Shares of Matterport (MTTR 0.86%) are up 26.2% on Friday as of 1:52 p.m. ET, following the spatial-data company's release late yesterday of its third-quarter 2022 report.
The stock's rise is largely attributable to the quarter's revenue and earnings exceeding the Wall Street consensus estimate, as well as management increasing its full-year 2022 outlook for earnings. It also slightly raised the midpoint of its outlook range for annual subscription revenue.
Shares are also likely getting a tailwind from the broader market, as most major indexes are in the green, with the tech-heavy Nasdaq Composite up 1.8% as of this writing.
Matterport's key numbers
| Metric | Q3 2021 | Q3 2022 | Change YOY* |
|---|---|---|---|
| Revenue | $27.7 million | $38 million | 37% |
| GAAP operating income | ($44.4 million) | ($59 million) | Loss widened 33% |
| GAAP net income | ($168 million) | ($58.3 million) | Loss narrowed 65% |
| Adjusted net income | ($14 million) | ($26.9 million) | Loss widened 92% |
| GAAP earnings per share (EPS) | ($0.86) | ($0.20) | Loss narrowed 77% |
| Adjusted EPS | ($0.06) | ($0.09) | Loss widened 50% |
Data source: Matterport. YOY = year over year. GAAP = generally accepted accounting principles. *Calculations by author.
Investors should focus on the adjusted numbers, as they strip out one-time items.
Revenue growth wasn't all organic. The company's revenue got a boost from its July 7 acquisition of VHT Studios, a real estate digital marketing company.
Wall Street was looking for an adjusted loss of $0.13 per share on revenue of $35.9 million. So Matterport beat both estimates. It also surpassed its own guidance, which was for an adjusted loss per share between $0.15 and $0.13, and for revenue of $35 million to $37 million.
Matterport used cash of $99.4 million running its operations during the first nine months of the year, compared with using cash of $21.1 million in the year-ago period. The increase in cash used stems from the company's scaling up of its operations. It ended the period with $495 million in cash and short-term investments, as well as no long-term debt.
For context, in the second quarter, total revenue edged down 3% year over year to $28.5 million, though subscription revenue increased 20% to $18.4 million.
Revenue breakdown
| Metric | Q3 2022 | Change YOY* |
|---|---|---|
| Subscription revenue | $19 million | 21% |
| License revenue | $21,000 | (82%) |
| Services revenue | $10 million | 204% |
| Product revenue | $9 million | 5% |
| Total revenue | $38 million | 37% |
Data source: Matterport. YOY = year over year. *Calculations by author.
Subscription revenue surpassed the company's guidance of $18.5 million to $18.8 million. Total subscribers increased to 657,000, up 50% from the year-ago quarter. Paid subs grew to 63,000, up 17%.
The quarter's net-dollar expansion rate was 106%, CFO JD Fay said on the earnings call. This means existing subscribers increased their spending with the company by an average of 6% year over year. This metric was 107% in the first and second quarters of this year, and has historically been about 110%.
The net-dollar expansion rate has been lighter than usual in 2022 because small and medium-size business customers are being cautious due to the volatility in the macroeconomic environment, according to Fay. On the positive side, the company continues to see "strong expansion" with its enterprise customers.
Spaces under management (SUM) grew to 8.7 million, up 40% year over year, indicating robust engagement with the company's platform.
Investors shouldn't be concerned that license revenue declined. This is by design, as the company has been transforming the software portion of its business model from one that's based on licenses to one that's focused on subscriptions, or a software-as-a-subscription model. This should prove a positive for the company and its investors because SaaS businesses generate recurring revenue.
Matterport shipped through its product order backlog during the third quarter. For some time, it had been unable to fulfill all orders for its cameras because of global supply chain issues.
Guidance
Management issued guidance for the fourth quarter. It also narrowed its 2022 guidance ranges for all three metrics for which it provides an outlook. This move had the effect of notably raising the midpoint of the earnings guidance and slightly increasing the midpoint of the subscription revenue guidance. The midpoint for total revenue guidance was unchanged.
| Metric | Q4 2022 Guidance | Q4 2022 Projected Change YOY* | Prior Full-Year 2022 Guidance | Current Full-Year 2022 Guidance | Full-Year 2022 Projected Change YOY* |
|---|---|---|---|---|---|
| Revenue | $39 million to $41 million |
44% to 51% |
$132 million to $138 million [$135 million midpoint] |
$134 million to $136 million [$135 million midpoint] |
21% to 22% |
| Subscription revenue | $19 million to $19.2 million |
28% |
$73 million to $74 million [$73.5 million midpoint] |
$73.5 million to $73.7 million [$73.6 million midpoint] |
20% |
| Adjusted earnings per share (loss) | ($0.11) to ($0.09) |
Loss projected to widen 10% to narrow 10% |
($0.50) to ($0.46) [($0.48) midpoint] |
($0.43) to ($0.41) [($0.42) midpoint] |
Loss projected to widen 87% to 78% |
Data source: Matterport. YOY = year over year. *Calculations by author.
A good quarter
In short, Matterport turned in a good quarter. It's a big positive that the company was able to catch up on its order backlog for its cameras, since its inability to fully meet demand for them had been hurting its paid subscriber count and revenue.
Some investors are enthused about the potential for Matterport's digital-twin technology to enable it to become a player in the emerging metaverse.
