Q4 2022 Matterport Inc Earnings Call
Good day and welcome to the matter of poor fiscal fourth quarter 2022 results conference call.
All participants will be in listen only mode should you need assistance. Please suddenly conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on your Touchtone phone to a charter or a question. Please press Star then two.
Please note today's event is being recorded I would now like to turn the conference over to Mike Knapp, Vice President of Investor Relations. Please go ahead Sir.
And welcome to matter ports fourth quarter and full year 2022 financial results Conference call.
After the market closed today matter Port released results for the quarter and year ended December 31.
2022.
The release is available on the company's website at investors stop matter Port Dot com.
This call is being recorded and webcast live and a link to the recording can be found on the Investor Relations section of the matter of Port website.
Four we begin I'd like to remind you that today's call contains forward looking statements within the meaning of the federal securities laws, including but not limited to statements regarding matter ports 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 on today's call.
Additional information regarding the risks and uncertainties can be found in our filings with the SEC.
All forward looking statements are made as of the date of this call and matter, Puerto assumes no obligation to update or revise them, except as required by law.
In addition financial references on this call will be on a non-GAAP basis, unless otherwise indicated 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 slides, which are available on the company's website.
Hosting todays call are RJ, Pittman, Chairman and Chief Executive Officer, and J D phage.
Sure.
And with that I'd like to turn it over to RJ to begin.
Thanks, Mike Good afternoon, everyone and thank you for joining us today.
He used to share that we have delivered record revenue of $41 1 million dollar for the fourth quarter up 52% from the year ago period with subscription revenue hitting a record of $19 $3 million.
Both of these figures exceeded the high end of our guidance range and demonstrates the success, we can achieve as we execute on our plan to digitize to build world.
This topline increase combined with our continued focus on operating effectiveness enabled us to post a net loss per share of nine at the top end of our guidance range.
In addition, our subscriber base crossed another milestone in the fourth quarter, surpassing 700000 subs for a total of 701000 up 39% from the year ago quarter, while spaces under management increased to over $9 2 million.
Up 37% over the same period.
For the full year 2022, we delivered record total revenue of $136 million as.
Price demand was robust during the calendar year and more than offset a subdued U S real estate market.
We see the current economic environment, driving more customers across facilities management retail AUC insurance and travel and hospitality towards our solutions to improve productivity and reduce costs.
Increasingly we are seeing matter of course digital twin platform being viewed by our customers as an essential tool to maximize efficiency and unlock critical insights about their real estate worldwide.
I believe the momentum we saw in the second half of 2022 is carrying through to 2023 and sets the stage for another record breaking year.
At matter for efficiency is a key focus for us as it is for many other organizations facing the current economic challenges.
We not only strive to improve the way we run our company.
But also to support our customers in their efforts to tackle their most pressing business challenges.
Our customers come from a range of industry and many are just starting to discover the potential of our digital twin platform.
That's why in the coming fiscal year, we are reinforcing our commitment to enhancing product and service adoption amongst our existing customer base.
We aim to expand the ways in which our customers utilize our platform, enabling them to overcome cross functional issues and gain new insight that will propel their businesses forward.
Here are two examples.
Through the acquisition of DHT Studios last year, we recently introduced digital pro to provide real estate professionals with a simple all in one solution to market and sell properties with more speed and efficiency.
We also partner with companies like AWS twin maker to help enterprise customers effectively manage their operations by seamlessly integrating Iot data into matter port.
Oh photo realistic and dimensional accurate.
In simpler terms matter part is helping businesses and real estate firm.
More time and money with their properties than ever.
Later in the year, we will make property intelligence available to the public.
Cutting edge AI that can analyze any property or portfolio with speed and efficiency producing tailored insights to meet the needs of any business.
We have already begun collaborating with some customers such as Airbnb, which I will touch upon later.
Next I'd like to discuss the great progress we made during the fourth quarter in more detail then I'll hand, it over to J D fade to discuss our financial results and outlook for 2023.
We introduced the pro three camera in September which has revolutionized <unk> capture for the built world.
Setting new benchmarks for speed accuracy versatility and fidelity.
Equipped with cutting edge Lidar technology and advanced onboard software. The pro three offers exceptional performance in a compact and portable design.
The pro <unk> impressive features were well received by our customers leading to a 51% increase in product revenue from the previous quarter.
The <unk> is just one aspect of our universal capture strategy, which allows us to create <unk> digital twins from almost any capture device.
This is because our solution is powered by core cats, our AI powered <unk> reconstruction software that automatically generate thousands of digital twins everyday with no humans in the profitable.
Companies choose matter part because of our unique ability to deliver precision results with such incredible speed and efficiency.
And because a matter port turns buildings into data or digital twins comprised so much more than photography.
We have the data to unlock new information about one building or space of any shape and size.
Making it available to our customers instantly from anywhere in the world.
One instance of our value added insight was highlighted in Airbnb 2020 two winter release in November.
Airbnb announced that it is using our property intelligence solution to analyze and verify a selection of Airbnb home to confirm they meet accessibility standards for guests with mobility requirements.
The new collection of lifting is called the adaptive category.
So pacing listening that have step free access to the home and some one or more bedrooms and bathrooms as well as other accessibility features.
These property insights on Airbnb platform are made possible through matter ports AI powered property intelligence technology.
This proprietary technology automatically converts digital twins into valuable insights on a large scale.
Forming tasks, such as identifying objects, including chairs or light fixtures measuring doorframe width pathways room size and much more.
This technology will help companies improve their operational efficiency by allowing them to asset essentials insight and manage their properties from their digital twin from anywhere in the world.
During the quarter, we were thrilled to attend the AWS reinvent 2022 conference hosted by Amazon to jointly unveil, our new solution with AWS twin maker.
This integration allows enterprise clients to effortlessly integrate Iot data into visually immersive dimensional accurate matter for digital twins.
The new solution supports the digital transformation efforts of enterprise customers and provides a convenient and cost effective method for optimizing building operations enhancing production and improving equipment performance.
The integration enables real time remote monitoring.
<unk> maintenance root cause analysis virtual equipment design and virtual training.
There is an immense opportunity for enterprise customers, particularly in the manufacturing and smart building sectors to leverage digital twins to gain deeper insights into their operation, while increasing efficiency across the organization.
And it didn't take long to catch on just last month, we announced that John Deere selected matter ports digital twin platform and <unk> capture technology to build a virtual operation center for remote management of over 60 facilities across North America, Europe and India.
Matter towards high Fidelity digital twins enable John Biers facilities and operations team to remotely track assets materials and project progress.
Land for site changes monitor factory vehicles integrate real time Iot data stream.
<unk> enable a single source of truth for effective global remote collaboration.
Collaboration can occur in real time or across working time zones within the matter for digital twins to improve productivity and accelerate cycle times, all while reducing the need for costly site visits.
The digital transformation of the built world is just beginning and our enterprise customers are quickly realizing the potential of our technology and we are continuing to see significant expansion with our enterprise customers.
And in the fourth quarter nearly half of our subscription revenue came from industries outside of residential real estate.
And nearly a quarter of the fortune 1000 companies were using Matterhorn.
Moving on to services.
With the successful integration of DHT, we are extending our industry leadership with a more integrated customer focused approach to marketing properties online.
Our new offering includes a comprehensive digital marketing solution that enhances our ability to promote property listings to their full potential.
We call it matter for digital probe.
Introduced to the market last week digital pro is the most innovative and affordable all in one property marketing solution available.
Offering professional grade high definition photos, but to the floor plan of three detour.
And Ah preview video for customers, that's perfect for sharing on social media.
All delivered within one to two business days.
Everything is produced entirely from one digital twin in one appointment for one flat rates.
Digital pro is designed for agents, who wants to stand out at the listing presentation and use them more tech forward approach to their marketing.
Marketing and promoting real estate has never been easier and more comprehensive.
The initial response to digital pro has been extremely encouraging and we're just getting started.
Now before I hand, it over to J D I would like to bring attention to our inaugural ESG report.
Which among many important aspects showcases our company's values and dedication to making every building every space more valuable and accessible.
We are driving the digitization of the built world and making it virtually accessible to everyone.
And matter for creating a more accessible and equitable world is not just a goal but it is at the core of our business model, we believe in making our QED capture technology widely available to anyone with a smartphone to reach more people and break down barriers. This purpose is reflected in our workplace culture, where we have always strived.
To attract diverse talent provide equitable career growth opportunities.
And create a welcoming and inclusive environment for all of our employees.
Moreover, our digital twins have the potential to play a crucial role in reducing carbon footprint.
This is truly inspiring.
In 2021, our solution help prevent the release of approximately 374 tons of cotwo into the atmosphere.
Which is the equivalent to the emissions of over 80000 cars driven for a year straight.
From this seminal report it is clear that our digital twins holds tremendous power in combat and carbon emissions and promoting sustainability.
By facilitating remote operations and reducing the need for business travel our platform is fast becoming a quantifiable Testament to this.
With continued efforts our platform has the potential to play an important role in the fight against climate change and health businesses achieve their sustainability goals, while saving time and money all along the way.
I would now like to turn it over to J D to discuss our financial performance for the fourth quarter and the outlook for Q1 and the full year 2023.
Thanks, RJ, we are pleased to deliver another record quarter for matter Port with total revenue of $41 1 million up 52% from the fourth quarter of 2021 and above our guidance range of $39 million to $41 million.
The strength of our revenue was across our subscription services and product categories with.
With subscription and product revenue hitting new records in the quarter.
Subscription revenue rose to $19 $3 million in the quarter, which was up 17% from the year ago period and above the top end of our guidance of 19% to $19 2 million.
In addition, our annual recurring revenue grew to a record $77 2 million.
Of a record 701000 subscribers at the end of the fourth quarter, we had 637003 subscribers and 64000 paid subscribers.
As I have noted on prior calls subscribers to the matter Port service continued to increase their spend with us and our net dollar expansion rate was 103% in Q4.
This was down from 106% in the prior quarter.
The sequential change was primarily due to small customers remaining cautious about their spending as macroeconomic uncertainty continued in customers in the U S residential real estate industry continued to face weakening industry trends in the quarter.
At the same time, we continued to see strong expansion with our enterprise customers in the fourth quarter, particularly driven by customers outside of residential real estate for example in retail facilities management insurance construction and travel and hospitality.
Notably growth of subscription revenue from vertical markets outside of real estate from new and existing enterprise customers has continued to grow over the past several quarters.
As a result, we now derive roughly 50% of our subscription revenue from non real estate up from approximately one third in the year ago period.
Our product revenue was $13 6 million in the fourth quarter more than doubled a year ago period and up 51% sequentially.
This was primarily driven by robust customer demand for our new pro three camera.
Services revenue for the fourth quarter was $8 3 million.
A 122% increase year over year, driven primarily by growth in all of our services offerings are service offerings include digital content for marketing residential real estate listings in the U S capture services, which rapidly captures our customers' physical spaces at scale with contracted certain.
<unk> matter port technicians globally, and other industry specific and in App offerings.
Moving onto gross margin our total non-GAAP gross margin for the fourth quarter was 36%, which was down sequentially from 48% in the prior quarter.
The sequentially lower gross margin was primarily due to a write down of the value of a portion of our protein camera inventory and related materials, we believe the better than expected demand for the pro three camera has impacted the demand for pro two cameras.
Accordingly, we have determined that it was appropriate to reduce the value of the pro to inventory.
This expense was $5 million in the fourth quarter.
Excluding this expense non-GAAP gross margin would've been 48%, which would've been consistent with our recent historical performance.
Our subscription gross margin was 75% improving from 72% in the prior quarter.
We are beginning to see scale benefits that we have discussed in prior quarters, as we better leverage our support functions and increase our processing and hosting efficiency of digital twins globally.
Product gross margin was negative 14% in the fourth quarter as compared to negative 11% in the year ago quarter.
Excluding the expense associated with pro to inventory product gross margin would have been positive 23% in the fourth quarter.
Up from 13% sequentially.
Driven by the strength in our pro three camera sales.
Regarding operating expenses research and development expenses were $10 3 million down $2 $1 million sequentially from Q3 are lower by 17%.
This reduction in R&D spend reflects our commitment to operate more efficiently while still supporting innovation throughout the company.
SG&A expenses for Q4 were $33 2 million.
<unk> zero point $5 million sequentially from Q3 were lower by 2%.
The decrease was primarily due to lower marketing campaign expenses.
Accordingly for the fourth quarter non-GAAP net loss was $26 6 million.
And non-GAAP loss per share was <unk> 90, <unk> at the top end of our guidance range of 9% to 11 loss.
Weighted average share count was 289 million shares.
We continue to focus on our path to profitability by carefully scrutinizing, the operating expenses necessary to achieve profitability.
While realizing the sizable market opportunity in front of us for.
For example, our total operating expenses for the quarter declined by $2 5 million sequentially or lower by 6%.
And we held head count flat at 590 people in Q4 compared to the prior quarter.
The cost savings initiatives, we implemented in the third quarter continued to yield benefits to our bottom line.
Moving onto our balance sheet, which remains strong we ended the quarter with $477 million in cash and investments and we remain debt free.
We believe that we are more than fully funded to achieve our business plan.
For full year 2022, we delivered record total revenue of $136 1 million.
This was up 22% from the prior year as subscription services and product revenue each had all time highs.
Full year non-GAAP gross margin was 45% and our non-GAAP loss per share was <unk> 41.
Our record Q4, <unk> and improving trends in subscription gross margin.
This is the company in a strong position to deliver continued growth this year.
While our declining losses are evidence of our progression down the path to profitability.
Today, we are introducing financial guidance for the first quarter and full year 2023.
We expect to deliver another record year for the company as we grow the top line and improve our loss per share.
That said, we expect the macro headwinds we faced in 2022, mainly characterized by our smaller customers, becoming more cautious with their spend.
We'll continue in 2023.
In addition, the supply chain issues, we experienced in 2022 have improved but are not completely resolved as we enter this year.
Given these factors we have widened our full year guidance range relative to prior years.
We feel confident we can achieve our objectives, because we have the right solutions to help our customers drive sales, while saving their organizations time and money.
In addition, if we see relief from the macro and supply chain uncertainties. We believe we are well positioned to outperform as we go through 2023.
For the first quarter, we expect total revenue to be in the range of $34 million to $36 million.
We expect subscription revenue to be in the range of $19 three to $19 $5 million we.
We expect the balance of revenue to be split roughly evenly between the services and product revenue lines.
We anticipate first quarter non-GAAP loss per share to be in the range of 9% to 11.
We expect full year 2023, total revenue to be in the range of $153 million to $169 million.
With full year 2023 subscription revenue.
Expected to be in the range of $84 five to $86 $5 million.
For the full year of 2023, we expect a 32% to 36 non-GAAP loss per share.
Which would represent a significant improvement from 2022.
We remain committed to our path to profitability as we execute on our plan to digitize the built world and drive efficiency across our organization.
We are proud of the improvements we've made over the course of the year, our first full year as a public company that.
That resulted in a full year non-GAAP loss per share of <unk> 41.
<unk> better than the midpoint of the guidance, we provided at the beginning of 2022.
As we enter 2023, we believe we can continue to drive efficient growth and expect our full year 2023, EPS loss to improve by up to 22% from last year's level.
Now I would like to turn the call back over to RJ.
Thanks J D.
Our record Q4, and 2022 results demonstrate the growing demand for our innovative solutions built around our digital twin platform.
Our platform is becoming a must have tool to help companies deliver measurable cost savings operating efficiencies and critical productivity gains in an environment that is requiring companies across end market to become more efficient.
Importantly, we have embarked on the next phase of our mission by launching our first value added services on top of the matter for digital twin.
Which are powered by AI and trained on more than $90 million digital twins, and 28 billion square feet of space under management on our platform.
Gartner expects global revenue generated from digital twin technology and related services to soar to more than $150 billion by.
By 2030.
Tremendously from $9 billion in 2021.
<unk> has the world's largest subscriber base for digital twins or cutting edge platform powered by cortex, AI has the capacity to scale significantly to automatically generate a digital twin for as many of the $4 billion buildings in the world that we can reach with rapid innovation and market expansion, we will continue leading.
The category, we created more than a decade ago well into the next decade ahead. Thank you for joining us today.
Operator, we are now ready for questions.
Thank you we will now begin the question and answer session.
Ask your question you May Press Star then one other touchtone phone.
If they're using a speaker phone.
We hope your handset before pressing the keys.
The charter question, please first for them too.
First question comes from Elizabeth <unk> with Morgan Stanley . Please go ahead.
Great. Thank you very much I first wanted to dig in on just the subscription revenue guidance, Yeah, I remember in the past.
Using cameras sales had weighed on subscription revenue for fiscal 2000 tailwind now that it looks like camera sales as being a recovery what let me just kind of a flow through of an attach 10, having better subscription revenue in 2023, and then related kind of when can we start to pick it up for any enterprise.
<unk> starting to drive some upside in that the subscription revenue as well.
Yes.
Thanks Elizabeth for the question.
You're right our camera.
Sales generate.
Paying subscribers and actually high generally high.
Average subscription revenue subscribers.
Well and so we're pleased of course that Q4 was a strong quarter for Cam.
Camera sales.
And then as you noted that will flow through into subscription revenue that's not the only way of course.
<unk> subscriber.
Subscribers to get onto the platform.
They can also do so through a.
Capture services.
<unk>.
Our service offering is as we've talked about as well as using some of the other capture devices, including smartphones.
So all of these ways are.
Inroads into.
The subscription platform and ultimately into subscription revenue.
So we're starting to see that relief in the supply chain happen.
Generating volume in camera sales and I think that will flow through.
In terms of steady growth in the subscription revenue line now and the last point as you may remember.
In our Q3 call we released.
The enterprise Essentials pack.
Package, which is a new pricing and service offerings are subscription offering for large customers and its more value based pricing targeted at the various vertical markets that.
Our.
Some of the major growth drivers of the business right now.
And we've already started to close contracts with this new pricing and.
Feature set.
So I anticipate we'll start to see some of that flow through.
This year as well so all of these things are coming together I think for two.
2023.
As we go through the year, and therefore im kind of optimistic that.
And that will we will start to see some acceleration as we get towards the back half of the year.
Got it and then just as a follow up.
Touch on the NRI or are you seeing F&B churn off the platform or is it just about less expansion, maybe you could help us understand just the components between expansion downtown churn.
Packing and IRR for the most recent quarter and how you think about the trend into 2023 that'd be great. Thank you.
Yes sure.
So in the small and medium business cohort.
The churn rates have remained largely steady with our historical experience.
Nothing really changing there.
And so that leaves essentially expansion and and so we're seeing those smaller customers being more cautious about.
Trading up to higher plans, perhaps even ahead of some other business activity and instead looking at.
Filling up the planned capacity they have before they trade up and so that's kind of the.
The bulk of the.
Trends, we're seeing with the muted.
Net dollar expansion rate or <unk>.
And then Conversely, we continue to see very healthy trends in the enterprise cohort.
And that's flowing through to to the mix of subscription revenue, which is now.
Only 40% enterprise versus small and medium business also continuing to become more balanced as the quarters go on.
Those.
Differences between small businesses and enterprises.
Continue that we saw them for most of last year.
And we're seeing them as we as we enter and continued through the first quarter too.
And I'd expect that to largely continue through the course of this year.
Unless something changes in the kind of macro environment right now or what we see is that the macro.
The environment that.
We have been experiencing experiencing over the last six months is going to continue the rest of this year.
Thank you.
Thank you and our next question comes from Brent British women with Piper Sandler. Please go ahead.
Hi, This is Mario jumping on for Brian Thanks for taking our question.
The first question I have is really around budget prioritization.
As your customers have maybe taken a closer look at budgets going into the year, whereas matter port shaking out in terms of budget prioritization going into 2023, and how your customers thinking about the mission criticality.
The matter part platform and then I have one follow up.
Sure Al.
Thanks, Adam and jump in.
Thanks for the question and it really depends on the markets that we're talking about right yes.
At the center.
Recent conversation certainly focus for the company as enterprise and in the enterprise everybody is looking at their opex.
By quarter, and maybe even by month quite frankly, and looking for ways to create efficiencies in their business more than ever we really saw that.
Development over the course of 2020 to really take off.
And so what we've been quick to do is to help our enterprise customers and prospective customers understand the value proposition of matter Port, which is pretty straightforward you create a digital twin of your facility your manufacturing unit.
Or a collection of retail chain and we dramatically reduce the cost of business travel.
At the time that goes into groups of people that need to access those properties physically to do their building and space analysis inspections walk throughs and the like.
This has been a huge boost and a huge improvement in the enterprise for customers that are looking to cut costs out of their organization, but that's still have dependencies on their physical footprint as part of their core business right. In those examples I gave run right down the center of that fairway and so we saw.
Great success as companies were reevaluating what investments they are going to make.
We're now getting positioned.
Productivity driver and a cost saver for these organizations getting them just onto the platform initially.
In other markets like residential real estate.
So there is no question with interest rates and the economy, where it is that that category has felt the pressure.
For the last 10 years the value proposition for their real estate agent. The homeowner the home buyer home seller has been if you put a digital twin.
Alongside your marketing activities for a given property, whether you are selling it or renting it.
Home stay on the market property stay on the market for much less time and seller rent for a higher price right. We have been proving that statistically urine and you're out over the last decade, and so while the real estate market might be soft there are still houses that are sitting out there looking for buyers.
And matter port speeds up that transaction creates buyer confidence by bringing more people into an open house in virtual form given them enough information to make a purchase decision even without having to set foot in the property.
And as we continue to push that value proposition even into challenged markets like real estate, we still see an opportunity for us to grow our business across all of these different verticals.
Got it. Thank you that's helpful color.
Then just second question is around I saw that you disclosed that overall net retention rate I think it was around 1% and 3% for the quarter is there a net retention number that you track or a range that we can think about for <unk> enterprise customers or even for customers outside of residential real estate.
Okay.
Yeah.
So we.
While we don't disclose additional numbers around.
Net dollar retention or net dollar expansion rate and what we have talked about over the last several quarters is that there is a bit of a separation between the enterprise and the small business customer in their respective.
N D.
And that <unk>.
Separation started about a year ago.
Prior to that it was.
It wasn't a difference, but it did began about a year ago.
Continued fairly steadily and enterprise customers are expanding at a much higher rate than the small business customer these days.
And that's been fairly steady for the last four quarters.
Thank you.
And our next question today comes from Yung, Kim with loop capital markets. Please go ahead alright.
Alright. Thanks.
Congrats on a pretty solid quarter there.
You got to the high end of the guidance range on congrats on that.
Just J D. In your prepared remark you mentioned that you plan to focus more on existing customer base. This year can you elaborate on that a bit.
Im assuming that youre targeting the enterprise business.
With additional products and services is there more pack.
Packaged or bundled.
Plan on introducing done may be more vertical focus is that.
But you're alluding to and then also if you do focus on existing customers does that mean there'll be should expect to see slower growth in DAU.
Certain metrics, such as user count growth and even space under management.
Okay.
Yeah.
Thank you.
We're not.
Focusing on enterprise customers to the exclusion of the new customers. So so apologies if that was unclear in their prepared remarks. So we've got I think an equal focus on those those types of cohorts.
What I'm discussing is.
We're finding that the enterprises are.
Particularly in the vertical markets outside of residential real estate are looking for ways to save money and.
Their business is much more operationally efficient as well as to meet some of their ESG goals.
And this traction.
It's something that we've been able to build on with new services.
Particularly some of the enterprise Essentials, we launched in the.
Latter part of the third quarter.
And thats the reception by those customers has been great and so we're going to double down on that effectively and in addition, we've.
Essentially ramped our sales and marketing.
Groups and align those campaigns and resources that was a big investment for us.
Through most of last year.
And by the Q4 results.
They have come online and theyre productive hitting.
Impressive attainment rates and so we're going to essentially double down on all of those those elements that are working.
But at the same time, you will see new services come out later this year.
RJ mentioned property intelligence in the first.
Those offerings.
Namely.
That which is helping airbnb and their accessibility and adapted categories for short term rentals, so theres more to come.
As well, so it's going to be a pack year, but.
Equal weight on both existing and new customers.
Okay and then.
Thanks for that and it's been several quarters since we.
It's been awhile since we talked about the fee capture app on iPhone and Android those free apps on the smartphone smartphones.
Clearly these investments.
Do take some time to generate return so.
Maybe maybe it's a good time now.
With the ramp of the enterprise and then also the port III.
Selling pretty well that gives you instant.
Monetization opportunity if you can give us some update on your strategy around these fleet downloads both in the near term and long term.
Thanks.
Sure and thanks for the question.
Firstly.
The freemium offering the ability to scan a space of any kind of home and office, even a factory floor using just the smartphone in your pocket is a powerful way to evaluate what matter port has to offer and as we discussed over a year.
Or so ago.
As this product really took hold was not just for the long tail of residential real estate and putting.
A digital twin and the hands of every homeowner or real estate agent, but actually connecting with the enterprise and mid market companies.
Now had a way to evaluate our technology without using one of our specialty cameras to get started.
And that was an unlock and continues to be an unlock that fills the pipeline for mid market and enterprise opportunities every day.
And it is a low touch low cost.
Way to get very valuable customers, including fortune 1000 customers into our pipeline and into our customer base.
That's number one and we continue to expect for the near term.
To lean into that even further for two reasons.
Not only do an opportunity to grab those new accounts that come by way of smartphone capture and turn them potentially into an enterprise.
We have one of the highest conversion rates.
Where these customers are organically converting from a free trial to paid subscription account, whether that's a starter tier or a pro tier or a business tier all without sales and marketing are human intervention is we'd like to say and thats really efficient parts of the business for us because it helps us.
Built not just evaluators, but pain.
Paying customers at scale.
And finally.
We are not done with unlocking the power of matter port in the digital twin in residential real estate. Despite the pressures globally on that category. Today. There is enormous growth that lies ahead.
And with the introduction of digital pro.
And the.
Advancements in technology and smartphone capture we are covering that market from both ends.
And residential real estate still represents the vast majority of the properties that make up the built world today. So it's always going to be a large opportunity market for us and that in the long term.
Representing huge upside for us so we're going to continue to.
To strengthen our offering from the smartphone in your pocket.
So the pro two and of course, the new flagship pro three to ensure that every property has a convenient and suitable entry points into creating their first digital twin and minimizing the friction of adoption.
For Smbs and enterprises worldwide.
Okay, great. Thanks for the update RJ.
You bet.
And our next question today comes from <unk> Shah with Deutsche Bank. Please go ahead.
Great. Thanks for taking my question Denny can you just maybe elaborate a little bit more on your plans to maybe on the outlook. I mean, you noted it is a pretty wide range. What are some of the assumptions that Gainesville. The high end of the range versus the low end how much of it the ensign and supply chain on product versus other factors that might impact either service or subscription revenue.
Yes, great. Thanks.
So the.
The guidance for the year in terms of kind of breaking it down.
First on the subscription line.
It's fairly steady.
Growth rates that we've seen over the last two years continuing into this year kind of to the conversation we had a bit earlier in this call too.
So that's fairly steady.
I think there is an opportunity for those to increase with growth rates in subscription to increase.
As we see strength in.
I think the <unk>.
Enterprise cohort and then of course, if the small business customer.
<unk> is a bit more confidence I think it will come back a bit stronger.
In the services revenue line item.
We will see a full year contribution from our new acquired business <unk> Studios as well as are we.
We believe some traction from the new digital pro offering that RJ talked about a bit earlier.
And we're also starting of course from a seasonal low point in terms of the capturing activity in the residential real estate space.
So that's essentially the assumptions on the growth line for services.
And then finally with product.
Year over year total is roughly flat.
Because we of course had some.
Supply chain constraints, yes, we've talked about but then we expect those too.
Moderate as we go through the rest of this year.
And in doing so there is an opportunity for outperformance in that line item as well.
And so those are the kind of going in assumptions and as a result, I think that the.
Guidance is is fairly reasonable.
And.
It kind of demonstrates it kind of continued growth trends like we've seen in the most recent quarters consistent macro also.
And then finally, you know the outperformance can again come from.
Continued growth from those enterprise customers.
Along with some of the new service offerings, such as digital pro.
And if we see the small medium business.
Kind of a return to growth.
As we go through the year.
Super helpful detail, there just give me a little bit on the expense side can you just maybe talk about where you guys are focused in terms of driving further efficiencies with opex in 'twenty three.
And how does that maybe compared to other areas. You guys are focused on this year in terms of investment into the lots of opportunity. Thank you yesterday.
Sure Judy maybe I'll take just the top of it you take the <unk>.
Bottom part of that question.
At the highest level one of the things that we're doing.
He is really.
Focusing on productivity as J D talked about a little bit earlier 2022 was a build year in many respects as we were fleeting up our sales and marketing organizations.
To meet the capacity of the growing demand in Midmarket and enterprise.
And the large scale of fortune 1000 customers, we're bringing onto the platform and we're coming into the year with full strength. So we anticipate doing much more with the organization, we have right being able to drive up more revenue with less cost attached to it because we have the momentum and the fleet at a full working for us.
Ready to go.
And we're going to continue.
In R&D product development.
Across the road map.
Prioritizing deployments and product launches that are specifically geared towards.
Accelerating adoption, which is ultimately accelerating revenue growth as well so the entire roadmap now.
As well as the sales and marketing team are all in lockstep alignment.
Around that effort to maximize our efficiency in markets anthem.
And to maximize our ambitions around driving adoption and getting major market share. So as we do that we're going to be pushing that top line up with even greater efficiency and we'd like to see that data you can talk about what we're doing on the cost side as well to continue to take costs out of the organization, while we're growing and accelerating.
Yeah, that's right and on a year over year basis, we'd expect operating expenses to be roughly roughly flat as.
As well our head count should be roughly flat, we're at 590 people.
Today.
Having reduced our head count a bit last year already.
We are scrutinizing all of our new program investments. We just finished a very large one which was the creation and launch of the <unk> camera on the enterprise Essentials platform.
And so we can turn our attention to two other programs, but that large dedicated program has rolled off now.
We're driving efficiencies in marketing spend.
We are carefully analyzing all of our campaign and other initiatives, there and looking for that optimal.
Roy.
In marketing spend and then finally, we're improving our back office systems, we're making some very targeted investments to create automation.
And scalability, so that we can drive more throughput.
Yes.
Through the business.
And through the income statement with with lower essentially manual effort.
There's a whole variety of efficiency programs going on at the company on this drive to profitability.
Thank you ladies and gentlemen. This concludes today's question and answer session I would like to turn the conference back over to Mike <unk> for any closing remarks.
Great well, thanks, everyone for joining us today as always we appreciate your interest in matter Port and we look forward to speaking with you on our next earnings call, Thanks and Goodbye.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.