Shares of Matterport (MTTR 0.87%) were up 31.6% as of 10:30 a.m. on Thursday, following the spatial-data company's release of its second-quarter 2022 results on Wednesday after the market close.
The market's delight is attributable to the quarter's earnings beating the Wall Street consensus estimate, along with third-quarter revenue guidance coming in higher than analysts had expected, and management increasing its full-year 2022 outlook for total revenue and earnings. The sizable increase in the annual-revenue outlook is probably the biggest catalyst for the stock's rise.
Image source: Getty Images.
Matterport's key numbers
| Metric | Q2 2022 | Q2 2021 | Change YOY |
|---|---|---|---|
| Revenue | $28.5 million | $29.5 million | (3%) |
| GAAP operating income | ($69.2 million) | ($5.8 million) | Loss widened 1,093% |
| GAAP net income | ($64.6 million) | ($6.2 million) | Loss widened 942% |
| Adjusted net income | ($35.3 million) | ($5.6 million) | Loss widened 530% |
| GAAP earnings per share (EPS) | ($0.23) | ($0.15) | Loss widened 53% |
| Adjusted EPS | ($0.12) | ($0.03) | Loss widened 300% |
Data source: Matterport. YOY = year over year. GAAP = generally accepted accounting principles.
Revenue was flat compared with the first quarter.
Investors should focus on the adjusted numbers, as they strip out one-time items. Wall Street was looking for an adjusted loss of $0.14 per share on revenue of $29.6 million, as outlined in my earnings preview. So Matterport beat the bottom-line expectation, though it missed the top-line estimate. It also bettered its own earnings guidance, which was for an adjusted loss per share between $0.15 and $0.13, and hit the lower end of its revenue-outlook range of $28.5 million to $30.5 million.
Matterport used cash of $32.8 million running its operations during the quarter. That compares with it using cash of $3.7 million in the year-ago period and $25.5 million in the first quarter of 2022. The company ended the period with $562 million in cash and short-term investments, and no debt.
For context, in the first quarter, total revenue grew 6% year over year to $28.5 million, driven by a 24% jump in subscription revenue to $17.1 million.
Revenue breakdown
The quarter's year-over-year revenue growth was driven by a 20% jump in subscription revenue to $18.4 million and a 74% surge in services revenue to $5 million. Subscription revenue grew 7% from the first quarter and beat the company's guidance of $18 million to $18.3 million.
Product revenue fell 45% to $5.1 million and license revenue declined to $26,000 from $2.1 million in the year-ago period. The drop in license revenue isn't a concern, as Matterport has been transitioning to a software-as-a-subscription business model.
Product revenue declined so much because of continuing supply chain constraints related to the pandemic. The company wasn't able to source enough of the components it needed to fully meet demand for its Pro2 camera.
On the earnings call, chief financial officer JD Fay said that supply chain constraints were worse than management had projected when it issued quarterly guidance in May. He added that had supply chain issues been less intense, product revenue would have been close to $8 million and total revenue would have exceeded $31 million. Moreover, the bottom line would have been better because the company incurred additional costs for expedited shipping.
Matterport exited the second quarter with record product backlog. Management said on the earnings call that it expects to clear much of this backlog in the third quarter.
Other key metrics
- Total subscribers increased 10% sequentially to 616,000.
- Spaces under management grew 10% sequentially to 8 million.
- Net-dollar expansion rate was 107%, Fay said, meaning existing subscribers increased their spending with the company by an average of 7% year over year. This metric is unchanged from the first quarter, and lower than the company's 110% historic rate. As with the first quarter, enterprise customers expanded their spending at a good pace, but small and medium-size business customers continue to be cautious, which management attributes to the macroeconomic environment.
Guidance
Management issued third-quarter guidance and revised its full-year 2022 outlook. A key reason for the full-year revision is the July 7 acquisition of VHT Studios, a real estate digital marketing company.
| Metric | Q3 2022 Guidance | Q3 2022 Projected Change YOY* | Current Full-Year 2022 Guidance | Initial Full-Year 2022 Guidance | Full-Year 2022 Projected Change YOY* |
|---|---|---|---|---|---|
| Revenue | $35 million to $37 million |
26% to 34% |
$132 million to $138 million | $125 million to $130 million | 19% to 24% |
| Subscription revenue | $18.5 million to $18.8 million |
18% to 20% |
$73 million to $74 million | $80 million to $82 million | 19% to 21% |
| Adjusted earnings per share (loss) | ($0.15) to ($0.13) |
Loss projected to widen 150% to 117% |
($0.50) to ($0.46) | ($0.52) to ($0.47) | Loss projected to widen 117% to 100% |
Data source: Matterport. YOY = year over year. *Calculated by author.
Going into the report, Wall Street had been modeling for third-quarter revenue of $32.9 million and an adjusted loss per share of $0.13. So revenue guidance came in higher than analysts had been projecting, while bottom-line guidance, at the midpoint, was a bit weaker than analysts had been expecting.
The company raised its annual outlook for total revenue and earnings, but lowered its expectation for subscription revenue. On the call, management gave two reasons for this move. First, the lighter-than-expected shipments of Pro2 cameras will hurt the paid-subscriber count. Second, the company is starting to see a trend of larger-enterprise contracts that have multiple-year terms. The total contract values are coming in higher than management expected, but these contracts often include a scaling up of subscription revenue.
A solid quarter
Matterport turned in a decent quarter given its supply chain constraints. Subscription revenue grew a solid 20% year over year, and management notably raised its annual revenue guidance.
