Matterport(MTTR) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Q2 2022 and 2021, including balance sheets, statements of operations, cash flows, and detailed notes on accounting policies and significant events Condensed Consolidated Balance Sheets As of June 30, 2022, total assets were $689.5 million, total liabilities decreased to $58.3 million, and stockholders' equity increased to $631.2 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $512,596 | $437,703 | | Total Assets | $689,532 | $719,176 | | Total Current Liabilities | $50,215 | $33,327 | | Total Liabilities | $58,325 | $451,013 | | Total Stockholders' Equity | $631,207 | $268,163 | Condensed Consolidated Statements of Operations For Q2 2022, total revenue was $28.5 million with a net loss of $64.6 million, while the six-month period saw $7.3 million net income due to a contingent earn-out gain Q2 2022 vs. Q2 2021 Statement of Operations (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Total Revenue | $28,481 | $29,503 | | Subscription Revenue | $18,386 | $15,281 | | Gross Profit | $11,713 | $17,814 | | Loss from Operations | $(69,190) | $(5,777) | | Net Loss | $(64,634) | $(6,209) | | Diluted Net Loss Per Share | $(0.23) | $(0.15) | H1 2022 vs. H1 2021 Statement of Operations (in thousands, except per share data) | Metric | H1 2022 | H1 2021 | | :--- | :--- | :--- | | Total Revenue | $56,991 | $56,432 | | Gross Profit | $23,622 | $34,542 | | Net Income (Loss) | $7,270 | $(9,081) | | Diluted Net Income (Loss) Per Share | $0.02 | $(0.22) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2022, net cash used in operating activities was $58.3 million, with net cash provided by investing activities at $34.2 million Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(58,278) | $(2,631) | | Net cash provided by (used in) investing activities | $34,155 | $(4,582) | | Net cash used in financing activities | $(1,612) | $(2,252) | | Net change in cash, cash equivalents, and restricted cash | $(25,735) | $(9,465) | Notes to the Consolidated Financial Statements (Unaudited) These notes detail significant accounting policies, the Enview acquisition, contingent earn-out settlement, warrant redemption, and revenue disaggregation, showing subscription revenue growth - On January 5, 2022, the company acquired Enview, Inc. for a total purchase consideration of $64.4 million, which resulted in $54.1 million of goodwill[83][85] - All six contingent earn-out triggering events occurred as of January 18, 2022, resulting in the issuance of 21.5 million earn-out shares to eligible holders, net of tax withholding[62][157] - The company redeemed all outstanding public warrants on January 14, 2022. The exercise of public and private warrants generated aggregate proceeds of $104.4 million[150] Revenue by Geography for Six Months Ended June 30 (in thousands) | Region | 2022 | 2021 | | :--- | :--- | :--- | | United States | $32,877 | $35,135 | | International | $24,114 | $21,297 | | Total Revenue | $56,991 | $56,432 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses performance, highlighting subscriber growth, Q2 2022 revenue of $28.5 million, a widened net loss of $69.2 million due to higher operating expenses, and strategic investments Key Metrics The company tracks Spaces Under Management, Total Subscribers, and Net Dollar Expansion Rate, showing growth in spaces and subscribers but a decrease in expansion rate Key Metrics Comparison | Metric | June 30, 2022 | June 30, 2021 | | :--- | :--- | :--- | | Spaces under management (millions) | 8.0 | 5.6 | | Total subscribers (thousands) | 616 | 404 | | Paid subscribers (thousands) | 62 | 51 | | Net dollar expansion rate (for Q2) | 107% | 132% | Results of Operations Q2 2022 revenue decreased 3% to $28.5 million, with subscription growth offset by product and license declines, gross margin fell to 41%, and operating expenses surged 243% due to compensation Revenue by Type - Q2 YoY Change (in thousands) | Revenue Type | Q2 2022 | Q2 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Subscription | $18,386 | $15,281 | 20% | | License | $26 | $2,099 | (99)% | | Services | $5,013 | $2,879 | 74% | | Product | $5,056 | $9,244 | (45)% | | Total Revenue | $28,481 | $29,503 | (3)% | - Gross margin decreased to 41% in Q2 2022 from 60% in Q2 2021, primarily due to lower product gross margins from supply chain issues, a decrease in subscription gross margin, and minimal license revenue[270] - Operating expenses for Q2 2022 increased by 243% YoY to $80.9 million. This was driven by a $14.4 million increase in R&D and a $42.9 million increase in SG&A, largely due to higher stock-based compensation and personnel costs[271][272] Liquidity and Capital Resources As of June 30, 2022, the company had $562.1 million in cash and investments, with $58.3 million net cash used in operations, and expects sufficient liquidity for the next 12 months Liquidity Position (in thousands) | Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $113,923 | $139,519 | | Investments | $448,142 | $528,590 | | Total cash, cash equivalents, and investments | $562,065 | $668,577 | - Management believes that its current financial resources are sufficient to continue operating activities for at least one year past the issuance date of the financial statements[281] Quantitative and Qualitative Disclosures About Market Risk The company identifies foreign currency exchange and inflation as primary market risks, noting that a strengthening U.S. dollar could impact international revenue, but inflation has not been material - The primary market risks are foreign currency exchange rates and inflation[298] - Foreign currency risk exists as expenses are denominated in currencies like the British Pound and Singapore Dollar, while revenue is primarily in U.S. dollars. A hypothetical 10% change in exchange rates is not expected to have a material impact[299] - Management does not believe that inflation has had a material effect on the business, financial condition, or results of operations[300] Controls and Procedures Management concluded that disclosure controls were ineffective as of June 30, 2022, due to material weaknesses in personnel, financial reporting controls, and IT general controls, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2022[302] - Material weaknesses were identified in three areas: insufficient personnel with appropriate accounting knowledge, ineffective design of period-end financial reporting controls, and deficiencies in IT general controls[303][309] - A remediation plan is in progress, which includes hiring additional finance personnel (including a Chief Accounting Officer), formalizing processes, and engaging an IT consulting firm to improve controls[310][311] PART II. OTHER INFORMATION Legal Proceedings The company faces a lawsuit from a former employee regarding stock transfer restrictions and is involved in a patent infringement case where it indemnified Redfin, with a favorable jury outcome - A lawsuit by former employee William J. Brown concerning stock transfer restrictions resulted in a court ruling in his favor, which was affirmed on appeal. Other claims in the suit are still pending[316] - In a patent case where Matterport indemnified Redfin against Surefield, a jury found no infringement and invalidated the asserted patents. Matterport has since filed its own declaratory judgment action against Surefield[317] Risk Factors This section updates risk factors, adding specific concerns about international geopolitical conflicts, including tensions between Taiwan and China and the war in Ukraine, and their potential impact on business - An updated risk factor was added concerning the potential negative impact of international geopolitical conflicts, specifically escalating tensions between Taiwan and China and the Russian invasion of Ukraine[320] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2022, Matterport issued 31,840 shares of Class A common stock to a customer as consideration for achieving milestones under a development agreement, exempt from registration - In Q2 2022, the company issued 31,840 shares of Class A common stock to a customer as part of a development agreement, utilizing an exemption from registration[318] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[321] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[322] Other Information The company reported no other information for this item - None[323] Exhibits This section lists the exhibits filed with the Form 10-Q, including the merger agreement, corporate governance documents, warrant agreements, and officer certifications - Lists exhibits filed with the report, including certifications from the Principal Executive Officer and Principal Financial Officer[326]