Here's Why Matterport Stock Plunged Following the Q4 Earnings Release

Matterport (MTTR 0.86%) stock plummeted 14.3% in Wednesday's after-hours trading session following the spatial-data company's release of its fourth-quarter and full-year 2021 results.

The market's displeasure is attributable to fourth-quarter earnings falling slightly short of the analyst consensus estimate, along with first-quarter and full-year 2022 guidance coming in considerably lighter than the Street had been expecting on both the top and bottom lines. The market looks ahead, so the disappointing outlook was probably the biggest factor in the stock's sell-off.

Global pandemic-driven supply chain issues are the culprit behind the much weaker-than-expected guidance, and also hurt the company's fourth-quarter results. 

Image source: Getty Images.

Matterport's key quarterly numbers

Data source: Matterport.

The huge net loss was largely driven by the costs associated with the company going public in July 2021. (It went public via a special purpose acquisition company, or SPAC.) Investors should focus on the adjusted metrics, which exclude one-time items.

Wall Street was looking for an adjusted loss of $0.09 per share on revenue of $25.1 million, as I outlined in my earnings preview. So, Matterport beat the top-line expectation but slightly missed on the bottom line.

For context, in the third quarter, revenue grew 10% to $27.7 million. This result missed the $29.1 million Wall Street consensus estimate, but only because of pandemic-driven supply constraints. Adjusted loss was $0.06 per share, compared with EPS of $0.01 in the year-ago period. That result edged by the loss of $0.07 per share that analysts had been expecting.

Revenue breakdown

The fourth quarter's year-over-year revenue growth was driven by a 32% jump in subscription revenue to $16.5 million and a 69% surge in services revenue to $3.7 million. Total subscribers increased to 503,000, up 98% year over year. Of that total, 448,000 are free subscribers and 55,000 are paid subscribers.

Product revenue fell 22% to $6.6 million and license revenue declined 43% to $284,000. On the earnings call, CFO JD Fay said that the company continues to experience "strong demand" for its products, but global supply chain constraints prevented the company from satisfying all the demand for its products.

Reiterating what I wrote last quarter: "The decline in licensing revenue is not a reason for concern, as it is 'lumpy' from quarter to quarter. Moreover, Matterport has been actively transitioning its business to one focused on subscriptions, which generate recurring revenue."

Matterport's Q4 net dollar expansion rate was 110%, meaning existing subscribers expanded their spending with the company by an average of 10% year over year. This metric is down from last quarter's 114%, but it's in line with the company's historic rate of about 110%, Fay said on the earnings call.

What management had to say

Here's part of CEO RJ Pittman's statement in the earnings release:

In 2021, we doubled our subscriber base, increased Spaces Under Management by 54%, and subscription revenue grew 47%, and total revenue was up 29% for the full year. ... Relentless innovation is the norm at Matterport, and with new products like Matterport Axis and Matterport for Android, we are racing to bring precision 3D capture and digital twins to everyone in the built world. ... Every industry on every continent is embracing digitization, and I am more confident than ever about the company's outlook for 2022 and the decade ahead.

Guidance

Data source: Matterport. YOY = year over year. *Company was not publicly traded in Q1 2021, so these figures aren't available; the outlook for Q1 2022 subscription revenue growth was provided in the issued guidance. **Calculated by author.

Going into the earnings release, for the first quarter of 2022, Wall Street was modeling for an adjusted loss of $0.07 per share on revenue of $31.9 million. And for full-year 2022, analysts were projecting an adjusted loss of $0.23 per share on revenue of $160.4 million.

So, the company's top- and bottom-line guidance for both periods fell far short of the Street's expectations. On the earnings call, Fay addressed the lighter-than-expected guidance:

[W]e would expect to be able to grow our annual total revenue around the 50% range as the economy returns to a more normalized state with respect to supply chain constraints and labor markets. ... At this point in the first quarter, however, we see the supply chain constraints continuing. This impacts product revenue and, to a lesser extent, it flows into our subscription revenue growth. Our guidance contemplates that these imbalances will be with us through the full year of 2022. 

Demand is strong for Matterport's products and services

In short, Matterport turned in solid results for the fourth quarter of 2021 in light of the supply chain issues it faced. Its outlook for the first quarter and full-year 2022 was disappointing, but supply constraints are to blame. These will eventually end or at least subside.

Demand remains strong for the company's products and services, which have the potential to be tools other companies and entities use to build out their metaverses.