Matterport Inc. Q1 2023 Earnings Call
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Good day and welcome to the matter Port Inc. Fiscal 2023 first quarter results conference call today, all participants will be in a listen only mode should you need assistance during todays conference. Please signal for a conference specialist by pressing the star key followed by zero.
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Please note that today's event is being recorded.
I'd now like to turn the conference over to Mike Knapp VP of Investor Relations. Please go ahead Sir.
Thanks, and welcome to matter ports first quarter 2023 financial results Conference call.
After the market close today matter Port released results for the quarter ended March 31 2023 the.
The release is available on the company's website at investors Dot 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 matter Port website.
Before we begin I'd like to remind you that today's call contains forward looking statements within the meaning of 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 in 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 Fink, our Chief Financial Officer.
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 I'm pleased to report that we're off to a great start in 2023.
First quarter revenue of $38 million 2 million above the high end of our guidance range and up 33% from the year ago period.
We set new records across key metrics with our stations under management, reaching $9 9 million by the end of the quarter more than double the number of spaces. We managed at the start of 2021, and we just crossed the 10 million spaces milestone last month.
Our subscriber base expanded to 771000.
Lead by strong enterprise adoption, and improving subscriber growth rates with small and medium businesses in the court.
Our platform's ability to increase productivity and reduce cost for our customers continues to drive this strong adoption.
It has also enabled us to add new blue chip names to our growing customer list.
Companies use our digital twins to better manage their building lifecycle.
Planning and construction facilities management and operation documentation appraisal and marketing.
Our customers across the verticals, we serve are seeing strong returns on investment with our solution.
Saving them time and money, while simplifying collaboration across their organization.
The criticality and value of our solution helped propel subscription revenue to a new record of $19 8 million.
Also above the high end of our guidance range for the quarter.
By the end of Q1, we have recorded over 100 enterprise account with greater than $50000 in annual recurring revenue as we continued to grow and diversify our customer base.
The strength in our business and our continued focus on operating efficiency has also resulted in strong outperformance on the bottom line with net loss per share of <unk> 10.
<unk> <unk> better than the midpoint of our guidance range as we accelerate our path to profitability.
These results are bolstered by our continued investment in highly scalable technology solutions for our customers.
Since the beginning matter Ford has built its foundation around cortex, our AI driven three knee reconstruction engine.
In our case AI driven means fully automate.
We are currently the only company that can generate dimensionally accurate photo realistic digital twins from an AI engine like cortex.
The first and only fully automated technology of its kind. This breakthrough enables us to create thousands of digital twins every day.
And because we employ a sophisticated deep learning neural network.
The more digital twins, we create the more efficient they become.
Matter for created this category more than a decade ago, and we have a lot more in store.
In 2022.
AI industry reached a significant inflection point with the introduction of new generics of AI technology that have captured the world's attention.
These disruptive advancements like data science market, turning point in the industry delivering human like intelligence and functionality that has already begun to revolutionize the way we do business today.
The unlock here is the data without vast amounts of data to train these new AI model, none of this would be possible.
The same has been true for batter ports since the beginning our digital twin platform depends on AI and our AI depends on an enormous amount of spatial data to train and learn how to automatically construct precision <unk> digital twin from any digital capture device, including the smartphone in your pocket.
To put this in perspective matter Port has now digitized over 30 billion square feet of physical space and over 177 countries around the world.
We have enough data to synthesize the complete picture and deep understanding of the built world.
Possibilities from here are limitless.
Experience in the field.
And matter of port solution into exciting new areas for our customers every day.
Property intelligence is our latest offering that unlocks the power of every digital twin we create and is the cornerstone of our future in the built world.
This fully automated software platform generates powerful property insight from our extensive spatial data library.
Enabling clients to easily manage their properties online and discover new operational efficiency.
We help them resolve a wide range of critical operating challenges in their buildings.
Difficult like cutting down the time needed for onsite inspection and analysis.
And for our larger customers and enables them to manage multiple facilities from any single remote location.
We're currently piloting property intelligence with select customers and expect to announce general availability in the second half of 2023.
We are incredibly excited about the growth potential of our new AI driven solution for both new and existing customers around the world.
This will be a significant unlock for matter of pork in the quarters and years to come.
Let's turn our attention to a few key industry milestones that are fueling our growth around the globe and then ill pass the discussion to J D.
We will elaborate on our financial results and provide an outlook for the remainder of the year.
Last month, we announced the general availability of new integrations with Amazon AWS Iot twin maker Navy.
Enabling enterprise customers to seamlessly connect data into digitally immersive dimensionally accurate matter for digital twin.
This solution makes it easier for developers to create digital twins of real world system, such as building factories industrial equipment and production lines.
Our new offerings supports enterprise digital transformation effort.
Providing customers with an efficient and cost effective solution to remotely optimize building operation increased production output.
Prove equipment performance and enhanced environmental health and safety at their facility.
We were extremely excited to showcase our new integrations and platform in April at Hanover, Messed up 2023, and Germany, alongside our partner AWS.
<unk> is the world's largest trade fair focused on industrial technology.
It is a renowned for showcasing cutting edge technology innovation and trends in areas like Digitization automation robotics industrial software and more.
The event brings together international inhibitor and visitors from diverse industry to exchange ideas explore business opportunities and discuss the latest development in industrial technology.
It was the perfect venue for matter more to announce our latest AWS integration.
Demonstrate the benefits of our solution potential as well as the existing customers.
During the quarter, we also announced new integrations with Autodesk construction cloud.
It's easier for project change using matter port and Autodesk build to collaborate within critical project management workflows.
This new solution allows project stakeholders to simplify and you get the request for information or a five process in autodesk built.
We are a high processes vital dialogue between contractors and architect on every construction project.
By moving from traditional methods of communication through immersive digital twins.
RFID becomes a detailed visual context.
Current state of the project.
Historically this process at the CBS and time consuming.
Documentation typically spans multiple formats that constantly evolve our stakeholders weigh in making it difficult for teams to track the latest information.
According to Navigant construction Forum's survey.
The average construction project will result in more than 800 or a bot.
Averaging more than 50 RFID submitted per week.
Inaccurate or incomplete documentation is responsible for almost half of the rework that occurs in the construction industry in the United States.
Matter part plus Autodesk build solution simplifies and streamlines the documentation process by creating a visual system of record for site condition, allowing users to create and track requests directly within the digital replica of the space.
Dramatically speed up the project, while reducing errors along the way.
We continue to add additional blue chip organizations for a growing roster of customers.
We are proud to call it 25% of Fortune 1000 companies are customers.
We are fortunate to have such an important set of customers across a diverse set of end market.
It has been critical in maintaining our strong revenue growth, reducing our reliance on any single market.
Driving innovation across our organization and strengthening the matter of core brands.
It is a testament to our value proposition that industries from retail insurance construction for travel and hospitality facilities management and real estate all recognize the many benefits of our solution and their ability to increase productivity and reduce costs for organizations around the globe.
Next I'd like to provide an update on the tremendous success, we are seeing with our new pro three camera.
This product has revolutionized <unk> capture the built world and opens new horizon with its ability to capture virtually any type of physical space.
No limits on site location and condition.
Indoors and outdoors.
Fastest camera of its kind you can capture large spaces in stunning detail. Thanks to its 20 megapixel sensor lidar power capture range of up to 100 meters.
And our customers agree that our price performance package is unbeatable and in a class all itself.
Received overwhelmingly positive reviews from customers and we are collecting their feedback and creative ways they've put the pro three to work in the field.
The market response has exceeded expectations since its debut last fall and pro three sales continue to top our original sales plan.
Moving on to service.
Q1 of this year, we introduced our second flagship offerings to the market digital pro.
Digital pro is the most innovative and affordable all in one property marketing solution in the industry.
It provides property marketing professionals with HD photos of two new floor plan.
<unk> matter Port <unk> tour, and a preview video great for social media all.
All delivered within one to two business days for less than $300.
I think the most compelling aspect of this offering is that the entire offering is produced from one digital twin in one appointment for one flat rate.
In this challenging real estate environment.
Al you want convenience of digital pro is a game changer for Asia and Theyre sellers.
The initial response to the excellent a large portion of new customers are choosing digital pro.
Difficult number of agents are upgrading from using photos only so the complete digital pro package often for the same or lower price.
Surprised the digital pro has doubled the attach rate of digital twin.
Real estate listings here in the U S with BHG Studios marketing arm of matter Park that we acquired last year.
Agents brokers and sellers are excited about getting the power of the <unk> war and much more.
Offer the same great price or less than traditional to the photography package it or their listing.
We are confident that digital pro will be the catalyst to accelerate matter for its share of total property listings in the U S and eventually around the world.
I would now like to turn it over to J D to discuss our financial performance for the first quarter and the outlook for Q2 and the full year 2023.
Thank you RJ we.
We delivered $38 million in total revenue for the first quarter up 33% from the year ago period, and well above our guidance range.
Our revenue was across subscription services and product categories with subscription revenue, achieving a new record in the quarter.
Subscription revenue rose to $19 $8 million in the quarter, which was up 16% from the year ago period.
And above the high end of our guidance range.
In addition, our annual recurring revenue grew to $79 $4 million.
Of our 771000 subscribers at the end of the first quarter, we had 704000 <unk> subscribers and 67000 paid subscribers Pago.
Positively free subscribers grew by 11% from the last quarter and paid subscribers grew by 5% sequentially.
Both growth rates were higher compared to what we have seen in those cohorts for the past several quarters.
Our net dollar expansion rate was 103% in Q1 and subscribers continued to increase their spend with US. This was unchanged from the prior quarter as enterprise retention and expansion remains strong and small customers remain more cautious on growing their spending.
Approximately 50% of our subscription revenue comes from non real estate customers.
While revenue from our real estate end market increased from the year ago period. This growth was eclipsed by strong double digit growth in facilities management, and retail construction insurance and travel and hospitality.
Yeah.
Services revenue for the first quarter was $8 $7 million more than doubled from the year ago period.
Driven by growth in all of our services offerings.
Customers continue to embrace capture services, where we perform the capture and Onboarding of digital twins into subscription accounts for the customer.
We also saw strong demand on the launch of our new digital pro offering that RJ described earlier.
Our product revenue was $9 $4 million in the first quarter up 28%.
From the year ago period.
This was primarily driven by continued robust demand for our new pro <unk> camera.
Moving onto gross margin, our total non-GAAP gross margin for the first quarter improved to 49%.
Significantly from 36% in the prior quarter attributable to higher product margins and enhanced services margins.
Our subscription gross margin was 74% roughly flat from the prior quarter and the year ago periods.
Subscription gross margin can vary 100 to 200 basis points from quarter to quarter as we release new features into the subscription platform.
We expect subscription gross margin to be in the mid seventies over the next several quarters.
Product gross margin improved to 17% in the first quarter compared to negative 14% in the prior quarter as we made excellent progress with our supply chain and we believe that the issues that challenged us last year are behind us.
And with the strong positive market reception for our <unk> III camera, we expect that product gross margin will be roughly consistent with the first quarter for the balance of 2023.
Turning to operating expenses research and development spend was $10 $1 million down 17% from the year ago period.
This reduction in R&D spend reflects our commitment to operate more efficiently as we continue to drive innovation in our technology platform and data insights for our customers.
SG&A expenses for Q1 were $31 $9 million up 8% from the year ago period, the lower by 4% from the prior quarter.
The growth year over year was primarily related to greater sales and marketing spend though it grew much more slowly than our growth in total revenue as we continued to drive efficiency and operations.
The result is a first quarter non-GAAP net loss of $25 million.
And non-GAAP loss per share of seven cents.
Three <unk> <unk> above the midpoint of our guidance range of a 9% to 11% loss.
This is also a 20% improvement in bottom line performance from the prior quarter.
I'm very pleased with the significant progress on the bottom line is we are actively driving the company to achieve profitability.
Our weighted average share count was 293 million shares.
Moving on to the balance sheet, we ended the quarter with $456 million in cash and investments and we remain debt free.
We have improved our free cash flow by more than 20% from the year ago period.
You need to believe we are more than fully funded to achieve our business plan.
Today, we are introducing financial guidance for the second quarter and raising our full year 2023 financial guidance.
We remain on track to deliver another record year for the company as we grow the top line and improve profitability metrics.
Strong customer adoption and our continued focus on operating efficiency as a result of that.
And an improving outlook for 2023.
Accordingly for the second quarter, we expect total revenue to be in the range of $38 million to $40 million.
And subscription revenue to be in the range of $27 million to $29 million.
We expect the balance of revenue to be roughly split evenly between the services and product revenue lines.
Yeah.
We anticipate second quarter non-GAAP loss per share to be in the range of seven to nine.
We now expect full year 2023, total revenue to be in the range of $155 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 27% to 31 non-GAAP loss per share.
This represents an improvement of five cents at the midpoint compared to the guidance, we articulated last quarter.
And represents a 29% improvement from 2022.
We have taken specific and measurable actions to accelerate our path to profitability, including taking out $20 million in annualized operating expenses in the latter half of last year and now these actions are becoming visible in our financial performance.
We will continue to pursue our path to profitability while at the same time execute on our plan to grow revenue by helping customers increase productivity and reduce their costs with ever more valuable matter port solutions centered around AI, driven data insights and digital twins of the real world.
Now I would like to turn the call back over to RJ.
Thanks J D.
Fight the headwinds and difficult challenges in the current macro environment, and especially those facing the residential and commercial real estate markets. Our record Q1 results demonstrate the growing demand for our innovative property solutions built around our digital twin platform.
Our diversified platform offering is essential to helping brokers agents and property managers and enterprise customers in the fortune 1000 alive keep their businesses moving forward.
While delivering critical cost savings operating efficiencies and productivity improvements.
Matter towards digital twin solution are an essential productivity driver that businesses can no longer ignore that.
The digital transformation of the built world is in full swing and matter port delivers immediate ROI by automating some of the most costly and inefficient tasks associated with managing buildings and spaces on location.
<unk> has the world's largest subscriber base for digital twins, and the largest <unk> spatial data library of the built world.
And it's growing every day.
Powered by cortex, AI, our platform is rapidly scaling to readily generate a digital twin for every building on the planet.
Whereas the dawn of a new era in data science, and AI and matter Port will continue to play a central role in harnessing new technology to deliver breakthrough solution for the built world for years to come.
We continue to lead the category, we created more than a decade ago and we.
Will boldly lead the industry through the next decade of Digitization and data vacation of the built world.
Thank you for joining us today, operator, we are now ready for questions.
We will now begin the question and answer session. As a reminder to ask a question you May Press Star then one on your telephone keypad. If you are using your speaker phone. Please pick up your handset before pressing the keys.
If you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Today's first question comes from <unk>, Kim with weak capital markets. Please proceed.
Thank you very much first congrats on another solid quarter R J and J D.
The metrics are it.
It seems to be stabilizing which is always good news.
Good to hear that the supply chain is now largely behind us I just want to make sure.
As Prof. III now available worldwide today, not just in certain regions. When you first launched it.
Thanks, Ian and quick response, there <unk> three is rolling out around the world and it's it's driven by two things. So it's not truly worldwide and in every country, but in the markets that we've served pro two we will be delivering pro three and that's gated by.
Just a few more steps in the process unrelated to supply chain, but related to country certifications and that could be for the.
Wi Fi or it could be for the power components in the camera and so but.
But as of as of now there are no blockers in the supply chain that are inhibiting us from getting our cameras out into Europe .
In Asia, and as we get more certifications from the local government.
We will continue to make the product available in more countries.
Okay, great. Thank you and then I.
I guess, we haven't asked in a couple of quarters, but if you can give us an update on the partner ecosystem front, how much Oh, how I know that's a key part of your overall enterprise strategy. Just if you could give us some update on the.
Partner traction maybe how much of your business is driven by partners today, and where do you see that mix trending towards too.
Sure partners play a huge role that matter port in the ecosystem and if you take a half step back. It's that's true in residential real estate with great partners like Redfin realtor Dot Com zillow.
Costar com.
Compass Realty.
Keller Williams just to name a few right. These are massive organizations that have huge reach and huge success.
Across the channel of residential real estate homeless things homes for sale and rent et cetera, and they provide tremendous value distribution.
And really value add as well on top of what matter port can bring to that industry.
In the enterprise and commercial real estate. The story is the same and it's getting better by the day.
A couple of announcements and things we discussed on the call already.
A flourishing relationship with Amazon and AWS.
And a global partnership there to bring our digital twins to the industrial and manufacturing category at full speed.
And I can tell you that that the event in Hanover, Germany was hugely successful that's when we went general availability with the digital twins and Iot twin maker from Amazon AWS.
And that has really opened the doors to large scale enterprises, and especially manufacturing companies around the world, where we can turn them up very quickly with the combination of a matter of port digital twin.
And visually incorporate and align real time performance data from inside factories and production lines.
Leslie and provide customers with a never before seen a dashboard and visual context right into the factory for us its really quite extraordinary and that has pushed our pipeline of interest.
In this category.
To new levels will put it that way the same is true with our new integrations and partnerships with companies.
Like Autodesk, obviously, a major influencer and bellwether in the category of architecture design and construction.
Most projects in the U S and around the world start with auto task and it's fantastic that we can have a similar.
Type of integration or earlier in the stage, then, perhaps AWS and twin maker, which are live operating facilities to.
To move upstream in the building lifecycle to deliver value at the design build and construction phase or those same kinds of building small and large.
I think that gives you a picture and we are continuing to invest in the channel and partner strategy not just here in the U S. But also around the world because it provides great access to these industries and verticals that we're continuing to scale into.
Oh, good to hear I, just have a quick follow up on the comments that you just made.
It sounds like you have a lot of value added products being introduced like property intelligence. So you just need to do.
W I AWS tween maker.
I'm just curious how much of your enterprise business is driven by those type of products and that and not just simply beyond does the scan services storage components call your subscription business.
Sure Yeah, because we like to say come from the digital twin and stay for all of the value added services and add ons.
And insight.
Alright.
So that's going to continue and that's probably the area with some of the most exciting advancements both in our data science technologies, but also across the board for solutions in each of these vertical and markets for us. So good. Good question that you asked there I've talked about this.
Quite a bit over the last several quarters that the real future growth opportunity in this business is going to be driven by these kinds of add on some data and insights that we can provide on top of the digital twin.
Thank you so much congrats again, congrats on to South Dakota.
Thanks to you.
The next question comes from Bobbin Shaw with Deutsche Bank. Please proceed.
Hi, everyone. That's Nick on for Bobbing. This evening, thanks for taking my questions J D. Starting with the guidance it looks like the back half subscription revenue growth accelerators from the first half can you talk about what you see driving that acceleration and just any other comments around linear there linearity, we should be aware of.
Yes. Thanks.
There's a little bit of an acceleration that we actually see that over the past several years. So overall are trends that we see for this year will be consistent with prior years.
In addition, as we've been chatting about here today, we're seeing strong growth in our enterprise cohort, including with existing customers growing there spend with us as well as with new customers adopting particularly around some of the.
Integrations R. J was just discussing so those accumulate over time and can help continue to drive the subscription growth.
<unk> and then year over year, so there's a little bit of a growth rate increase implied in the.
Two two guidance from from Q1, and then largely steady going forward is what we're looking for on a quarter by quarter basis to hit the pull your guidance we provided today.
Great. Thank you. This is a follow up after seeing the E. P. S. For is how should we think about the pace of spending investments for the rest of the year and just bouncing that with I think if I'm remembering right does he said sort of flattish gross margins for the rest of the year.
Yeah, that's right and in terms of.
Operating expense growth. We of course are focusing very closely on where are we make our investments and making sure that they have strong are wise, they're highly efficient.
And that we continue to make progress down the path to profitability and so that includes of course in the operating expenses lines.
From the perspective of.
The.
The rest of this year.
I would see our quarterly operating expenses to be roughly flat with what we saw on Q1, perhaps slightly off from Q2. It's just got a couple of targeted and investments in mid flight that are performing well and then trickling back down a little bit again, largely consistent with what we ripped.
<unk> Q1.
On the margin fronts gross margin front.
I agree that our outlook for gross margins in total is roughly consistent as well with what we reported in Q1, so largely steady trends out through the rest of this year.
Great. Thank you and then R. J one for you more back on the expansion within the existing enterprise customers.
Where do you think that could eventually crows. So in the future from talking about you know I think it was 100 customers over 50000 in a R. What should we expect that are are figured it looked like in the future.
Sure you know it it follows a trend if you look back several quarters, yeah, maybe a few years back to when we entered the enterprise market with a you know a real enterprise solution to things occurred one of course was.
Growing that customer base than the size of those companies and the size of the facilities and spaces that we have that digitizing also got larger and then the number of those locations, where we've gone from one two or three factories a production line operation to 10 20, even hundreds.
And going all the way up to thousands of retail location for some of our large enterprise retail customers all of those metrics of expansion continue.
And we have been working really hard you know I'll I'll I'll take that as a comment about both your previous question and the one you just ask.
In the last year, we invested if they can't Lily in the platform for enterprise, both hardware software and services the big build year for US It was a big commitment of investment.
2023 is all about rolling out that that's how we are able to control and keep our costs at bay and in fact create much greater operational efficiency. Because this is the year that will bring in all of that great investments and all that capability to market.
T part of that is to drive up the value proposition and those enterprise solutions pushes past you know the average 50000, Mark and I will tell you that there are a number of customers and that left that are well past 50000, and well into the six figures and even some that are higher than that and that is predicated on us.
Continuing to build those kind of.
You add on capabilities that are of particular importance to enterprises running these larger more complex and more distributed facilities. Many locations around the world. We feel like we've got a fantastic solution that now includes enterprise collaboration enterprise access control.
Security really taking this too I'd call. It a platinum class enterprise offering that conserve capabilities all the way up to government great security if that's required.
Great. Thank you so much.
Our next question comes from Elizabeth Porter, which Morgan Stanley . Please proceed.
Hi, This is Sophie Lee on <unk>.
I had a quick question on your <unk> software cloud [laughter]. It seems like the beat this quarter. It came from product and services and if you look at the guide them for F. Y 23 mm. The race was also you know coming from product and services.
So I'm wondering why the software Avenue isn't growing as fast as some of the other segments.
And if you think about the a W. S announcement and the integration with audit this construction cloud.
I'm wondering how significant this is especially to the crowd software software revenue subscription afternoon, and if any of that is factored into the guidance.
[noise] yeah. Thanks Sophie.
Well well first in our queue, one actual alright 19.8 million a subscription revenue.
Does the top of our guidance range that we gave last quarter for for that.
For that I still feel really good about that.
The acceleration in subscription revenue growth there the sequential growth rate actually increased as well.
And so we're performing better than our expectations are better than our guidance on subscription revenue.
For the Q1 results that we just we just issued are Choo Choo guidance also applies a further acceleration of our sequential growth and subscription revenue.
As we have kind of a exited two one with a strong subscription trends.
Growth with enterprise customers and that should carry through to the go forward periods and then if you were to kind of model it out from there to the full year <unk>.
I think you'll see that the implied sequential growth is is higher than than what we've seen in some quarters and pass period. So feel really good about the improvements in the growth rates in subscription revenue so remodeled into the the guidance we have some good visibility and.
Two subscription revenue given it's recurring nature and giving the given the increasing proportion that is coming from enterprises a longer term contract.
So actually I think that's part of the outperformance along with as you noted some strong growth and the service is line and of course in the product line.
On the partner side.
With respect to some of the partners we've spoken about today, such as AWS twin maker and Autodesk with their construction cloud integration, where in the early stages of getting those enterprise partner deals concluded, but the pipeline is very strong with very large customers.
It's quite exciting and the and all the companies in these partnership discussions are working together.
To help customers solve their efficiency and workflow needs. So I also expect that over time, we'll see some progress concluding even more of those transactions, including you know nothing or in addition to those that were describing some of our recent press releases.
Which will further create a tailwind and that's subscriber growth.
Got it thanks, so much for that Claire there [noise] mm mm.
My second question is you mentioned seeing some SNB weakness continue into the quarter. So.
Is there any recovery or incremental weaknesses <unk>, we should be thinking about in terms of S. M B and check men throughout this year.
And also what are you kind of factoring in as in our our for the full year.
And I'm wondering if you can also provide us any commentary on the.
Progress in diversification.
Uhm, especially from residential real estate.
Yeah Yeah.
Yeah. Thanks for those those questions sofa, So first perhaps the last question first.
And <unk> and residential real estate real estate in general that's about 50 per cent of our subscription revenue. So while that continues to grow in absolute dollar terms year over year in terms of the percentage of total revenue, it's moderating to around that 50 per cent Mark and we've you may remember that we said or.
Noted that the industry real property in the world about two thirds residential real estate, so we'd always expect to have.
Ah Ah Ah healthy proportion of residential real estate in our business, but it's moderating around 50% and of course, the other industry verticals, which are growing quite strongly.
Are coming up too of course make up the other 50 50 per cent with respect to S. M b or small and medium businesses. It is true that their expansion has moderated which we've talked about over the last couple of quarters, but I would say that the trends have been steady over the last couple of quarters. So no change in the trends.
Sequentially.
S M B space in terms of Ah gross and Netflix Scriber additions, we've actually seen an uptick in S. M B subscriber growth.
And some of that can be seen in our free and paid subscriber numbers that we reported today. So that's quite encouraging that were garnering new subscribers at a faster rate, including in the S. B cohort as customers in all particles, including.
In residential real estate are looking for ways to achieve better productivity and efficiency in their operations.
And then finally, you know with the launch of our digital pro offering which is a service, but it is focused on in the residential real estate space, particularly in the United States, providing a very cost effective and quick.
Digital marketing package.
To meet.
And all and agents promotion needs.
We've actually seen a very successful launch response from customers with that service and that's hoping to drive more interested matter port generally more usage of matter port across the real estate industry, but also more subscribers.
Has agents and brokers first start out perhaps with digital pro and then come onto the platform more comprehensively.
So we have a lot going on in the S. N b space and the early indications for this fiscal year or that there are some positive receptiveness S. B subscriber numbers actually have grown in terms of our outlook for that dollar expansion Randy R for the year I'd expect overall with.
S M B in a very strong performance. It continues in enterprise that that metrics days roughly consistent with what we've seen over the last couple of quarters.
Got it thank you so much.
Thank you Sir.
As a reminder, if you do have a question. Please press Star then one.
The next question comes from <unk> with both research. Please proceed.
Hi, This is November Josh figure out some of the results can you talk about some of the puts and takes which have led to be improved product gross margin. Thank you.
Yes.
Improved product gross margin was largely driven by.
Two things one is a stronger or higher growth and the pro three camera sales cause our new camera and that comes with a higher average selling price that matches. The great additional features and value. It provides.
The first element that helped improve gross margin.
And then.
Secondly.
As we have started to put.
The remnants of the supply chain constraints behind US we are in the process of selling through those higher cost of materials that that went into the pro two camera.
That we were purchasing all of last year, we talked about about those impacts in the prior prior conference calls so now that that supply chain constraints.
Issue is behind US, we're able to sell through those pro two cameras that have higher cost of materials inside of them.
And if that happens it also helps increase the product margin.
So overall those trends should remain steady through the rest of the year with the supply chain constraints behind us and continued robust demand expected for the pro Street.
Great. Thank you so much and just a quick follow up it's been a few quarters since the B H T Studios acquisition.
Business doing and is there any way you could help us to quantify the contribution to the quarter.
You know I'll take the first part of it and J D. You can talk about quarterly contribution.
You know first we're really excited to have V. H T now fully integrated and part of matter for both operationally organizationally, where one company.
And this was a really important acquisition from out of port because residential real estate is such a significant part of our business and also an important very key part of our future and it is the largest cohort of.
The Bill World and always will be there is so much more ground to cover so much more to do right and these guys are on the Frontlines of residential real estate everyday you know good bad and otherwise and the reality is you know we are facing some pretty tough headwinds and challenges in the residential real estate market due to the macro environment <unk>.
Dominantly interest rates inflation et cetera is really bearing down on listing volume and real estate activity across the U S. But also around the world.
And so you know you heard us talk a lot about digital pro and this was the first.
Project post merger that we both had our eyes on and the teams worked incredibly quickly to bring this to market and we think it's a game changer.
Because what we're offering to the market is something that's never been offered before the opportunity to cast and go far beyond digital photos for the same or lower price than what people pay for just traditional photos and the lifting today and you'll get the matter for digital twin the two D floor plans the video walk throughs.
It's it's a very very competitive if not transformational offering and it's at the core of the spirit of this merger and these two companies coming together and so it is early days.
We just started rolling at this corner, we have a lot of work to do to put some real brand and market awareness behind it but for those markets in regions, where we have brought it out it's been a huge success and this is how we're gonna grow share in the <unk> business and make some headway here even though.
We're facing some headwinds.
And and we think that it couldn't be you know a.
More important product to be bring it to the market when realtors agents and brokers are all feeling, particularly constrained and strapped in this tough economy to have a breakthrough in cost efficiency and maybe even a superpower when it comes to real estate marketing capability online. So.
A lot of expectations for for digital pro and the partnership to come in the future. It's gonna take a few quarters for this thing to really get off the launch pad and into full swing, but we're feeling really good about the early progress and how well it's being received most importantly by our customers and <unk>.
J D. You want to talk a little bit about the near term and yeah and any other business impact.
Sure.
In this b H T business rules up into our services line in the income statement.
And sequentially well, we don't break it out with sequentially Dht's business was up double digit percentage points.
Which was great to see.
For some of the reasons that are just talked about as well as it is has a very strong reputation in our market share presence and its key markets in the United States.
We're going to expand that further as as we discussed in terms of bringing up two more markets as well as more verticals overtime, so great performance sequentially.
Double digit percentage growth and that helped bring up services revenue in total you over here by well over 100 per cent. So all around good news.
Great. Thank you so much.
At this time, we are showing new further questionnaires in the queue and this does conclude our question and answer session.
I would now like to turn the conference back over to Mike Knack for any closing remarks.
Great. Thanks, everyone for joining us today as always we appreciate your interest in that report and we look forward to speaking with you on our next earnings call <unk>.
Thanks and goodbye.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
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