increase was primarily due to investments in sales and marketing, which will also part of our growth plan.

We continue to invest in global selling and marketing capacity to drive further growth.

Investments in these areas are expected to begin bearing fruit in the second half of this year.

non-GAAP net loss was $27 9 million and diluted non-GAAP loss per share was <unk> <unk> for the quarter.

Other than our guidance range of a 13% to 15 set loss.

Weighted average share count was roughly 275 million shares slightly below the 277 million shares we provided in our guidance. There were three nonrecurring events that drove the changes in our share count during Q1.

First we called 2 million warrants for redemption, raising an additional 28 billion.

This represents the January portion of the $104 million in total warrant proceeds to the company, which stretched over Q4 and Q1.

Second we issued $21 5 million earn out shares on February one.

We issued fewer shares to employees and granted as we elected the net settlement method of this portion of the earn out share issuance.

And third we net settled our vested restricted stock release in Q1 for employees.

Under the net settlement method, we paid $33 million for the employee withholding taxes instead of selling those shares on the open market.

<unk> the total expected dilution relating to these issuances by one 2% or $3 2 million shares.

Moving onto our balance sheet, we ended the quarter with $600 million in cash and investments and we do not have any debt.

Our exceptionally strong balance sheet is a valuable asset as we evaluate and make investments while continuing to be deliberate with capital allocations to further strengthen our technology and market leading positions.

Today, we are introducing financial guidance for the second quarter and reiterating full year 2022 financial guidance.

While there is a high level of macroeconomic uncertainty as well as the continuing impact of supply chain challenges, we are maintaining our full year guidance from last quarter.

We continue to expect full year 2022, total revenue to be in the range of $125 million to $135 million.

We continue to expect subscription revenue to be in the range of $80 million to $82 million.

Okay.

For the second quarter, we expect total revenue to be in the range of 28, 5% to $35 million.

We expect subscription revenue to be in the range of 18% to $18 3 million.

The balance of our revenue forecast is comprised roughly evenly between product revenue on the one hand and services and license revenue on the other.

Consistent with our investment plans, we expect second quarter non-GAAP loss per share to be in the range of 13 to 15.

License revenue is expected to be approximately $400000 per quarter for the remainder of 2022.

As noted on previous earnings calls license revenue can be lumpy from quarter to quarter, depending on the timing of completed transactions and any associated implementation work that we must perform to recognize revenue.

I am pleased to report that we have a new seven figure contract against which we are working to deliver this year.

We believe that we are on track for these deliveries accordingly, our expectation is we will be able to recognize revenue from this contract over the next three quarters.

Regarding non-GAAP earnings per share we continue to expect a 47 to 52 set loss for the full year of 2022.

Certain projects planned for the first quarter have moved to later in the year, but our full year Opex is expected to be unchanged overall.

We have recently made considerable investments in building the necessary team to position us for future growth, we expect that the growth in Opex investment spend will moderate in the second half of this year as we begin to see returns on those investments.

And we continue to monitor the productivity of all of our growth investments to allocate our capital prudently.

While we continue to focus on top line growth, we have a robust high margin subscription business that has allowed us to operate profitably in the past this gives us confidence in the long term strength of this business today.

Now I would like to turn the call back over to RJ.

Thank you J D.

The last 12 months of the company have been very productive as we delivered on our plan to scale operations for the next stage of growth.

We have outperformed our timeline to achieve increased capacity and global reach for our business.

We raised significant capital in the public markets to position the company for long term growth and profitability with a considerable scale advantage.

We have invested in the most important asset of our business our team.

We have sharpened our technology advantage with breakthrough innovations like matter Port access Bim for enterprise, our spatial data platform and much more.

We are disciplined capital allocators, and our operating plan for 2022 will enable us to stay focused on delivering for the business and helping our customers win.

The World continues to modernize through pivotal technology investments, we have heard from our customers over the years that rain or shine in all market conditions technology led transformations are critical to the success of the property industry.

Our cloud software solution helps businesses property managers and building owners create value and reduce the operating costs of the world's most valued asset during a time when cost savings and capital preservation matter most.

The path to transformative change is not a straight line and matter port is helping companies get there faster than ever before our.

Our success will continue to be measured in the years and decades ahead as we lead the digital transformation of the built world.

I'd like to thank our investors for joining us on this exciting journey.

Operator, we are now ready for questions.

Yes, Thank you and I have answers at this time, we will begin the question and answer session.

I'll ask a question you May press Star then one on your Touchtone phone.

You are using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

Please hold for them I'll always somewhat roster.

And the first question comes from John Walsh with Credit Suisse.

Yeah.

Hi, good afternoon, and nice start to the year.

Thanks, John Thanks, John .

I guess the first question is around.

It was nice to see the paid subscriber number accelerate here on a sequential basis the rate of change. So can you talk a little bit more about that you highlighted a lot of new verticals in your prepared remarks, but is.

Is this coming from kind of the core real estate business or.

Is there a difference between that and kind of some of these new verticals.

Sure I'll start and J D. Please feel free to add in as well.

It is.

Been very market progress in our expanding and markets without question and one of the.

The areas that I.

Repeat and reiterate that all of these calls is our intense focus on the enterprise and enterprise is really continuing to bear fruit. This is where we put.

Appointed investments in increasing our capacity increasing our operations specifically.

The go to market functions, the sales and marketing functions.

That has been making great strides in great inroads in not only bringing on new business in all of these categories across the enterprise, but also.

Seeing promising expansion and re upping with our existing customers as well and so it's really.

Putting even further into balance.

The business operation as it continues to diversify from.

A.

Very dominant.

Share of our business coming from residential real estate now evening out.

Every quarter.

Into the enterprise into commercial real estate into manufacturing operations.

Travel and hospitality.

Great Yeah, I'll, just add to that quickly John .

This is Judy I, just thought I'd add to that is right I mean, our.

Subscription revenue.

Coming from real estate is actually now about 60% of revenue all other verticals were up to 40%.

So that balances continuing to occur and its been consistent over the last four quarters and I think as a result, youre starting to see.

Some of that paid subscriber growth coming from other verticals. In addition to real estate.

Great.

And then maybe another question, obviously, great to see the $600 million of.

Cash and investments you referenced but just wondering if you could give us an update either on each one versus each to how youre thinking of uses of cash and.

When do you think you kind of get to cash positive. Thank you.

Sure the last <unk>.

Three quarters wasn't intense growth period for matter ports and as I mentioned on the call. We did a great job in fleeting up the organization, bringing that capacity and where we needed it especially in these expanding markets.

And that is where the bulk of our focus and attention has been sales marketing and the R&D function.

And that was predominantly the last <unk>.

Nine months activity.

And we got what we needed to be and so as we turn towards the second half of the year. It is all about activating and maximizing productivity from.

The increased capacity that we invest in a lot of new folks joined the company as recently as the last three or four months. So we're still fleeting up for sure and we're putting a lot of attention towards our go to market with that increased capacity and what youll see in the future as a shift from investment in head count to assure.

Shifting our go to market programs building brand awareness and understanding in those Geo expansion markets, we've talked about and again with a very pointed interest in expanding in the enterprise and so that's going to definitely be an investment shifts.

And overall Opex tapering without question right is we've really are.

Cheap cruising altitude a little bit ahead of plan here. We can now go to work and just growing that business has grown the pipeline.

Great. Thank.

Thank you for taking the questions.

Okay.

Thank you and the next question comes from Robin Shah with Deutsche Bank.

Great. Thanks for taking my question just focusing on subscription revenue if I look at your <unk> performance in tissue guidance.

Play a pretty material sequential growth in the back half of the year can you just talk about what are some of the drivers at the scene that confidence in seeing the ability to kind of ramp up into H.

Absolutely.

Couple of things right, we've been laying the foundation for subscription growth really over the last 18 months and there is a few really important forces at work that are just continuing to drive acceleration in this all important part of the company.

And first and foremost is.

Creating options to accelerate adoption and that is our capturing ubiquity strategy.

As a matter of port for mobile matter Port access in combination with capture services, which J D spoke about seeing.

Really strong acceleration as well that's driving the adoption of digital twins right and of course as you know the more spaces under management the faster we grow our subscription business and so putting these very scalable oars in the water, particularly in an environment, where we have discussed before the challenges in the supply.

Lie chain related to hardware in the manufacture ability of our pro two camera. This is giving us tremendous option value. We've seen great success out of the gates with matter port access and smartphone capture and capture services.

Tend to be just extraordinary advantages for us to play in this constrained environment that we're in today and that's what's given us the confidence even in today's environment.

To see that kind of acceleration in the back half of the year. So that's one.

The other part of this too is we're really now have the capacity in the organization.

To move much quicker in driving penetration in new geographic markets and across our newer end markets and thats not just in the sales functions, but also in the marketing investments we're making.

To create that market understanding and to shorten the sales cycles for our workforce out there.

And then lastly, I would say.

Is data vacation.

This is.

Specifically in the use case of our emerging customer base in the enterprise.

That looks to matter for them to manage their facilities online in a more cost effective and time efficient manner.

And getting building insights remote building inspections.

And full property and asset audits from our software.

Is generating tremendous upside for both the installed base, but also a very powerful use case, that's bringing many of these new enterprises that I mentioned on the call onto our platform as well, so thats, creating a compounding effect.

Additional subscription revenue and Thats.

Today working exactly to the plan that we put forward.

Super Insightful and I guess, a follow up on the first point can you maybe help us better understand how the mix of maybe paid spaces in our management breaks down between want that may be leveraged a pro two camera versus something that are spaced out leverage maybe mobile capture services and how that's trended over time just to help us better understand how.

Capture services can be overtime.

Yeah.

Sure well I'll take the last question and then J D. I'll flip it back to you for the breakdown but.

Look we think capture services has enormous potential because remember.

Today, our capture services network.

<unk> has more than 40 countries. In fact, I think we are extensively in more than 50, but squarely in at least 40 countries today and growing and these cap service providers now have more options at their fingertips limited not only to our pro two camera as the means of showing up to your.

Property or your portfolio of properties and digitizing them.

Can now use low cost third party capture devices that 360 cameras.

From our partners as well as of course, the smartphone and now with smartphone plus matter port access that's a pretty big deal because it's bridging a gap using ostensibly a consumer device to create a professional grade digital twin.

So increases basically the types of people, who could become a capture service provider.

That's as simple as just for any professional photographer our professional service person of any time.

Now very easily use their own smartphone in their pocket plus a very low cost.

Rice.

In a matter of port access.

To produce something that we are seeing meeting the standard for mid market and enterprise as much as it is for small business. So that's that really puts a tremendous opportunity for acceleration in front of us and I'm looking at this the early.

Stages of the introduction of this new solution.

We're very very encouraged by its potential.

Yes ill just add it is it is somewhat early in the capture services life compared to the pro two of course, the <unk> been around for nearly five years now are thinking at least five years now.

And capture services.

<unk> has been has been delivering.

Revenue here for about a year and a half and so notwithstanding that we've seen capture services in terms of space creation grow.

Well over 50% year over year, so while we don't give out that specific number itself the growth rates actually have been.

In that in that 50% range.

Ending ending this quarter.

Great. Thanks for taking my questions.

Thank you and the next question comes from Joseph <unk>.

<unk> with Morgan Stanley .

Hi, Thank you so much for your question congrats on the quarter and reiterating the full year guide despite some of the macro volatility.

Turning to get just an update on demand within that residential real estate uk's.

Given rising interest rates and headlines on softening demand.

Should we think about that of course, the ability to either take a bigger piece of a potentially smaller pie of residential real estate activity or the ability for those new verticals like insurance and construction to offset a potentially slower real estate market. Thank you.

Okay.

Yes, great.

Thanks Elizabeth.

First we haven't seen any impact on our business either from the unusually low inventory of houses for sale, particularly in United States or as a result of rising interest rates. So the residential real estate and commercial real estate spaces have continued to grow with us and perform as expected.

In the first quarter.

And then of course, the other thing that I think about a lot and look at is the fact that we do have a global business we've got.

Matter for customers and nearly 100 and 180 countries and then to your point, we obviously have a growing business in non residential real estate.

Vertical markets as well and we are seeing growth in all of those other verticals certainly travel and hospitality with RJ mentioned is growing as we're starting to see more people out and about traveling experiencing restaurants at events, we're seeing growth in the business there.

Similarly.

In insurance factory management.

<unk> facilities and in retail in all those sectors.

They are growing.

As companies are increasingly looking to improve their efficiency of operations by using technology, particularly AI and ml driven technologies.

So I think that we will continue to see kind of growth in all verticals.

And even with if the or as the U S residential real estate markets go through its ups and downs with respect to mortgage rates or where home selling prices. We still have an incredibly large opportunity just in that segment in front of us we think our penetration rates in the United States for example.

7% of homes listed in the United States each year have a matter of port digital twin associated with them.

There is another 93% of that market, regardless of whether it's 6 million homes sold in the year of $5 5 million homes or 5 billion homes sold in the year. That's ahead of us to go capture in that segment too so.

The opportunities I think in all those segments remain.

Significant massive and in front of us.

And I think we'll still continue to see the growth that we're forecasting even with.

Dynamic market environment.

Great. Thank you so much and as a follow up.

Interesting to see that the Midland Holdings acquisition.

Curious if you can kind of keep our rationale for acquiring a broker and is that a strategy you are looking to expand thank you.

Well I think to clarify we did not acquire them, we acquired them as a customer.

But.

No we did not own Midland holding.

Our customer very much like.

A number of enterprise relationships that we engage in with global brokerages around the world like Compass for example, and Keller Williams, <unk> Glyn Cushman and Wakefield on the commercial real estate side.

And Midland of course is just a fantastic gateway for us into.

A very large market opportunity in China.

Great. Thanks for the clarification.

Yeah.

Thank you and the next question comes from Yun, Kim with loop capital markets.

Thank you congrats on a solid quarter, arguing JD given the current focus on the enterprise can you just talk about it at least qualitatively does subscription revenue mix between enterprise and non enterprise and how has that been trending and should we expect any inflection point.

That mix sometime in second half of the year of your recent sales hires in the enterprise.

To wrap up thanks.

Well, yes in terms of the trends in enterprise versus SMB or small and medium business.

The enterprise business has been growing as a percent of the total for the last several quarters in fact from last year.

Early part of last year, all the way through to now.

But both segments grow and so the.

Mix shift is relatively steady.

So it's still about 30% of revenue is coming from the enterprise, but again up a little bit each quarter as we go along.

So that's what we've seen looking backward now looking forward.

Of course, as we've talked about we are making significant investments in our judgment discussed. This earlier in enterprise go to market motions, both sales and marketing and so while I'm not forecasting an inflection I do expect to continue to see accelerated growth in enterprise both in terms of new customer.

Logo acquisition and in terms of outperformance in the net dollar expansion rate.

Okay, great. Thank you and then J D. Another one for you. It's a quick one remind.

Remind us about the various factors thats driving your account receivables it looks like.

Went up a bit.

Moreover, again, a function of a higher mix of enterprise business tends to have a longer.

Generally as long with DSO.

Youre exactly right.

As a result of the increasing mix of enterprise customers enterprise customers.

And channel partners tend to pay on terms and so.

We're issuing the invoices and then working to collect those builds whereas the small to medium business cohort tends to pay by credit card in advance and so when you see the growth in accounts receivable.

That is as you said, it's due to the growth in the enterprise business as well as the channel the channel partners.

Okay, great. Thank you so much.

Youre welcome.

Thank you and the next question comes from Wayne <unk> with Piper Sandler.

Hi, this is weighing on for Brent just wondering if you guys could give some insight into what drove the growth in spaces under management and how we should think about monetization in this space.

Sure.

It's a good story across the board, we're seeing positive adoption.

Residential and commercial real estate and enterprise and once again.

When the all the cylinders in the engine are firing including capture services.

Again that global network out there that continues.

<unk>.

Its acceleration continues to really ramp up.

That's just adding to the monthly velocity of some growth or spaces under management and this has also been a very important part of the strategy. We've been discussing over the last several quarters of where we've been making very specific investments as well to accelerate those efforts.

Put more capacity into the system to.

To cast a wider net to get those initial spaces going and new accounts created in many cases.

Boosting space under management.

Second part of this that youre going to see more and more of going into the back half of the year is.

We continue to see a healthy mix of paid subscriber growth.

And paid some growth, but also the freemium part of the business is very important because that's the easiest way to.

To test drive matter ports and to measure the value proposition in any of these end markets from enterprise and in any geography.

And because our Tam is just so large.

We need to continue to cast.

A much much wider net and exponentially wider net of awareness to get that top of funnel really fall to the place wed like it and so that's where we're going to be putting forward some highly performance.

Marketing programs that continue to drive the awareness of the matter for value proposition all of these growth markets that we have.

<unk> been discussing and in all the Geo markets that we now have a beachhead in so that you can.

Expect to continue to see acceleration.

The back half of the year end and of course next year.

Great and just wondering if there was any update on the hardware camera supply chain constraints.

Sure.

It is challenging to be Frank it is.

Yeah.

We have been making good progress and at the same time, sometimes it feels like it's one step forward, maybe one and a half steps back as.

We have been very steadily.

Doing everything from making smart.

And savi in timely spot buys to minimize the stock outs of our products.

And very actively multi sourcing components from other suppliers.

Yeah.

We also find ourselves in at the wins of the pandemic that has caused for Shenzhen and other regions to go into Lockdown again, and basically bring supply change to a halt which includes.

Key components for our hardware product offering, but I can tell you again, we've got one of the best teams in the business in manufacturing.

Not just on the R&D side, but in the full supply chain management that has been doing just a spectacular job of keeping it at bay right to the extent we can.

Having said that there is there is a meaningful backlog of product, there's very strong demand.

Even in today's market for matter Port Pro two cameras and so we're going to be continuing to work this very actively.

But we're positively staying ahead of it as best we can and steadily digging out as we go and I can't predict any further kind of global macro events, but.

Save for those that we're contending with here in Q2, and the China Lockdowns.

Im optimistic.

We are doing all of the right things to keep it at Bay for the quarters ahead.

Okay, great. Thanks, guys.

Thank you and this concludes our question and answer session as well as the call itself. Thank you. So much for attending today you may now disconnect your lines.