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Matterport (NASDAQ:MTTR) Misses Q4 Revenue Estimates


Full Report / February 20, 2024

Real estate focused virtual reality platform Matterport (NASDAQ:MTTR) fell short of analysts' expectations in Q4 FY2023, with revenue down 3.9% year on year to $39.55 million. Next quarter's revenue guidance of $40 million also underwhelmed, coming in 2.9% below analysts' estimates. It made a non-GAAP loss of $0.04 per share, improving from its loss of $0.09 per share in the same quarter last year.

Matterport (MTTR) Q4 FY2023 Highlights:

  • Revenue: $39.55 million vs analyst estimates of $39.98 million (1.1% miss)
  • EPS (non-GAAP): -$0.04 vs analyst estimates of -$0.04 (in line)
  • Revenue Guidance for Q1 2024 is $40 million at the midpoint, below analyst estimates of $41.21 million
  • Management's revenue guidance for the upcoming financial year 2024 is $178 million at the midpoint, in line with analyst expectations and implying 12.8% growth (vs 18.8% in FY2023)
  • Free Cash Flow was -$12.66 million compared to -$15.49 million in the previous quarter
  • Customers: 938,000, up from 887,000 in the previous quarter
  • Gross Margin (GAAP): 46.1%, up from 28.8% in the same quarter last year
  • Market Capitalization: $755 million

Founded in 2011 before any mass-market VR headset was released, Matterport (NASDAQ:MTTR) provides the hardware and software necessary to turn real-world spaces into 3D visualization.

Real estate is the world’s largest asset class and as the designing, construction, and selling of real estate moves online there has been an increasing need for 3D real estate visualization.

The internet has become the starting point for almost every property search. Buying, selling, and renting living spaces is a complicated process that historically involves setting up numerous in person showings even when consumers are using internet based real-estate platforms. As technologies continue to reduce the need for human contact and make complicated processes more efficient, real estate digitization has been slowed because people are uncomfortable buying or renting a home without seeing it in person. Matterport helps solve this problem by enabling its customers to create immersive 3D tours that replace in-person viewings.

Matterport sells VR hardware to users so that they can capture their spaces in 3D. Matterport also sells software subscriptions that help users effectively leverage their VR spaces. Bringing homes online helps realtors get more enquiries but is also a useful tool for the design and construction process. Using Matterport’s platform, design-focused architects and contractors no longer have to be on site to do their jobs.

Design Software

The demand for rich, interactive 2D, 3D, VR and AR experiences is growing, and while the ubiquitous metaverse might still be more of a buzzword than a real thing, what is real is the demand for the tools to create these experiences, whether they are games, 3D tours or interactive movies.

Sales Growth

As you can see below, Matterport's revenue growth has been solid over the last two years, growing from $27.09 million in Q4 FY2021 to $39.55 million this quarter.

Matterport Total Revenue

This quarter, Matterport's revenue was down 3.9% year on year, which might disappointment some shareholders.

Next quarter's guidance suggests that Matterport is expecting revenue to grow 5.3% year on year to $40 million, slowing down from the 33.3% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $178 million at the midpoint, growing 12.8% year on year compared to the 15.9% increase in FY2023.

Customer Growth

Matterport reported 938,000 customers at the end of the quarter, an increase of 51,000 from the previous quarter. That's a fair bit slower customer growth than last quarter but in line with what we've observed in past quarters, suggesting that the company still has decent sales momentum.

Matterport Customers

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Matterport's gross profit margin, an important metric measuring how much money there's left after paying for servers, licenses, technical support, and other necessary running expenses, was 46.1% in Q4.

Matterport Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.46 left to spend on developing new products, sales and marketing, and general administrative overhead. Matterport's gross margin is poor for a SaaS business and it's dropped significantly since the previous quarter. This is probably the exact opposite of what shareholders would like to see.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Matterport burned through $12.66 million of cash in Q4 , increasing its cash burn by 35.1% year on year.

Matterport Free Cash Flow

Matterport has burned through $61.09 million of cash over the last 12 months, resulting in a negative 38.7% free cash flow margin. This low FCF margin stems from Matterport's poor unit economics or a constant need to reinvest in its business to stay competitive.

Key Takeaways from Matterport's Q4 Results

Revenue missed and EPS was in line, so this wasn't an exciting quarter but also not disastrous. Its revenue guidance for next quarter missed analysts' expectations and its revenue missed Wall Street's estimates. Overall, this was a mixed quarter for Matterport. The stock is flat after reporting and currently trades at $2.53 per share.

Is Now The Time?

When considering an investment in Matterport, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

We cheer for everyone who's making the lives of others easier through technology, but in case of Matterport, we'll be cheering from the sidelines. Although its , Wall Street expects growth to deteriorate from here. And while its customers spend noticeably more each year, which is great to see, the downside is its customer acquisition is less efficient than many comparable companies. On top of that, its gross margins show its business model is much less lucrative than the best software businesses.

Matterport's price-to-sales ratio based on the next 12 months is 4.4x, suggesting that the market does have lower expectations of the business, relative to the high growth tech stocks. While we have no doubt one can find things to like about the company, we think there might be better opportunities in the market and at the moment don't see many reasons to get involved.

Wall Street analysts covering the company had a one-year price target of $4.40 per share right before these results (compared to the current share price of $2.53).

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