Matterport(US:MTTR)2023-08-08 16:00PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Q2 2023 and 2022, covering balance sheets, statements of operations, and cash flows Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $82,316 | $117,128 | | Short-term investments | $363,295 | $355,815 | | Total current assets | $483,694 | $517,932 | | Total assets | $604,728 | $640,395 | | Liabilities & Equity | | | | Total current liabilities | $49,835 | $48,978 | | Total liabilities | $53,226 | $56,484 | | Total stockholders' equity | $551,502 | $583,911 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $39,567 | $28,481 | $77,561 | $56,991 | | Gross profit | $15,963 | $11,713 | $32,375 | $23,622 | | Loss from operations | $(58,906) | $(69,190) | $(115,700) | $(154,132) | | Net income (loss) | $(56,536) | $(64,634) | $(110,378) | $7,270 | | Diluted EPS | $(0.19) | $(0.23) | $(0.37) | $0.02 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(32,839) | $(58,278) | | Net cash provided by (used in) investing activities | $(4,027) | $34,155 | | Net cash provided by (used in) financing activities | $1,866 | $(1,612) | | Net change in cash | $(35,000) | $(25,735) | - Subsequent to the quarter end, on July 11, 2023, the company announced a restructuring plan to reduce operating costs, including a reduction of approximately 170 roles (30% of its workforce), with expected charges of $4.0 to $5.0 million primarily in Q3 and Q4 of 2023114 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's Q2 and H1 2023 financial performance, highlighting a 39% revenue increase, key business metrics, cost structures, and a recent restructuring plan to accelerate profitability - The company is leading the digitization of the built world, with an estimated total addressable market of over $240 billion, comprising more than four billion buildings globally, and approximately 10.5 million spaces under management as of June 30, 2023117119 Key Business Metrics | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Spaces under management (millions) | 10.5 | 8.0 | | Total subscribers (thousands) | 827 | 616 | | - Paid subscribers (thousands) | 69 | 62 | | - Free subscribers (thousands) | 758 | 554 | - The Net Dollar Expansion Rate was 100% for the three months ended June 30, 2023, down from 107% in the same period of 2022, reflecting spending caution from smaller customers in U.S. residential real estate due to the macroeconomic environment144153 - On July 11, 2023, the company announced a restructuring plan involving a 30% workforce reduction (approximately 170 roles) to reduce operating costs and accelerate its path to profitability, with expected charges of $4.0 to $5.0 million123 Results of Operations Total revenue increased 39% year-over-year to $39.6 million for Q2 2023, driven by growth in Services, Product, and Subscription revenue, leading to a reduced operating loss Revenue by Type (in thousands) | Revenue Type | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Subscription | $20,868 | $18,386 | 13% | | Services | $10,684 | $5,013 | 113% | | Product | $7,988 | $5,056 | 58% | | Total Revenue | $39,567 | $28,481 | 39% | - The 113% increase in Services revenue was primarily driven by the acquisition of VHT Studios, which contributed $4.3 million in the quarter, while the 58% increase in Product revenue was mainly due to higher demand for the Pro3 Camera, launched in August 2022189190 - Research and Development expenses decreased by 12% YoY for the quarter, reflecting a strategic reallocation of spending, and Selling, General, and Administrative expenses decreased by 6% YoY, primarily due to a $3.1 million reduction in marketing programs198199 Non-GAAP Financial Measures The company provides non-GAAP financial measures, showing an improved non-GAAP loss from operations of $24.0 million for Q2 2023 and reduced free cash flow outflow for H1 2023 Reconciliation of GAAP to Non-GAAP Loss from Operations (in thousands) | | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | GAAP loss from operations | $(58,906) | $(69,190) | | Stock based compensation expense, net | $34,449 | $32,889 | | Acquisition-related costs | $0 | $900 | | Amortization of acquired intangible assets | $443 | $265 | | Non-GAAP loss from operations | $(24,014) | $(35,136) | Free Cash Flow Calculation (in thousands) | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(32,839) | $(58,278) | | Less: purchases of property and equipment | $101 | $866 | | Less: capitalized software and development costs | $5,248 | $7,086 | | Free cash flow | $(38,188) | $(66,230) | Liquidity and Capital Resources As of June 30, 2023, the company had $445.6 million in cash, cash equivalents, and investments, deemed sufficient to fund operations for at least the next twelve months - The company's total cash, cash equivalents, and investments stood at $445.6 million as of June 30, 2023, down from $476.9 million at the end of 2022211212 - Management believes that current financial resources are sufficient to continue operating activities for at least one year past the issuance date of the financial statements213 Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, primarily foreign currency exchange and inflation, noting no material impact to date - The company's primary market risks are foreign currency exchange risk and inflation risk227 - Revenue is primarily generated in U.S. dollars, while expenses are denominated in various currencies; a hypothetical 10% change in foreign currency exchange rates would not have a material impact on the financial statements as of June 30, 2023228 - The company does not believe that inflation has had a material effect on its business, financial condition, or results of operations229 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level231 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting232 PART II. OTHER INFORMATION Legal Proceedings The company discloses ongoing legal matters, including a former employee lawsuit, patent infringement litigation, and a 2021 SEC information request regarding securities sales - The company is in ongoing litigation with former employee William J. Brown regarding stock transfer restrictions and alleged fiduciary duty violations, with a trial scheduled for November 13, 2023237 - The company is indemnifying Redfin in a patent infringement lawsuit brought by Surefield, where a jury found non-infringement and invalid patents in May 2022, with post-trial motions pending239240 - In January 2021, the company received a voluntary request for information from the SEC's Division of Enforcement regarding certain sales and repurchases of its securities, to which it has complied and has not received any updates on the investigation's status241 Risk Factors This section updates risk factors, emphasizing the potential negative impact of adverse macroeconomic conditions, including inflation, recession, and global banking system turmoil - The company's business may be negatively affected by adverse macroeconomic conditions, including inflation, slower growth or recession, tighter credit, and higher interest rates, which can impact consumer and business spending244245 - Turmoil in the global banking system, exemplified by the March 2023 closure of Silicon Valley Bank (SVB), a banking partner, poses a potential risk to the business and the financial condition of its customers and suppliers247 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period Other Information No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2023 Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer, and XBRL data files