Matterport(MTTR) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents Matterport's unaudited Q1 2022 financial statements, showing $28.5 million revenue, $71.9 million net income, and $25.5 million cash used in operations Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $721,901 | $719,176 | | Cash and cash equivalents | $92,996 | $139,519 | | Short-term investments | $308,813 | $264,931 | | Total Liabilities | $62,263 | $451,013 | | Warrants liability | $6,405 | $38,974 | | Contingent earn-out liability | $0 | $377,576 | | Total Stockholders' Equity | $659,638 | $268,163 | Condensed Consolidated Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total Revenue | $28,510 | $26,929 | | Gross Profit | $11,909 | $16,728 | | Loss from Operations | ($84,942) | ($2,355) | | Total other income (expense) | $157,450 | ($498) | | Net Income (Loss) | $71,904 | ($2,872) | | Diluted EPS | $0.23 | ($0.07) | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($25,478) | $1,056 | | Net cash used in investing activities | ($18,242) | ($2,506) | | Net cash used in financing activities | ($3,226) | ($903) | | Net change in cash, cash equivalents, and restricted cash | ($46,946) | ($2,353) | Notes to the Consolidated Financial Statements (Unaudited) This section details Q1 2022 accounting policies and events, including the $64.4 million Enview acquisition, earn-out liability elimination, warrant redemption, and a surge in stock-based compensation to $61.1 million - On January 5, 2022, the company completed the acquisition of Enview, Inc. for a total purchase consideration of $64.4 million, consisting of $35.0 million in cash and $19.1 million in common stock, plus unpaid consideration, resulting in $54.1 million in goodwill[79][81] - All six Earn-out Triggering Events occurred as of January 18, 2022, resulting in the issuance of an aggregate of 21.5 million Earn-out Shares and the elimination of the contingent earn-out liability of $377.6 million by March 31, 2022[61][152][153] - The company redeemed all outstanding Public Warrants as of January 14, 2022, issuing 9.1 million shares upon exercise of public and private warrants, generating aggregate proceeds of $104.4 million, with 1.7 million Private Warrants remaining outstanding as of March 31, 2022[144][145] Stock-based Compensation Expense (in thousands) | Expense Category | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Costs of revenue | $1,809 | $25 | | Research and development | $12,943 | $138 | | Selling, general, and administrative | $40,525 | $495 | | Total Stock-based Compensation | $61,097 | $740 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Matterport's market position, Q1 2022 revenue growth to $28.5 million, widening operating loss to $84.9 million due to stock-based compensation, and strong $600 million liquidity - Matterport is focused on several growth vectors: scaling the enterprise across industry verticals, expanding internationally, investing in R&D, and expanding partner integrations and third-party developer platforms[183] Key Business Metrics | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Spaces Under Management (millions) | 7.3 | 4.9 | | Total Subscribers (thousands) | 562 | 331 | | Paid Subscribers (thousands) | 58 | 49 | | Net Dollar Expansion Rate | 107% | 129% | Non-GAAP Loss from Operations (in thousands) | Line Item | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | GAAP loss from operations | $(84,942) | $(2,355) | | Add back: stock based compensation expense, net | $56,088 | $658 | | Other adjustments | $1,596 | $0 | | Non-GAAP loss from operations | $(27,258) | $(1,697) | Results of Operations Q1 2022 total revenue increased 6% to $28.5 million, driven by subscription growth, while gross margin contracted to 42% and operating expenses surged to $96.9 million due to stock-based compensation Revenue by Type (in thousands) | Revenue Type | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Subscription | $17,141 | $13,800 | 24% | | License | $23 | $2,260 | (99)% | | Services | $3,973 | $2,689 | 48% | | Product | $7,373 | $8,180 | (10)% | | Total Revenue | $28,510 | $26,929 | 6% | - Gross margin decreased to 42% from 62% year-over-year, primarily due to minimal high-margin license revenue and lower product gross margins from using alternative suppliers to mitigate supply chain shortages[260] - Research and development expenses increased 332% to $26.0 million, largely due to a $12.8 million increase in stock-based compensation and a $5.5 million increase in salary expenses from higher headcount[261] - Selling, general and administrative expenses increased 443% to $70.8 million, driven by a $40.0 million increase in stock-based compensation and a $10.9 million increase in personnel-related costs[262] Liquidity and Capital Resources Matterport maintained a strong $600 million liquidity position as of March 31, 2022, primarily from equity issuances and warrant exercises, despite using $25.5 million in operating cash Liquidity Position (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $92,996 | $139,519 | | Investments | $506,991 | $528,590 | | Total cash, cash equivalents, and investments | $599,987 | $668,577 | - Net cash used in operating activities was $25.5 million for Q1 2022, compared to net cash provided by operating activities of $1.1 million in Q1 2021[273][274] - Net cash used in investing activities was $18.2 million, primarily for business acquisitions ($30.0 million) and capitalized software ($3.6 million), partially offset by maturities of investments ($46.2 million)[276] - Net cash used in financing activities was $3.2 million, reflecting a $33.3 million payment for taxes on net settlement of equity awards, largely offset by $27.8 million in proceeds from warrant exercises[278] Quantitative and Qualitative Disclosures About Market Risk The company identifies foreign currency and inflation as primary market risks, noting no material impact from a hypothetical 10% currency change or current inflation - The company's results are subject to fluctuations from foreign currency exchange rates as expenses are denominated in currencies of jurisdictions where it operates, primarily the U.S., U.K., and Singapore[285] - Management does not believe inflation has had a material effect on the business but notes that an inability to offset higher costs through price increases could harm future results[286] Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2022, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of March 31, 2022, due to material weaknesses in internal control over financial reporting[288] - Identified material weaknesses include: (1) not maintaining a sufficient complement of personnel with appropriate accounting and internal controls knowledge; (2) ineffective design of controls over the period-end financial reporting process; and (3) ineffective IT general controls for relevant information systems[290][291] - The company has initiated a remediation plan that includes hiring additional accounting and finance resources, designing and implementing improved controls, and engaging a third-party IT consulting firm[293] PART II. OTHER INFORMATION Legal Proceedings The company is involved in ongoing legal matters, including an appeal against a former employee's lawsuit, indemnifying Redfin in a patent case, and responding to an SEC information request - A former employee and shareholder, William J. Brown, sued the company over stock transfer restrictions; a Delaware court ruled against the company, which filed a notice of appeal on February 8, 2022[297][298] - The company is indemnifying Redfin Corporation in a patent infringement lawsuit filed by Surefield concerning Redfin's use of Matterport's 3D-Walkthrough technology, with the case tentatively set for trial in May 2022[127] - In January 2021, Legacy Matterport received a voluntary request for information from the SEC's Division of Enforcement related to certain secondary market securities sales and repurchases, with which the company states it has fully complied[128] Unregistered Sales of Equity Securities and Use of Proceeds In February 2022, the company issued 99,501 unregistered Class A common shares to a customer as consideration for development agreement milestones - In February 2022, 99,501 shares of Class A common stock were issued to a customer for achieving milestones under a development agreement, unregistered and relying on the exemption in Section 4(a)(2) of the Securities Act[299] Other Items (Items 3, 4, 5 & 6) This section confirms no defaults on senior securities, no mine safety disclosures, no other material information, and lists filed exhibits - The company reported no defaults upon senior securities, no mine safety disclosures, and no other material information required to be disclosed under Item 5[300][301]