Shares of Matterport (MTTR 0.85%) dropped 16.9% on Wednesday, following the digital-twin platform operator's release on the prior afternoon of its fourth-quarter 2023 report. The stock's decline is probably largely attributable to the quarter's revenue, along with first-quarter 2024 revenue guidance, missing Wall Street's expectations.
The company fared better on the bottom line relative to analyst consensus estimates. The fourth quarter's adjusted earnings-per-share (EPS) result was in line with the Street's projection, as was the first quarter's adjusted EPS outlook. And full-year 2024 earnings guidance slightly exceeded the consensus estimate, while revenue was in line with it.
Matterport's key quarterly numbers
| Metric | Q4 2022 | Q4 2023 | Change (YOY) |
|---|---|---|---|
| Revenue | $41.1 million | $39.5 million | (3.9%)* |
| GAAP operating income | ($62.4 million) | ($49.1 million) | Loss narrowed by 21% |
| GAAP net income | ($60.4 million) | ($43.9 million) | Loss narrowed by 27% |
| Adjusted net income | ($26.6 million) | ($11.8 million) | Loss narrowed by 56% |
| GAAP earnings per share (EPS) | ($0.21) | ($0.14) | Loss narrowed by 33% |
| Adjusted EPS | ($0.09) | ($0.04) | Loss narrowed by 56% |
Data source: Matterport. YOY = year over year. GAAP = generally accepted accounting principles. *Calculation by author.
Investors should focus on the adjusted numbers, which exclude one-time items.
Wall Street was looking for an adjusted loss of $0.04 per share on revenue of $40.2 million. So, Matterport hit the bottom-line estimate on the bull's-eye but fell short of the top-line one. Revenue was near the low end of the company's guidance range of $39 million to $41 million, while the bottom line was in line with its guidance of an adjusted loss per share of $0.05 to $0.03.
In Q4 2023, Matterport used $10.4 million of cash running its operations, a 46% improvement from the year-ago period. The company's balance sheet remains robust, with $423 million in cash and short-term investments and no long-term debt.
Revenue breakdown
| Metric | Q4 2023 | Change (YOY)* |
|---|---|---|
| Subscription revenue | $23.7 million | 23% |
| License revenue | $28,000 | 3.7% |
| Services revenue | $8.3 million | Flat |
| Product revenue | $7.5 million | (44%) |
| Total revenue | $39.5 million | (3.9%) |
Data source: Matterport. *Calculations by author, except for subscription revenue change, which Matterport provided.
In Q4, total subscribers jumped 34% year over year to 938,000. Paid subscribers grew 13% to 72,000. And spaces under management increased 27% to 11.7 million.
The quarter's net dollar expansion rate was 109%. This means that existing subscribers increased their spending with the company by an average of 9% year over year. While this is the highest result in two years, it's still somewhat lower than what I'd like to see for a small company in the early stages of its growth. For context, this metric was 106% in the prior quarter.
What the CEO had to say
Here's most of what CEO RJ Pittman had to say in the earnings release:
Subscription revenue growth accelerated to 23% year over year, ahead of our expectations, driven by broad-based strength across our global customer base. Our net-dollar expansion rate expanded to 109%, the highest level in two years...
I'm incredibly excited about our 2024 Winter Release where we introduced Property Intelligence -- a suite of AI [artificial intelligence]-powered features and automations -- along with new capabilities and add-ons that our customers are craving. This launch sets the stage for 2024 to be the year of the intelligent digital twin, fueling our AI-driven revenue growth and accelerating us toward our profitability goal.
The launch Pittman references occurred on Feb. 15.
Pittman mentions the company's profitability goal. Its near-term goal in this category is to achieve a positive cash flow from operations by the end of the year.
Guidance
Management initiated Q1 2024 and full-year 2024 guidance as follows.
| Period/Metric | Guidance | Change Implied by Guidance (YOY)* |
|---|---|---|
| Q1 2024 total revenue | $39 million to $41 million | 2.6% to 7.9% |
| Q1 2024 subscription revenue | $24.0 million to $24.2 million | 21% to 22% |
| Q1 2024 adjusted EPS | ($0.04) to ($0.02) | Loss narrowing by 43% to 71% |
| Full-year 2024 total revenue | $173 million to $183 million | 9.7% to 16% |
| Full-year 2024 subscription revenue | $104 million to $106 million | 19% to 22% |
| Full-year 2024 adjusted EPS | ($0.11) to ($0.07) | Loss narrowing by 50% to 68% |
Data source: Matterport. *Calculations by author, except for subscription revenue changes, which Matterport provided.
Going into the release, Wall Street had been modeling for a Q1 adjusted loss of $0.03 a share on revenue of $41.2 million, and full-year adjusted loss of $0.10 on revenue of $177.7 million. So, for Q1, the company's earnings guidance was in line with the analyst consensus estimate but revenue was lower than it. And for full year 2024, the bottom-line outlook, at the midpoint, slightly surpassed the Street's expectation, while revenue was in line with it.
Solid progress, but caution is still warranted
I'm going to reiterate my conclusion from last quarter, as it still reflects my thoughts on Matterport stock. The data from the two reasons for caution is updated.
Matterport did a good job of increasing subscription revenue, narrowing the adjusted loss per share, and narrowing the negative cash flow from operations. Moreover, its balance sheet remains very healthy. The company has significant growth potential, though that does not mean it will realize that potential.
Investors still need to be cautious for the following key reasons:
1. While an improvement from [Q3 and the last two years], the quarter's net-dollar expansion rate of [109%] is still on the [low to moderate] side. It suggests that customers as a whole are not seeing enough value in their current paid subscriptions to notably expand their spending on the company's offerings. Of course, this metric is being hurt by the uncertainty surrounding the macro environment and the tough real estate market. We just can't know to what degree.
2. The company's stock is priced under $5 per share. [It closed at $2.11 on Wednesday.] This makes it a "penny stock." Such stocks tend to be highly volatile and risky.
