Skyworks Solutions Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 9 speakers on the call.

Operator

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Thortman, please go ahead.

Speaker 1

Good afternoon, everyone, and welcome to alarm.com's Q1 2023 earnings conference call. Please note that this call is being recorded. Joining us today from alarm.com are Steve Trundle, our CEO Steve Valenzuela, our CFO And Jeff Bedell, President of our Ventures Business and Corporate Strategy. During today's call, we will be making forward looking statements, which are predictions, These statements are based on current expectations and assumptions that are subject to risks And uncertainties that may cause actual results to differ materially from our current expectations. We refer you to the risk factors discussed in our quarterly report on Form 10Q and our Form we will be filing shortly after this call with the SEC along with the associated press release.

Speaker 1

This call is subject to these risk factors and we encourage you to review them. Alarm.com assumes no obligation to update any forward looking statements or information, which speaks as of their respective dates. In addition, several non GAAP financial measures will be used on this call. A reconciliation of the GAAP and non GAAP measures can be found in today's press release I'll now turn the call over to Steve Trundle. You may

Speaker 2

begin. Thank you, Matt. Good afternoon and welcome to everyone. We are pleased to report Q1 results that exceeded our expectations. SaaS and license revenue in the Q1 was $135,400,000 resulting in a non GAAP Growth rate of 14.9 percent over the last year, excluding Vivint.

Speaker 2

Our adjusted EBITDA in the first quarter was

Speaker 3

$30,600,000 I'm going to touch on a couple of things in

Speaker 2

the core alarm.com business and then I'm excited to have Jeff Bedell, The President of our Ventures Business and Corporate Strategy joining the call today. I'll be looking to include Jeff or Dan Kirsner, the President of our platforms business in future quarterly updates so that we can provide a deeper review of some areas of the business. I'll start things off with a few takeaways from our recent presence at ISC West, the largest trade show for the physical security industry. Alarm.com's presence this year reflected our increasingly diversified business profile with alarm.com, OpenEye and Shooter Detection Systems each having a dedicated presence. Overall, attendance at the show returned to pre pandemic levels.

Speaker 2

The commercial market was a significant theme during ISC West. Most of the alarm.com service provider partners that I met were expanding their use of our commercial services. Recently released products have also helped our partners become better at targeting our platform at specific verticals where they are developing expertise. One of the things we highlighted was our expanded range of 3rd party camera support. Our video solution will be able to support 80% to 90% of 3rd party cameras that have been installed in midsized and large commercial settings since 2018.

Speaker 2

With a more flexible video solution, our service providers can support businesses that want the benefits of our integrated video solution without the cost of replacing existing installed video cameras. As we've expanded and enhanced our access control solution, It continues to gain momentum. During the Q1, access control door installations increased 45% over the Q1 of last year. At ISC, we introduced a new access control product called Cell Connector. Cell Connector is a door controller that leverages our work with 4 gs LTE cellular networks To connect directly to the alarm.com platform where system data is aggregated.

Speaker 2

Bypassing the customer's local network reduces installation complexity and enables an affordable and effective access control system. For example, Larger, more sophisticated commercial customers and corporate accounts typically have rigorous approval processes for 3rd party devices to connect to their local area network. Cell Connector significantly streamlines the sales and installation process and makes it easier for these customers to acquire an alarm.com system. In the residential market, Our service providers continue to report steady demand. Despite the macro environment, we've also continued to expand our partnerships with builders.

Speaker 2

New RMR creation from our homebuilder program increased 14% during the Q1 as compared to last year. We also continue to expand our services to fully address the long term opportunity we see in the residential market. A recent report by Strategy Analytics estimated that about 40% of households with an active Professionally monitored security system are still limited to traditional system capabilities that do not include any Smart home capabilities like those that alarm.com service providers offer. Our goal is to maintain and build on our service providers' strong competitive position so they can steadily expand their account base as the market continues shifting to smart home systems. Shifting to our operations.

Speaker 2

During the Q1, we continued to focus on driving increased efficiency and focus, which will allow us to perform against our corporate EBITDA objectives for the year. We did this without undermining the R and D investments drive future opportunities and feel like we have struck the right balance overall. We will continue to invest in innovation To continue to build the company for the future, while also maintaining discipline through profitability. Overall, I'm pleased with our Q1 results. Our performance reflects our continuing momentum and the significant and diverse opportunities that we are addressing.

Speaker 2

I want to thank our service provider partners and our team for their hard work and our investors for their continued trust in our business. Now I'll hand things over to Jeff to provide a little more detail on 2 of the areas he oversees. Jeff?

Speaker 4

Thanks, Steve. It's great to speak with everyone today and I look forward to getting to know many of you. I'll start with an update on OpenEye and their cloud managed Video surveillance solution for the commercial market. Video surveillance is a critical system for commercial businesses. Today, many businesses have A major technology shift is underway moving from these older on premises analog systems We continue to invest in the expansion of OpenEye's platform and business to capture share as this technology shift unfolds.

Speaker 4

Our recent acquisition of Vintra expands our AI program and will accelerate the development of video analytics capabilities across our platforms, Beginning with delivering innovative models to the OpenEye platform. This quarter OpenEye launched a few new solutions enabled through its open ecosystem The OpenEye platform allows data from 3rd party devices to be married to OpenEye video data to generate alerts and enable forensic search capabilities. This allows users to find video content based on external data inputs. The first new offering is OpenEye's point of sale solution called Sales Connect, which integrates transaction data from leading suppliers of point of sale systems. Sales Connect triggers real time alerts for point of sales exceptions such as Boyd's refunds and overrides and retrieve the corresponding video of the transaction.

Speaker 4

SalesConnect is sold as an additional SaaS module and significantly Strengthens OpenEye's position in the retail grocery and quick serve restaurant verticals. Next, OpenEye launched an integration with 3rd party environmental sensors, which detect smoke from cigarettes and vapes, monitor temperature, humidity and air quality and detect sound anomalies. This integration enables OpenEye to associate video with more environmental events, generating, as an example, vape alerts And providing valuable capabilities that have been heavily requested by secondary schools. Shifting to EnergyHub, I want to touch on a recent milestone. Recall that EnergyHub provides a SaaS platform for electric utilities that is known as a distributed energy resource management system or DERMs.

Speaker 4

The EnergyHub solution allows utilities to manage grid load by controlling demand side management, leveraging smart thermostats, EVs, connected EV chargers and other grid edge devices. EnergyHub's proprietary artificial intelligence And machine learning models allow utilities to fine tune load, shape on the grid and to balance energy demand with supply. EnergyHub recently announced that it is the 1st Derm's platform to exceed 1,000,000 devices under management. Collectively, these devices provide 1.35 gigawatts of flexibility to North America's electrical grid, which is greater than the generation capacity of a medium sized nuclear power plant. Extreme weather events like heat waves, the rising adoption of EVs and the intermittent nature of many renewable energy sources Are making grid stability increasingly challenging and complex.

Speaker 4

Utilities around the country are actively developing load flexibility strategies and investing in Derm's technology. EnergyHub's platform is directly addressing these macro trends. To sum up, we've made continued progress with Open Eye and EnergyHub's businesses. They are important to the expansion of our addressable markets and are 2 key components of our overall growth strategy. Steve Valenzuela will now cover our financials.

Speaker 4

Steve?

Speaker 5

Thanks, Jeff. I'll begin with a review of our Q1 2023 financial results And then provide our updated guidance before opening the call for questions. 1st quarter SaaS and license revenue of $135,400,000 Grew 9.9% from the same quarter last year. Excluding Vivint license revenue, Q1 2023 non GAAP SaaS and license revenue grew 14.9% year over year on a comparable basis. SaaS and license revenue includes Connect software license revenue of approximately $6,200,000 for the Q1, down as expected from $7,100,000 in the year ago quarter.

Speaker 5

Our SaaS and license revenue visibility remains high with a revenue renewal rate of 93% in the Q1, in the middle of our long term range. Hardware and other revenue in the Q1 was $74,300,000 down from $82,200,000 in Q1 2022, mainly due to fewer cellular module sales from the end of the 3 gs upgrade cycle and fewer camera sales as service providers Work down their inventory levels. Total revenue of $209,700,000 for the Q1 Grew 2.1% year over year. SaaS and license gross margin for the Q1 was 85.5%, Down slightly from 86.3% in the year ago quarter. Hardware gross margin was 23.9% for the Q1, consistent with historical trends and up from 11% in Q1 2022, Mainly due to improving supply chain dynamics and favorable product mix with more commercial offerings.

Speaker 5

Total gross margin was 63.7 percent for the Q1, up from 56.1% for Q1 2022, Mainly due to the improvement in hardware margins and a mix shift to SaaS revenue. Turning to operating expenses. R and D expenses in the Q1 were $61,900,000 compared to $51,500,000 for the Q1 of 2022, Mainly due to an increase in headcount and related compensation expenses and reflecting the cost of acquired teams. We ended the Q1 with 10.42 employees in R and D, up from 8.92 employees in Q1 2022. Total headcount increased to 1858 employees for the Q1 compared to 1565 employees in the year ago quarter.

Speaker 5

Sales and marketing expenses in the Q1 were $26,600,000 or 12.7 percent of total revenue Compared to $23,200,000 or 11.3 percent of revenue in the same quarter last year, mainly due to increased headcount And more employees traveling with the easing of COVID restrictions. Our G and A expenses in the Q1 were $28,500,000 Compared to $24,000,000 in the year ago quarter, mainly due to acquisition costs, increased personnel costs and accounting fees. G and A expense in the Q1 includes non ordinary course litigation expense of 800,000 And acquisition related costs of $800,000 Non ordinary course litigation and acquisition expenses are part of our adjusted measures and are excluded from our measurement of our non GAAP financial performance. In the Q1, GAAP net income was $14,400,000 Compared to GAAP net income of $9,100,000 for Q1 2022. Non GAAP adjusted EBITDA in the first quarter was $30,600,000 compared to $29,900,000 in Q1 2022.

Speaker 5

Non GAAP adjusted net income was $22,000,000 or $0.41 per diluted share in the 1st quarter compared to $21,300,000 or $0.39 per share for the Q1 of 2022. Turning to our balance sheet. We ended the Q1 with $606,400,000 of cash and cash equivalents, down from $622,200,000 At December 31, 2022, mainly due to payments for estimated federal tax, acquisition costs and employee annual bonus payments. Turning to our financial outlook. For the Q2 of 2023, we expect SaaS and license revenue of $137,200,000 to $137,400,000 For the full year of 2023, We now expect SaaS and license revenue to be between $555,900,000 to $556,500,000 Up from our prior guidance of $551,500,000 to 552,500,000 We are projecting total revenue for 2023 of 855.9 to $881,500,000 increased from our prior guidance of $851,500,000 to $877,500,000 which includes estimated hardware and other revenue of $300,000,000 to 325,000,000 We estimate that adjusted EBITDA for 2023 will be between $120,000,000 to 125,000,000 Compared to our prior guidance of $115,000,000 to $125,000,000 we expect adjusted EBITDA for the Q2 of 2023 To represent approximately 23% to 24% of our annual guide, non GAAP net income for 2023 is projected to be $84,600,000 to $87,500,000 or 1.55 to $1.60 per diluted share, up from our prior guidance of $79,700,000 to $86,500,000 are $1.44 to $1.57 per diluted share.

Speaker 5

EPS is based on an estimate of 54,700,000 Weighted average diluted shares outstanding. We currently project our non GAAP tax rate for 2023 to remain at 21% under current tax rules. We expect full year 2023 stock based compensation expense of $54,000,000 to $56,000,000 In summary, We are focused on executing on our strategic business plan and investing in our long term strategy while continuing to deliver profitable growth. And with that, operator, please open the call for Q and A.

Operator

Thank you. Our first question comes from Michael Funk with Bank of America. Your line is open.

Speaker 3

Hi. Yes. This is Matt Bullock on for Mike Fong. Thanks for taking the questions. It was great to hear all that detail about some of your AI products.

Speaker 3

I was hoping you could give us a little bit more color on how we should think about the artificial intelligence roadmap and then any additional detail on future monetization in terms of whether or not you're going to leverage it as primarily a product enhancement or as a vector for new logo additions? Hey, Michael. This is Steve speaking.

Speaker 2

Well, I think it's one of the reasons we actually did the Just as evidence of our commitment to that arena, the Ventra acquisition during the quarter that was recently announced Where we picked up, there's been an expansion on our AI video analytics team of about 35 In terms of headcount. So in terms of the overall roadmap, I think any company that's not sort of looking universally at everything they're doing both From an operating standpoint, but also from the perspective of user interfaces that they provide to the customer, Would be sort of not looking at things the correct way. So we're looking at essentially everything we do, both internally in terms of processes, but also in terms of the way we present UIs to the customer. And of course, we've got A pretty long history though on the video analytics side of using AI to improve the insight that we deliver to the customer. We would expect We'll continue to expand that.

Speaker 2

Obviously, the more insight, the more intelligence we can deliver to the consumer, the more valuable The experience and so it's sort of right in our crosshairs, I would say.

Speaker 3

That's helpful. Thanks. And then Just one quick follow-up. Have you noticed any material changes or subtle changes in the competitive environment following some of the M and A activity of competitors.

Speaker 2

I haven't really noticed any changes in the competitive environment. I'm imagining probably what you're referring to is one of the recent more significant positions where a utility or an energy company acquired a service provider that competes with many of our dealers. I haven't heard yet that there's been any sort of change though in the overall competitive dynamic and sort of business as usual so far.

Speaker 3

Excellent. Thanks very much. I'll pass

Speaker 2

it on.

Speaker 6

Yes.

Operator

Thank you. One moment. Our next question comes from Saket Kalia from Barclays, your line is open.

Speaker 3

Okay, great. Hey, good afternoon, guys. Thanks for taking my questions here. Steve Trundle, maybe for you, just always appreciate kind of just updated thinking that you have on ADT and them as a customer and how things are changing there. And so maybe the question for you is, can we just talk a little bit about any revised thinking on how you're thinking about command and control and ADT subscribers kind of starting to roll in.

Speaker 3

Anything that you can give us just on how that's sort of rolling into the model if at all.

Speaker 2

Sure. Yes, Suki. Good question. And first just At a macro level, we continue to collaborate with ADT on multiple fronts. We have, I think a great relationship there.

Speaker 2

I'm very pleased with the record sort of attrition levels that they're getting As a higher and higher percentage of their base are on a smart platform like command and control. So things are generally going, I think relatively well. We watch of course, exactly what they're as much as we can, what they're presenting to the public markets about their internal plans related to their work with Google. And I think we commented publicly at the end of Q4 that we anticipated an increased use by ADT of their new platform at the end of Q2 that was based on what Jim and the team had presented and maybe we're being a little conservative in the model, but they've had a couple of reports since then. And I'd say we're probably now Looking really more for that to be something that maybe happens towards the end of the year in Q4.

Speaker 2

I want to remind people of course that there will be lots of areas, but the partnership with ADT is pretty broad. So there is commercial, there's SMB, there's something called Custom Home, there are lots of different areas and no single solution is a fit for every area, but we expect based on their most recent report That we've begun to see some transition there in the Q4 timeframe and we've updated our models accordingly.

Speaker 3

Got it. That's super helpful. Steve Valenzuela, maybe for you, great to hear just the operational rigor, right, of the company. I think there was a reference made just to some cost savings. I was just wondering if you could just talk about some of the cost savings that you folks started this quarter, how much you sort of expect to save annually and whether we should think about those being reinvested or maybe falling to the bottom line?

Speaker 5

Yes, Saket, good point. I mean, we did a little cost rationalization really. And if you think about it, most companies actually Look at their cost structure, look at their headcount every year and kind of make adjustments. So it was fairly minor on our side and We're continuing to invest, so we're continuing to hire employees. So the savings from that small reduction really is going to translate into hiring.

Speaker 5

So we've reflected that into our guidance. And so we're going to continue to hire especially in the R and D area. And so that's really factored into the guidance we provided for the quarter for the year.

Speaker 3

Very helpful guys. Thanks so much.

Speaker 2

Thank

Operator

you. Our next question comes from Matthew Fow with William Blair. Your line is open.

Speaker 7

Hey, great. Thanks for taking my questions. First, I wanted to ask on the commentary around access control and that 45% year over year growth rate of door installations in the Q1. I'm guessing that's higher than what you've been seeing and that's why you called it out. But maybe if you could just give us some context around that number.

Speaker 7

And then if so, you've been clearly improving that product for some time. If you're seeing an inflection there, what's helping to drive that? Thanks.

Speaker 2

Yes, good question. I called it out because we were Pleasantly, I guess, surprised by the uptick on access control installation velocity.

Speaker 3

The business is

Speaker 2

not yet the largest business at alarm.com by any stretch, but We're continuing to grow there. I think we saw what happened in the Q1. Yes. We got we had had some supply chain issues in that category the last 2 years. We began to sort of thin those problems out And the dealers dealer adoption has been good.

Speaker 2

So just in general, we saw kind of material uptick there. In In terms of overall scale, we're talking about between 50,000 100,000 Doors right now on the Access Control platform that will obviously continue to grow, but just to give you a feel for the size of that business at the moment. Looking forward, I also talked about CellConnect. So what we're doing there is enabling the access control solution to Be more easily installed by service providers and we would hope that that further puts some win in the sales there.

Speaker 7

Great. And then on the commercial opportunity more broadly, you mentioned at ISC West that partners we're expanding the use and partly you've released new services that help target specific verticals, some of the ones you called out with Open Eye. Is that an important piece of the strategy going forward to gain more traction in commercial? Is that maybe something you feel you've been missing as some of this vertical specific Functionality to help drive adoption in that market?

Speaker 2

I think so. And Jeff spoke about it a little bit when we talked Specifically about OpenEye, but I feel like the closer you get to a ready to install sort of vertical solution that has a Set of key integrations with it, the more sort of differentiated your service provider can be in the sales process. So We've seen that on in the MDU business, for example, PointCentral, we have an integration with an entity called uTour And that helps create some pull through there where we can do self guided tours day 1. On the Open Eye side, they made Some strides during the quarter to add certain retail analytic Integrations that really not just retail, quick serve restaurant integrations that really make the solution sort of a better fit That segment of the market and give them a story they can talk to. So there was an earlier question about AI.

Speaker 2

And as we Move forward, I think the more we can leverage some of the capabilities that we're developing to tailor Solutions for specific use cases and be more relevant to a given vertical. A, it's a great problem for B, if you're in the software business, you want to have Really solutions that are vertically inclined and B, I think it will just make the offering more relevant. So it is a focus.

Speaker 7

Great. Thank you.

Speaker 6

Thanks.

Operator

Thank you. One moment. Our next question comes from Mark Kash with Raymond James. Your line is open.

Speaker 6

Yes, this is Mark on for Adam. Thanks for taking our question. So Maybe first starting with Steve T and if Jeff wants to weigh in on this. But considering the macro and the growth opportunities, so first, How are you allocating resources across the 4 key growth areas of commercial, video software, international and New Venture? And as part of that question, you had plans to expand the support for security control panels internationally this year.

Speaker 6

So how is that coming along? And we just say you've integrated the ones that really open up the opportunity at this point?

Speaker 3

Yes. So good question. You said Steve, there's one Steve that tends to speak probably

Speaker 2

too much, but I'll take it. Yes. In terms of the allocation of resources across the different growth areas, I mean, we're basically looking at the long term SaaS growth potential in each domain modeling that out, looking at what we need to do to either compete or to remain more sticky with our service providers and allocating Resources accordingly. In terms of some of the efficiency shaping we did earlier this year, I would say there was generally a move to paper some, The investment we're making in some of the areas that aren't growing as fast and reallocate some of that investment to commercial, to video, To international and then to our other segment business, especially Energy Hub. So we're favoring these growth areas.

Speaker 2

We're willing to live with negative cash contribution for a meaningful period of time so long as we're getting Or we can see daylight on 25% plus growth rates in these domains and that's what we're seeing so far. So As they come to scale, we would expect them to continue to contribute to the overall company's growth and therefore they warrant Sort of excessive, if you will, excessive resource allocations. With regard to the International piece specifically and the comments I made last quarter about a desire to Support a wider array of equipment there. We did complete in the Q1 An acquisition of a company called EBS, based in Europe that has been in the business For some time of building universal communicators that work with a lot of the legacy Control panels that are already installed by our international dealers. That's always been a soft spot for alarm.com.

Speaker 2

We come in, They love the solution, but they may have a base of 100,000, 200,000, whatever number of customers that are working on older equipment. So What we're doing there is really taking that universal communicator technology and integrating that into the platform so that we can get back to some of those legacy customers where the cost to replace all their hardware would be prohibitive. So I think that's We're not in terms of time frame for that, we just finished that in Q1, finished sort of the deal and now there's a lot of Wood to chop and we're probably into the Q3 before we're actually able to go to market and say we're supporting all the controls that we would like to. That was the purpose.

Speaker 6

Okay, great. And as a follow-up, Last week, ADP pointed out seeing impacts from customers not paying. So I guess, first, are you seeing that through your partners? And Secondly, could you just comment on the makeup of the business today versus previous macro spending pullbacks, let's say, in 'eight And the resilience that you see now in the business?

Speaker 2

Sure. The first part of the question is, are we seeing an impact from So obviously our customer is the service provider, not the consumer. And most of our Service providers are pretty robust and I don't think we've seen any kind of uptick in bad debt. Have we at least not at a meaningful level? No, no, no.

Speaker 2

Not at a meaningful level. Yes. In terms of are we hearing anything anecdotally, I mean ADT is really the only company that reports publicly on a routine basis. We obviously would look to what they say, but I have not been hearing from our other service providers that that's been a material issue. And Everyone goes to market differently.

Speaker 2

So it can be where you are geographically or what type of customer you serve, whatever. With regard to the second question, I'm trying to remember it was

Speaker 6

Just kind of the makeup of this is today And like versus like in 'eight and a big pullback happen Yes.

Speaker 2

The housing crisis. Yes. Good question. I don't think we've seen kind of things be quite as dire as maybe they seemed in 2,008. I'll just remind folks that generally in a bad market or in a bad macro environment, Security tends to be pretty resilient.

Speaker 2

People tend to want to tend to get more focused on protecting their assets and protecting their home. They become worried about Strangers wandering through the neighborhood who may be unemployed. So we didn't see a huge Problem in 2008 or 2009, either you generally get fewer moves and that results in Less attrition, you just get fewer you may get a slight headwind in terms of new accounts created at the same time. I'd say we're seeing about the same. I mean, we were pleasantly surprised.

Speaker 2

The housing market is very hard to figure out right now and that there's Mortgage of housing stocks of builders continue to do relatively well in our universe. I commented on that. And things look Generally, I'd say less at the moment, a little less compressed than 2,008 or 2,009.

Speaker 3

All right.

Speaker 6

Thanks so much for taking our questions. Much appreciated.

Speaker 3

Thank you.

Operator

Thank you. Our next question looks like it comes from Darren Aftahi With ROTH, your line is open.

Speaker 2

Hey, guys. Thanks for taking

Speaker 8

my questions. First one, I don't know if you mentioned, what were the growth rates on Commercial Business and International in the quarter. And I guess, Steve, your comments about ISU West, like are you more positive, Neutral sort of coming out of that conference as it relates to commercial business?

Speaker 5

Darren, it's Steve Ellenzuel. I'll take the first question. The growth rates Both for international commercial continue to do really well in the mid-twenty 5 percent range. Last quarter, we gave that those metrics that we don't typically give it every quarter, but They're still running at about both at around 25% growth year over year, doing quite well.

Speaker 2

Yes. And the second question, Coming out of ISC West, how do we feel about commercial? I think we've been feeling There's definitely a sentiment now where a wider and wider array of service providers have at least a portion of their business allocated to commercial and small business. So there seems to be a bit more of a greenfield there. Those a lot of those entities, Yes, I'd say we brought sort of the mobile and smart experience to the residential world, 3, 4, 5 years before it really In the commercial world, a lot of the stuff we've been doing for a while, putting control of your home or now in the case of commercial, Enterprise in your hand with the mobile app is a little bit newer in the commercial space.

Speaker 2

So there are more folks looking to Be in the market, be upgrading commercial customers, be upgrading SMB customers. And then I'm enthusiastic because I thought our teams executed Pretty well at the show or had good things to show, had good booth traffic. So I'm not I'd say I was Overall, just pleased with the sentiment and the momentum on the commercial side and the feedback that we are getting from service providers there.

Speaker 3

Thanks.

Speaker 2

Sure.

Operator

Okay. Our next question comes from Jack Cordero from Maxim Group. Your line is open.

Speaker 3

Hi. Thank you for taking my question. This is Jack Hodera calling in for Jack Mandaraj. I've got a lot of great color on the commercial side of the business. Last quarter, you guys mentioned how ARPUs are a lot higher.

Speaker 3

I was wondering if you could give any color longer term for expectations of revenue mix between residential and commercial? And I have one follow-up.

Speaker 5

The commercial this quarter was about 8.5% of total SaaS. It was about 7% a year ago. So commercial certainly is growing Faster than residential. We haven't really given a longer term projection. But if you continue to see the trend, certainly Commercial is growing at a faster rate.

Speaker 5

It will be a larger and larger percentage of our SaaS revenue going forward. We haven't really broken out what that would be though.

Speaker 3

Okay, understood. That's helpful color. And then given the macroeconomic effects, I think the explanation you guys have given is makes sense, although a little jarring. But I was wondering if you could share any other anecdotal evidence. Is there any effect on residential attachments or any regions that you're seeing different products or different changes in market dynamics Being affected by macro at all?

Speaker 3

Thank you so much.

Speaker 2

Yes. I mean regionally there are different definitely areas of strength, Those being Texas and Florida. I mean you visit as examples, there are probably more, but those are To where when I go visit a service provider, Yes, they're basically as busy as we can be in these markets. So they're continuing to sort of see robust Good robust macro conditions. We've also seen strength in the last quarter in Canada.

Speaker 2

We're not exactly sure Yes. Why? But Canada has performed well. Some of the markets You might expect where you have either declining population or whatnot, or maybe not quite as strong. But We haven't seen any really dramatic macro level impacts, thus far.

Speaker 2

I'd say probably the biggest thing is a slightly smaller footprint In terms of the number of devices that the consumer is choosing to purchase at the time of new account Installation where maybe they're watching sort of their we haven't seen a decline in activations, but we've seen them put slightly less hardware on each installation than what we were seeing a year ago. And that's probably the biggest takeaway on the residential side that I think we've noticed.

Speaker 3

Thank you. That's helpful color.

Speaker 6

Sure.

Operator

Thank you. One moment for our next question. I'm showing no other questions in the queue. This does conclude today's conference call. Thank you for participating.

Operator

You may now disconnect.

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Skyworks Solutions Q1 2023
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