Matterport (MTTR 0.85%) stock plunged 17.4% on Thursday, Feb. 17, following the spacial-data company's release of its fourth-quarter and full-year 2021 results on the prior afternoon.
Investors' displeasure was largely attributable to guidance for the first quarter and full year 2022 falling considerably short of the Wall Street consensus estimate for both revenue and earnings. The fourth-quarter bottom line coming in slightly weaker than analysts had expected also likely weighed on the stock.
In the fourth quarter, Matterport's revenue grew 15% year over year to $27.1 million, which was in line with the Street's expectation. Growth was driven by a 32% jump in subscription revenue to $16.5 million. Adjusted net loss was $0.10 per share, a tenfold widening from the year-ago period. This loss was driven by the company's scaling up of its operations following it going public last July via a special purpose acquisition company (SPAC). Measures management took to mitigate the impact to revenue from global supply chain bottlenecks also contributed to the loss.
Earnings releases tell only part of the story. Here are three key things management shared on the Q4 earnings call that you should know.
Image source: Getty Images.
Winning large companies as customers
From CEO RJ Pittman's remarks:
I am excited to report that we now have 20% of the Fortune 1000 as customers, many of whom were able to prove Matterport's enterprise value immediately using just the phone in their pocket and our no-cost freemium tier to get started.
The Fortune 1000 are the 1,000 largest American companies (public and private) ranked by revenue, as compiled annually by Fortune magazine. Matterport has considerable room for expanding sales to these customers. And there's a tremendous amount of potential in the enterprise space beyond these existing customers.
Beyond the sheer size of the revenue opportunity with enterprise customers, there's another big positive with this class of business: very low churn. Enterprise churn is "almost non-existent," CFO JD Fay said on the call.
"Exceptionally strong" performance in capture services
From CFO Fay's remarks:
Services revenue for the fourth quarter was $3.7 million, a 69% increase year on year. ... The year-over-year growth was led by exceptionally strong performance in our Capture Services segment. In the fourth quarter, we started to see enterprise customers that had agreed to use Capture Services earlier in the year begin to schedule and scan their physical footprint in greater volumes.
In capture services, enterprise customers hire Matterport to subcontract the capture of their physical spaces in high volume. So, this service enables the enterprise customers to get onto Matterport's platform more quickly and at a larger scale than by using other ways to 3D scan their spaces, such as by buying Matterport's cameras and doing the work themselves.
Many enterprise customers that "had agreed to use capture services earlier in [2021]" -- to use Fay's words -- put off scheduling the service due to the pandemic. That Matterport is seeing an uptick in these customers beginning to schedule this service is obviously a positive.
Supply chain bottleneck mitigation measures hurt gross margin
From CFO Fay's remarks:
[O]ur total non-GAAP [adjusted] gross margin for the fourth quarter was 50%. Our subscription gross margin was 78%, as compared to 75% a year ago. ... Product gross margin was negative 11%, as compared to positive 39% a year ago.
Product adjusted gross margin declining to negative 11% from positive 39% is a huge drop. For context, fourth-quarter product revenue fell 22% year over year to $6.6 million, accounting for 24% of the company's total quarterly revenue. That decline was due to the company being unable to fully meet customer demand because of global supply chain issues.
Product adjusted gross margin plunged for two main reasons. First, near the end of the third quarter, the company began paying for expedited shipping for "materials in short supply to meet customer demand," said Fay. Second, management "made tactical decisions to source parts from alternative suppliers or to pay higher prices to secure allocations," he added.
Matterport's decision to take a hit on costs associated with its products was a smart move for the long term. Servicing customers in a timely manner is important for keeping them happy. Moreover, as Fay explained: "in most cases the shipment of a Pro2 camera results in a new paid subscriber to our platform. In this situation, we expect to recover the current product gross profit investment within the first four months of the customer's subscription term with us, on average."
A stock worth watching
Matterport is worth putting on your watch list because it has the potential to be a player in the metaverse. Its stock has sold off considerably as investors haven't been pleased with its growth dynamics. Revenue growth has been hampered because of the global supply chain mess, not because of lack of strong demand for its products and services. The supply chain issues have also hurt its bottom line. Eventually, things will improve on the supply chain front.
