Matterport, Inc.

Thank you for standing by, and welcome to the Matterport Inc. Fiscal Year 2022 Fourth Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program may be recorded. And now I'd like to introduce your host for today's program, Suhan Kim, Vice President of Investor Relations. Please go ahead.

Thank you.

Before we begin, I'd like to remind you that today's call contains forward-looking statements within the meeting of federal securities laws, including but not limited to statements regarding Matterport's future financial results and management's expectations and plans for the business. These forward-looking statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from those discussed on today's call. Additional information regarding the risks and uncertainties that could cause actual results to differ from forward-looking statements can be found in our filings with the SEC. Any forward-looking statements made on this call speak only as of today, and Matterport assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. In addition, today's call may include discussion of non-GAAP financial measures. These measures should be considered as a supplement to and not a substitute for GAAP financial measures. Reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's earnings deck, which is available on the company's website. Hosting Faith Caller, R.J. Pittman, Chairman and Chief Executive Officer of Matterport, and J.D. Fay, Chief Financial Officer. Now, I'd like to turn it over to R.J. to begin.

Thanks, Suhan. Good afternoon, everyone, and thank you for joining us today. 2021 was a landmark year for Matterport. We completed our merger with Gores Holding 6 and began trading on the NASDAQ in July, raising over $640 million in gross proceeds, significantly strengthening our balance sheet. We doubled our headcount in the year right on plan, giving us the capacity and world-class leadership across the company to execute our growth plan. I am incredibly proud of the organization we have built, and the caliber of the team is exceptional. We understand better than most the magnitude of scale required to fulfill our ambitious goal of digitizing the built world at large. I am very impressed with our accomplishments over the last decade, and especially in just the last year. But for Matterport, this is just the start of the start. I'm thrilled the report's strong growth metrics for 2021 that demonstrate the power of our platform and the sharp progress we're making scaling the business. For the full year, our subscriber base doubled to more than 503 subscribers. Spaces under management grew 54% to $6.7 million, and subscription revenue increased 47% to $61 million, as subscription revenue continues to increase as a percentage of the total revenue mix. The outlook for 2022 and the next decade ahead for Matterport is extremely compelling. We expect to see a continued convergence of the physical and digital worlds. People want to be able to access every corner of the globe digitally. More broadly, digital access to the real world is rapidly changing the game, particularly as Matterport unlocks the power of our spatial data library, comprising billions of square feet of rich building data from all types of spaces in 177 countries. The insights and analytics we can generate from that data creates so much new value for the property and the owner manager, and occupants. This is why our mission to make every space more valuable and accessible is so important to the digital first world of tomorrow. And today, we are greatly simplifying the process, enabling anyone to create a high-fidelity digital twin of any physical space, starting with just the smartphone in their pocket. Our strategy for growth remains the same. Scale customer acquisition, unlock the power of our spatial data, and expand our platform ecosystem. I'd like to provide an update on each of these. Let's start with customer acquisition. To accelerate growth, we continue to innovate in a critical initiative we call Capture Ubiquity. Capture Ubiquity provides the best way to digitize any physical space for any type of customer. From professional on-demand capture services to a capture device of choice, customers can digitize a space using a range of offerings, including the Matterport Pro 2 camera, third-party devices, and even the smartphone in your pocket. In 2021, we scaled every aspect of our capture portfolio, and in Q4, we introduced Matterport for Android, making 3D capture available to anyone with a compatible Android device in 177 countries around the world. Bringing Matterport capture to Android is a key part of our growth strategy that taps into the other 75% of the smartphone install base in the world. This will help us accelerate our international expansion across Europe, the Middle East and Africa, and the Asia-Pacific region where Android market share is especially concentrated. At launch, we saw tremendous response from Android users. We served over 200,000 app downloads from the Google Play Store in just the last two months of the fourth quarter. As expected, we are seeing strong international mix that is ready for Matterport on a mobile device. In fact, more than half of our Android subscribers came from Europe in the quarter. Smartphone capture is an important part of our go-to-market strategy, and it continues to drive adoption across SMB, mid-market, and enterprise. I'm excited to report that we now have 20% of the Fortune 1000S customers, many of whom were able to prove Matterport's enterprise value immediately using just the phone in their pocket and our no-cost premium tier to get started. But we didn't stop there. On the heels of Matterport for Android, we are excited to introduce Matterport Axis. Axis is a revolutionary motorized mount that works with a smartphone to capture 3D digital twins of any physical space with increased speed, precision, and consistency. This convenient hands-free solution produces reliable, high-fidelity results with just a click of a button. From homes to offices, hotels, rentals, retail locations, even a factory floor, Matterport Access is the most affordable way to supercharge 3D capture using either an iOS or Android smartphone. With Axis, we aim to accelerate the digital transformation of the built world by making it effortless for anyone with a smartphone to digitize any kind of space with a new level of precision and ease of use. Customers across a variety of industries use Matterport to virtually measure, document, manage, and promote their properties online. Now with Matterport Access, organizations across the globe can scale up their efforts to affordably capture high-fidelity digital twins at multiple locations simultaneously. Distributed teams get reliable, consistent results from their smartphones, and Access helps to ensure that every scan from every location achieves the same level of precision. On February 8th, Axis became available for pre-launch reservation at Matterport.com and also with our partners Adorama and B&H with a special pre-launch price of just $59. Due to overwhelming demand, we have nearly allocated all of our initial supply allocation. Additionally, we have seen tremendous interest from enterprise customers with many already in full evaluations with Axis today. We expect general availability of Access in early April, along with our first Access Starter Bundle that includes Access, a tripod, carry case, and a 12-month subscription plan for just $149, our best customer value offered to date. The second part of our strategy unlocks the power of our Spatial Data Library. We introduced our Datification Strategy in 2021, and have been on a roll ever since. Today, Matterport transforms buildings into data with our powerful digital twin technology. Tomorrow, we will increase the value of every building in space through analysis and understanding of every square foot and every square centimeter of a physical space. A fully digital spatial audit with far more detail and building insights than are currently available from the property appraisals, inspections, and walkthroughs of today. The potential is enormous, and the opportunity is now. We are already in market with early commercial deployments of datification, and we aim to supercharge those efforts with the acquisition of Enview, a premier provider of scalable AI-powered 3D spatial analysis that closed on January 6th of this year. Enview uses a combination of artificial intelligence, deep learning, and computer vision to understand what's in a space, recognize objects, and recognize where they're positioned in an outdoor environment or an indoor space. It's very difficult to codify what we as humans do when we walk through a space, and Enview helps us get there faster with extraordinary technology and data science expertise. our customers agree that canvassing every centimeter of a single 200,000 square foot facility is at best difficult to do with sufficient energy and precision. With Matterport's datafication platform, we will soon be ready to simultaneously analyze thousands of these facilities with the precision that leaves no centimeter unturned. This is remote facilities management and building intelligence at scale. and we're very excited about it. Now I'd like to talk about the third part of our strategy, the expansion of the Matterport platform ecosystem. We have been hard at work extending the Matterport value proposition by opening the platform to developers, partners, and enterprises. Now these industry partners can build and integrate with the world's largest spatial data library to customize our digital twins and create vertical market applications for all of our major end markets. Our partners connect with hundreds of thousands of Matterport customers in 177 countries to market their innovations and deliver breakthrough 3D experiences. We're grateful to have partners like SimLab, Redfin, Autodesk, and 150 more. Last year, We expanded our partnership with Amazon Web Services in two important ways. In Q3, we launched AWS GovCloud. This will be the platform where we deploy and manage our FedRAMP compliant offering. In Q4, we announced our digital twin platform support as a launch partner for AWS IoT TwinMaker, introduced at the reInvent conference, which took place in November. further demonstrating the growing demand for digital twin solutions in the enterprise and showcasing Matterport's industry-leading solution in 3D capture for the built world. Amazon looks to meet customers where they are today, with solutions that cater to the data they store in AWS Cloud. Buildings, facilities, and manufacturing data is among the growing cohorts. With Matterport's scalable digital twin platform, we provide an easy on-ramp to AWS IoT TwinMaker with a precision digital twin to accurately represent and help optimize the physical operating environment. This is another example of Matterport's platform ecosystem that readily scales to deliver powerful partner solutions for large-scale businesses like AWS. The versatility of our platform ecosystem has also helped us expand our partnership with Facebook, now Meta, to enable researchers and academics to develop advanced intelligent systems with a physical or virtual embodiment such as robots and personal digital assistants. Meta's AI group is partnering with Matterport to provide access to a collection of Matterport's powerful 3D spatial data out of a shared interest in addressing this area of critical need in embodied AI to spur greater innovation in both the digital and physical world. We came together with Meta and released an unprecedented 1,000 digital buildings and spaces of all kinds from over 90 countries that researchers from top universities all over the world have started using to train AI models and autonomous systems to make proper decisions in both digital and real-world situations. Since we announced the program last summer, we have received more than 450 applications, and hundreds of universities and researchers have already started their work. Following this program, there has been quite a bit of discussion about the future of digital twins and how essential they are to creating a viable metaverse at scale. We certainly share in the enthusiasm for what the future holds in a digital-first world. Some are approaching the metaverse with simulated virtual worlds, VR and AR layers for gaming, entertainment, social, and meetings. Matterport, by contrast, has been digitizing buildings in the physical world to generate proven business value by turning buildings into data with our powerful AI platform and connecting real-world spaces in the digital realm. And we're doing it at an unprecedented scale that is unequaled today. Matterport for Android, Access, Enview, and our growing partnerships with companies like AWS and Meta are great indicators of our continued momentum and the focused execution in just Q4 alone. directly fueling our capture, spatial data, and platform ecosystem growth strategy. I can't be more proud of our team for delivering on such major initiatives in Q4 and setting the stage for another year of innovation and growth in 2022. I will now turn it over to JD, who will discuss our financial performance for the fourth quarter and the continued strength of our business model.

Thank you, RJ. We had a remarkable year in 2021, achieving record total revenue of $111 million, which was up 29% year over year. Recurring subscription revenue also achieved a record $61 million, increasing 47% year over year. In 2021, we continued to make progress on our transition to a recurring subscription business. Not only was 2021 the fourth year in a row that recurring subscription revenue as a percentage of total revenue increased, but also in 2021, subscription revenue became the majority of our revenue for the first time. Subscription revenue represented 55% of total revenue, which was an increase of 700 basis points from the prior year. The growth of subscription revenue also naturally results in more of our revenue becoming recurring with high gross margin. Subscription gross margin was 76%, which represents nearly a 400 basis point increase from 2020. We had another outstanding year of customer acquisition, nearly doubling our total subscribers year over year to 503,000. At the end of the fourth quarter, we had 448,000 free subscribers and 55,000 paid subscribers. Moving to Q4 performance, I am pleased to report that we delivered record fourth quarter revenue of $27.1 million, up 15% from Q4 last year. Subscription revenue was a record $16.5 million, up 32% from the year-ago quarter. In addition, our annual recurring metric, or ARR, grew to a record $66.1 million at quarter end. Subscription revenue was 61% of total revenue in the fourth quarter compared to 53% in the year-ago period. Subscriptions are core to our growth strategy, and we leverage the other revenue lines, product, services, and license, to continue to build subscribers and subscription revenue over time. Our subscribers are also increasing their spend with us at a healthy rate. Our net dollar expansion rate was 110% in Q4. This is in line with our historical growth rate for this metric. I mentioned in the past that our net dollar expansion rate can be driven by our enterprise customers where we still have relatively low penetration and we had another successful quarter moving enterprise customers upward to higher plans as they grew their use of Matterport. Small businesses tend to have lower activity on the platform in the fourth calendar quarter given the holidays and winter weather in our larger markets and which partially offset the strength in enterprise customer expansions. License revenue was $.3 million in the fourth quarter. As I noted on the third quarter call, there was a large enterprise transaction that was expected to be recognized as license revenue during Q4. However, that relationship progressed directly into the subscription phase in the quarter. And because it is now a subscription, this transaction is expected to continue to be recognized as recurring subscription revenue over at least the next four quarters. The license revenue recognized in the quarter derives from another new offering launched in 2021, which is an application programming interface and software development kit to integrate Matterport data into customers' enterprise applications. This API SDK integration enables enterprises to bring Matterport data and content into their workflows, such as project management, modeling, and asset maintenance applications. This is part of our strategy to integrate into enterprise workflows robustly, increasing adoption and usage of Matterport spaces and their data over time. Services revenue for the fourth quarter was $3.7 million, a 69% increase year on year. We provide a variety of services, including in-app purchases and capture services. The year-over-year growth was led by exceptionally strong performance in our capture services segment. Capture services is an offering by which enterprise customers hire us to subcontract the capture of their spaces in high volume, enabling them to get onto our platform more quickly and at scale. In the fourth quarter, we started to see enterprise customers that had agreed to use capture services earlier in the year begin to schedule and scan their physical footprint in greater volumes. In addition, in-app purchases, which provide our customers additional digital assets, such as schematic floor plans and scan-to-BIM files, also continued to provide strong year-over-year growth. Our product revenue was $6.6 million in the quarter compared to $8.4 million in a year-ago period. We continue to see strong demand throughout the quarter for our products, But as I noted in the third quarter conference call, we were impacted by the full quarter of the global supply chain constraints. This meant that we could not satisfy all the demand for our products. And as a result, we entered the first quarter of 2022 with one of our largest backlogs ever. I believe that we could have seen year over year growth in our product revenue had we been able to satisfy all of the demand. Moving on to gross margin, our total non-GAAP gross margin for the fourth quarter was 50%. Our subscription gross margin was 78% as compared to 75% a year ago. Our subscription gross margin remains strong as we continue to make enhancements to our technology platform, while our total spaces under management grew over 50% last year. As we have noted before, we expect subscription gross margin to vary by 100 to 200 basis points from quarter to quarter as we continue to invest in building out our subscription platform. Product gross margin was negative 11% as compared to positive 39% a year ago. As I mentioned on our last earnings call, toward the end of Q3, we began expediting materials in short supply to meet customer demand. We also made tactical decisions to source parts from alternative suppliers or to pay higher prices to secure allocations. The combined impact of these factors drove the increase in our product cost of goods sold. While it is not our intention to lose money on products, it's also important to support our customers. And in most cases, the shipment of a Pro2 camera results in a new paid subscriber to our platform. In this situation, we expect to recover the current gross profit investment within the first four months of the customer's subscription term with us on average. Reviewing non-GAAP operating expenses in Q4, research and development expenses were $9 million, up from $4.6 million in the prior year period. The growth in spending was as planned and is primarily attributable to investments in headcount to increase our product development capabilities and throughput, and to support the launch of Matterport for Android and the newly announced Matterport Access product. SG&A expenses were $30.1 million as compared to $11.1 million a year ago. The majority of this increase is due to investments in sales and marketing, which were also part of our growth plan. we continue to invest in global selling and marketing capacity to drive further growth. We are investing now knowing that it requires some lead time before seeing the fruit from these investments. Non-GAAP net loss was $25.1 million, and diluted non-GAAP loss per share was 10 cents for the quarter, as expected, using a weighted average share count of roughly 245 million shares. Moving on to our balance sheet, we ended the quarter with almost $670 million in cash and investments. We redeemed 7.1 million warrants, raising $76 million in Q4. Since the end of the fourth quarter, we redeemed another 2 million warrants, raising an additional $28 million. Continuing to have a strong balance sheet will give us tremendous flexibility to accelerate our growth over time. Today, we are introducing financial guidance for the full year of 2022 and the first quarter. We continue to see an extraordinary opportunity in front of us, that is for Matterport to lead the digitization and datafication of the built world. While we are the first mover and first scaler with over 6.7 million spaces under management already, in many ways, we have just started on a journey of propelling the digital transformation of the world's largest asset class, real estate. With over 500,000 subscribers, we see the myriad ways Matterport adds value and can see that every structure benefits from a Matterport digital twin and the content and application integration that comes along with that digital twin. Moreover, there are 4 billion buildings and 20 billion spaces in the world for us to capture. Accordingly, we expect 2022 will be another year of strong growth for Matterport. We expect full year 2022 total revenue to be in the range of $125 to $135 million. Importantly, we expect subscription revenue to be in the range of $80 million to $82 million, which represents 32% annual growth at the midpoint. With respect to our acquisition of Enview, We are planning to spend this year integrating its technology into our platform, and accordingly, we expect minimal revenue from the acquisition in 2022. For the first quarter, we expect total revenue to be in the range of $25.5 million to $27.5 million. We expect subscription revenue to be in the range of $17.1 to $17.4 million, which represents 25% annual growth at the midpoint. We expect first quarter non-GAAP loss per share to be in the range of 13 to 15 cents. The balance of our revenue forecast is comprised roughly evenly between product revenue on the one hand and services and license revenue on the other. In the third quarter conference call, while only issuing guidance for 2021 at that time, I did say we would expect to be able to grow our annual total revenue around the 50% range as the economy returns to a more normalized state with respect to supply chain constraints and labor markets, given we did not see any change in the end market demand for our products and services. The demand side of the equation has held up. We continue to see healthy demand. At this point in the first quarter, however, we see the supply chain constraints continuing. This impacts product revenue, and to a lesser extent, it flows into our subscription revenue growth. Our guidance contemplates that these imbalances will be with us through the full year of 2022. There are signs that pressure on component availability could abate somewhat in the back half of 2022. Regardless, our plans assume that balance in the supply chain will not be fully restored until sometime in 2023. License revenue is expected to remain approximately $300,000 per quarter in 2022. Regarding non-GAAP earnings per share, we expect a 47 to 52 cent loss for 2022. Finally, we remain very excited about our market opportunity and growth prospects as we build on our recent product launches. Accordingly, we are optimistic that 2022 will be another exciting growth year for Matterport as we continue on our mission to digitally transform the entire built world. Now, I would like to turn the call back over to RJ.

Thank you, JD. 2021 marked the company's 10-year anniversary and definitively positioned Matterport to lead the digital transformation of the largest asset class in the world. Valued at more than $230 trillion, this will be the most important market in the world to undergo such a significant sea change in the next 10 years. The physical world is going digital. Every industry on every continent is embracing digitization. The largest technology platforms in the world are invested in the movement, and Matterport is the scaled platform to lead the way. This is why Matterport in 2022 is the start of the start. Thank you very much. Operator, we are now ready for questions.

Certainly. As a reminder, ladies and gentlemen, if you have a question at this time, please press star then one. Our first question comes from the line of Bob and Chuck from Deutsche Bank. Your question, please.

Great. Thanks for taking my question. Just maybe for Arjun, just on your sub growth, it's nice to see the above 500K for the end of the year, but paid subs only do 25% year-over-year in fiscal 21. Just giving you accelerated investments you guys are putting into SG&A, Can you just maybe talk about the timing of when we should see those investments pay off into paid subscribers? And maybe can you also just elaborate on your ability to kind of migrate customers from the free tier to becoming paid subscribers?

Sure. Thanks, Bobbin. A couple of things there. So without question, we've seen strong growth in our subscriber tier, specifically tied to smartphone capture and our freemium tier. accounts. And that's been the on-ramp, as we've talked about over the last year or so, to SMB mid-market and enterprise customers. And there is a cycle time that companies who start with Matterport and then graduate up the chain to a paid account. So you're going to see, you know, most typically our free accounts and our smartphone capture accounts converting and growing at a the paid accounts for that reason. The second part of it is paid accounts don't only come through that funnel. We have a full motion for our SMB mid-market and enterprise sales force and go-to-market around the world that manages to a different timeline and a different sales cycle for much larger accounts where one account could actually translate to thousands of spaces and a very large five, six, and even seven-figure SaaS subscription license to follow. So I think it's important to kind of make just a few of those distinctions. And as we put more of these oars in the water on that capture ubiquity part of the strategy, it's going to accelerate that number that you see, yes, indeed, up over the half a million mark for subscribers. And then you see the paid accounts growing at the 25% clip, that's also reflective of, you know, another chunk of the growth, not coming from new accounts, but also continuing to expand the revenue within those subscriber accounts that we have. And, you know, JD mentioned a little bit of this, and certainly a big focus for us in 2022 is tapping into the vast opportunity to fulfill more digitization and in those Fortune 1000 and in those enterprise accounts that have not, where we've not digitized all of the buildings and, you know, achieved our full potential.

Thanks, that's helpful. Just a quick follow-up. Just on your guidance, and I appreciate the look into subscription revenue growth, but can you maybe provide any insight into how we should be thinking about ARR exiting fiscal 22? Sure.

Yeah, thanks, Bob. And, you know, given the subscription growth that we talked about, as you mentioned, I do think that we can grow the ARR, annualized recurring revenue, up to $100 million exiting 2022. So that would be a pretty remarkable milestone. So we're focused quite a bit on getting to that exit run rate.

Great. Appreciate you taking my questions.

Thank you. Our next question comes from the line of Yoon Kim from Loop Capital Market. Your question, please.

Thank you. Congrats on actually a pretty solid quarter despite facing the supply chain constraints. JD, can you just share with us additional details on the current status of the supply chain, for instance? And then also, to what degree do you plan to continue to subsidize the Pro2 cameras like you did in Q4? Thanks.

Yeah. Thanks, June. So right now, with respect to the supply chain, first I wanted to say thanks to the entire procurement, ops, and engineering teams that are working this problem. They're working incredibly hard to mitigate those impacts. And, of course, the main reason is we've got tremendous demand for our Pro2 cameras. And so the more that we mitigate these challenges, the more we can ship. And that drives higher, obviously, product revenue and then of course, higher subscription revenue because most Pro2 cameras come with a new paid SaaS subscription and then some, of course, go to existing customers as well. So big thanks to the team and they're going to continue to work very hard to try to mitigate. With respect to what we're seeing is there are critical chip components that we use in our Pro2 camera that other companies use in their electronics too. And so those components are in high demand. We can go on allocation or we need to find or and we need to find alternative sources for those components. And sometimes we do, and that helps mitigate that issue. And while we're doing that, something else might go on short supply. And so we have seen different components go on, go into short supply at different times in a quarter and overlap one another. So it is a pretty robust activity to try to mitigate, and it's not just one component that persists. As I mentioned in the prepared remarks, we do work pretty hard to find alternative sources of supply and expedite parts when we find that supply to get them to our production facilities. So that's active. It's ongoing. It started at the end of Q3. It's continued through Q4, as I mentioned. And I am planning for it to continue throughout this calendar year for sure. And that's what's in our forecasts. And so our product – revenue forecast or take that into account for the full year. So that is certainly one of the main areas that is impacting how fast we can grow. But, you know, again, stepping back from that particular element of selling Pro2 cameras, in addition, this is why we're working so hard on creating capture ubiquity, creating, you know, many ways for customers to capture spaces from their smartphones to iOS and Android smartphones to the newly announced Matterport Access product that adds to that to using our capture services business. And so we're not going to sort of rest given that there is a macroeconomic impact from the supply chain. We're going to continue to drive growth through these other approaches to capturing and digitizing the built world. There's a lot going on, and we've got a lot of ways, and I think time is good for us to release Matterport for Android and Matterport Access as well so that we can continue to grow and grow around whatever headwind we face.

Okay. Thanks for that detailed answer. RJ, can you remind us how much of your business is driven by the residential real estate market and how has that trended over the past year?

past year and what are the assumptions you're making regarding the regarding that vertical this year given that you know the prospects of a higher interest rate and such RJ you might be on mute sorry about that thanks for the question so indeed residential real estate that category isn't always will be a major part of the business because you look at the built world and the the building stock that comprises those 4 billion buildings and about 60 plus percent of it, maybe 65 percent of it is residential. So we will always be overweight there for very good reason. And in fact, today our mix of the business sits right at about 66, interestingly enough, 66 percent in RRE. And I think that's going to hold steady for a number of reasons. And One part of that is, remember, the value proposition of Matterport and the digital twin goes beyond just providing a virtual tour for an open house. So we're moving beyond just a moment or a transitionary period in a property and moving more into property lifecycle management and using Matterport and all of our property data in more useful ways across the building lifecycle. We will continue to see, though, movement in commercial real estate. That's a big opportunity for us because, you know, the customers we have are the largest commercial real estate portfolios in the world, and there is billions of square feet for us to go Matterport under the agreements that we've been cutting with these companies over the years. And the same is true as we continue into our, you know, growing verticals in insurance, travel and hospitality, and construction, these are growing at a healthy clip. So I do expect, you know, the mix to eventually get a little bit more blended in the years ahead.

All right. Great. Thank you so much, guys.

Thank you. Our next question comes from the line of Brent Braceland from Piper Sandler. Your question, please.

Thank you, and good afternoon. Jamie, maybe I'll start with you here on churn. I have a question here. As you think about a return to normal in the residential space, have you seen any sort of change in churn within residential on the paid subscriber side? Just trying to think through churn dynamics relative to residential versus I'd assume enterprise commercial tends to be much more sticky.

Thanks for the question, Brent. You're right on the assumption enterprise is a very low churn space for us. It's almost nonexistent, and that's great. I mean, our main focus of enterprise is growing inside those accounts. With respect to churn broadly, over the past year, and even looking back two years, our churn has – has largely remained steady, and on the logo side of churn, it's actually declined. And so we're actually seeing improving churn metrics in the business. And that has to do with the fact that we continue to improve the way we communicate with our subscribers and how we help integrate into their workflows and and share with them the various ways they can use Matterport Data Digital Twins to improve the value accessibility of their properties. So we're actually seeing, again, steady to improving churn metrics over the past several quarters, both on a logo basis and dollars basis.

Got it. So as you think about more of a return to normal in the second half year, you wouldn't expect that to materially change. I guess, RJ, as we just take a step back here, big step up in the freemium base, maybe walk us through monetization levers. Clearly, the most direct way to monetize that freemium base is convert it to a paid subscriber, but maybe walk us through how you're thinking about different levers to monetize this really large base for users. Are there different kind of pricing things you can do here? Is there app store opportunities? Maybe just walk us through how you're thinking through the different levers to monetize what is now a pretty large premium base of users.

Sure. And I'm really excited about this because the marketplace for Matterport is something that we have been building really for the last couple of years. And we're putting a lot more commercial strength and marketing behind it in bringing forward these 150 partners that I talked about earlier into full commercial view for our customers. And that applies to someone on the free tier as well as somebody in a paid subscription. And these things range from floor plans, for example. which is a one-click add-on if you'd like to get kind of architect-grade 2D floor plans, which many people do for a variety of reasons. That is an example of an add-on. It's part of our services offering. And we have many more like this, add-ons that allow you to publish to a wide variety of different online portals. We have add-ons that allow you to convert your digital twin into really into any CAD system format for customization and editing in AutoCAD or Revit and these sorts of things. And that just creates all kinds of use cases for the digital twin that are available to everyone. And you can think of a few of those ideas that maybe you as an end consumer aren't going to – start working with your digital twin and AutoCAD, but you might be very interested in being able to virtually redesign your living room, right? Or try out new furniture in the space with exact dimensional precision and photorealism before you make a purchase, right? Our customers are doing that all over the world today. And we want to make that very user-friendly so that anybody can do it, right? And that our hundreds of thousands of subscribers out there today and in the future millions of them will have one-click access to a wide variety of property add-ons and really exciting new functionality that will all be available from hundreds if not thousands of third-party developers, add-ons and applications at the click of a button. This is a really exciting part of the future of Matterport and it's at the center this platform ecosystem.

Makes sense. And then maybe my last question, you know, back to JD, as you think about the guidance for Q1 on the subscription side and then the full year guide, it does look like you do expect growth to kind of reaccelerate here. What are some of the drivers inherent in some of that reacceleration? Is it partially dependent on supply chain improvements and that attach rate to some of the cameras helping, or are there other catalysts that you see that could help kind of re-accelerate that subscription growth rate going into the second half of the year?

Yeah, thanks again. We do see that for a couple of reasons. One is, and we talked a little bit about it earlier, we've got a a growing stable of enterprise customers that have massive physical footprints that we have yet to digitize, and we're working on that. We're actually building up a customer success function to help those customers with their capture activity, and then moving beyond that into the integration of Matterport into their workflows. I touched on that a little bit with some of the API integrations, and we have a host of in-app purchases. That is one piece, is continued penetration in our existing enterprise accounts to grow their use of Matterport globally. The second is we have made a number of investments in sales and marketing generally, particularly around headcount in the back half of Q4 and already early in Q1. And we expect all of those new teammates to ramp and start to become productive in the second half of this year, and that will deliver incremental bookings and then drive into SAS subscription revenues. So there is an expectation of an acceleration and essentially building on the success of the first half and last year and getting to that higher growth rate in the second half.

Does that answer all your questions?

Helpful color, yes. Thank you. I was on mute there. Very helpful. Thank you, guys.

Thank you. Our next question comes from the line of John Walsh from Credit Suisse. Your question, please.

Hi. Good afternoon, everyone. I guess the first question is around you obviously spent time to talk about what you're doing with AWS. and what you're doing with Facebook AI Meta. Can you maybe give us more specificity around how you'll be able to monetize those relationships? And maybe the question around AWS, is that really for existing logos going into an analytics package, or is it really for new logos?

Sure, and I think the way I look at that, the first piece of the equation with AWS, it's very complementary, meaning the AWS customer base represents a channel of opportunity of new business that may not be using Matterport in their enterprises or in their infrastructure, but are up and running with some forms of IoT infrastructure some forms of sensor fusion, and we might even say factory automation. And this is an area that we like to play in, you know, in the enterprise space and in the manufacturing space. And so we see this as an incremental growth opportunity for sure. And AWS has huge global reach, as you know, and a customer base that, that I think uniquely complements what Matterport's going after. So that's the first part of it. The second part of it is that we always look at our platform in both directions. And so there's no question that this offers up an opportunity to take more control of your digital twin, just like we talked about in the marketplace, extend the functionality and customize it in a lot of different ways, including using real-time data management tools. And those aren't all going to come from Matterport. We talk about data vacation and unlocking all of that insights and analysis from the twin. There's a lot in there to get after. And we're going to be leaning on partners like AWS and the work that they're doing with TwinMaker to do exactly that. It's a fantastic partnership in that regard that we've fully integrated believe in. Now, it's very early days, right? This is just coming off the launch pad for AWS as well, but our platform is in great shape and in position to scale up with that thing as it starts to roll out this year, right? So, we'll talk more about it as we get into the commercial markets together with Amazon. On the Facebook frontier, this is important as well, right? Obviously, there's a lot of discussion and maybe more than discussion, right? I mean, There's discussions about new ways to talk about or what we decide to ultimately call this digital universe that many industries have been operating in for years, right? Not the least of which being Matterport over the last decade, right? We've been turning buildings into data, moving them into the digital realm since our founding. And whether it's the metaverse or some other movement that brings more of the industry to the table, Let's see. But what we do know through the partnership here is that we are advancing the capabilities of Matterport's digital twins in a different way, right? Tapping into really state-of-the-art research and development in the critical fields of deep learning, machine learning, autonomous systems, and how they will function and interoperate in either a digital world and the physical world. And once again, that sits right at the intersection of where Matterport plays best today. And this enables us to get the benefit of all of that R&D, right? So new kinds of personal digital assistants that could literally locate your keys for you in your property or find a very specific out-of-place sprinkler head in a factory will be done through a combination of two things, the Matterport spatial data and and some of these intelligent systems that are being developed by the top universities around the world and ultimately turned into technologies that we can deploy commercially. So some of it is, you know, a little deeper range thinking and looking, but that's where Matterport's always been, is out on the leading edge looking around the corner for the next opportunity to unlock the power of our spatial data and the digital twins. And like we said, they're already off and running and moving very quickly because this is an area that I think everybody sees enormous potential in.

Great. And then maybe just thinking about services and the growth there, I think it might have been back in one of the earlier quarters going through the pandemic and labor shortages. You might not have been able to find as many people as you initially wanted. You've had a couple of press releases with nice expansion. Can you kind of talk about how that's going to play out and the ability of you to get people in different geographies around the world going out and doing the capture services? Has that gotten easier or is it still the same?

It's definitely gaining momentum. And it's in two forms. One, we've also been relentless in optimizing and scaling the platform, which is, let's call it the global capture tech logistics and dispatch system, right, that makes it seamless and really turn key. We call it capture services on demand. And it's as easy to use now as ordering, you know, a DoorDash meal. And it's that convenient as well. And as we start to really go to market with this, push our growth marketing campaigns around it, we've seen immediate effect. And the adoption is picking up on the demand side. And at the same time, you know, we have been pushing, as JD discussed, all alternate methods of capture, right? Beyond just the Pro2 cameras and our professional capture devices, They're now armed with a variety of third-party devices and even high-end smartphones, including the iPhone 12 and 13, that's equipped with a precision LiDAR sensor on it as well, which we take full advantage of. And so that's also just given us, as J.D. discussed, option value around our hardware to a certain degree to continue to arm devices capture and the scale of our capture ubiquities playbook in some really important ways. And indeed, capture services is benefiting from that.

Thank you. Our final question for tonight comes from the line of Sophie Lee from Barenberg Capital. Your question, please.

Hi, thanks for taking my question. My question is on the scan to BIM function. So construction customers are a really important part of the long-term story for Matterport. So out of the existing customers in construction, how are you seeing the demand for the scan-to-BIM offering? And on the margins of the scan-to-BIM, how much service is actually required in the process to turn the scans to BIM files? So what's the margin on it, if you can elaborate on that?

Sure. I'll start with the high level, and JD can talk about the unit economics around BIMfile. But first and foremost, just from an efficiency point of view, with Matterport Digital Twin, we take roughly two-thirds of the effort, the labor, and the cost and the time, maybe even more than two-thirds of the time, out of the process to create a BIM file from any other source of information. And, you know, BIM files are very sophisticated and obviously very important to the AEC and construction industry, and it's just that precision reality capture that goes an extraordinarily long way in getting information us almost all the way down the line with what we say partially automated solution for converting Matterport to BIMfile. There still is a service component to it, but we're now able to turn around these conversions in a single day. Larger ones will take a few days, but this is reducing BIMfile conversion lead times that are normally on the order of weeks and even over a month. and it does so with much less error and much greater precision. So that's the first part. And in terms of uptake, we've been in kind of our early rollout of this, and it's important that we've started with a core group of existing customers, and it's been very successful, but we've also been tuning the system, really trying to optimize and get this thing as solid as it can be for a much bigger scale. And you're going to see us taking this in a global rollout all across 2022 and really pushing it as one of the key offerings in the marketplace. It's an opportunity for us now that we have all the confidence behind this with the early runs of BIM file in the fourth quarter that we're going to put the marketing engine behind it from here.

Thank you.

Yeah, I'll just add, I'll jump in for one comment there. I'm pretty excited about Scan2BIM from an income statement and growth point of view. Fourth quarter was our first quarter of offering it, and it has had one of the fastest growths in terms of zero to revenue at the end of the quarter of any of our in-app purchases or add-on purchases yet. So I expect that to continue to grow rapidly. like that in 2022. From a margin point of view, you know, we tend not to break down margins by every product, but I will say that it's a very healthy gross margin, and it's kind of by design. As we take all of that cost out that RJ talked about in the system, we can really deliver both a compelling product from the point of view of price, but then also from the point of view to us with respect to margins. So very pleased with it so far.

Thank you.

And I think it's a great example of when we talk about the marketplace and we talk about where the growth factors come from the company and the technology and this ecosystem, if you look at Vimfile, it's just one of hundreds to come across the verticals that have such a high impact on companies properties and buildings and spaces of all kinds in all of these industries. And it's just further reinforcement for this strategy. And I think these are good proxies for you to look at in trying to form a bigger understanding of the potential of this platform ecosystem as we roll it out across this year. You're going to hear a lot from us every quarter on Marketplace.

Thank you. This does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation in today's conference. Everyone have a great evening.