Matterport, Inc.

Welcome to the Matterport, Inc. Fiscal 2023 Third Quarter Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn to the conference host of your host today, Mike Knapp. Please go ahead, sir.

Thanks, and welcome to Matterport's third quarter 2023 financial results conference call. After the market closed today, Matterport released results for the quarter ended September 30th, 2023. The release is available on the company's website at investors.matterport.com. This call is being recorded and webcast live, and a link to the webcast can be found in the investor relations section of our website. Before we begin i'd like to remind you that today's call contains forward looking statements within the meaning of the federal securities laws. Including but not limited to statements regarding that reports 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 can be found in our filings with the SEC. All forward-looking statements are made as of the date of this call and Matterport assumes no obligation to update or revise them except as required by law. In addition, financial references on this call will be on a non-GAAP basis unless otherwise indicated. 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 measure can be found in today's earnings slides, which are available on the company's website. I also wanted to highlight that we recently announced the launch of the Matterport Shareholder Rewards Program with Stock Perks. Interested investors should visit the Stock Perks app for more details on how to claim Matterport Shareholder Perks. Hosting today's call are RJ Pittman, Chairman and Chief Executive Officer, and J.D. Fay, Chief Financial Officer. And with that, I'd like to turn it over to RJ to begin.

Thanks, Mike. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report standout third quarter results with both revenue and loss per share surpassing the high end of guidance. Total revenue for the quarter grew to $40.6 million, fueled by strong uptake from both enterprise and small and medium-sized businesses. Subscription revenue jumped to 20% year-over-year growth, reaching a record $22.9 million, underscoring the growing trust in our platform to boost productivity and cut operational costs. In services, Q3 revenue was resilient as customers chose our capture services and marketing solution to gain a competitive edge in the challenging real estate market. We continue to expand at a rapid pace, with spaces under management hitting 11.1 million and our subscriber base expanding to 887,000, reflecting steady growth in Matterport Digital Twin adoption worldwide. In addition, gross margins reached 56%, a two-year high as subscription and product revenue lines saw significant year-over-year improvement. Revenue growth, Gross margin expansion and continued operating expense discipline drove our loss per share to 4 cents, which is above guidance and a 56% year-over-year improvement. These results highlight that we are improving our operating efficiency while continuing to fund our innovation engine to drive top-line growth. It also confirms that we are firmly on our accelerated path to profitability, which we remain confident in achieving next year. On top of these financial improvements, we saw our net dollar expansion rate improve to 106% from 100% in the prior quarter, as trends in both small and medium-sized businesses and the enterprise cohorts improved. Customers are the lifeblood of our business, and our client-focused approach is driving greater retention and expansion as we help organizations better understand how to get the most out of our platform across the vertical markets we serve. I am particularly encouraged by our opportunity to accelerate the evolution of the real estate sector. The past two decades have bared witness to profound technological disruptions that have shaped various industries, including finance, retail, and entertainment, to name a few. The internet has disrupted just about every marketplace in the world, making products cheaper, including the transaction fees, because of the ubiquitous efficiency of digitization. such as the $0 fees offered by brokerages to trade stocks online, for example. Meanwhile, the real estate sector has largely preserved its traditional analog approach to the property marketplace, which is shackled with inefficiencies with costs and fees that haven't changed in decades. Our ability to identify and tackle these inefficiencies give Matterport and the digital twin a central role in moving the real estate industry forward the old-fashioned way by bringing it all online. History has shown that in all cases, the antiquated offline industries must either evolve and embrace digitization or risk extinction. Recently, we have seen new cracks appear in the foundation of the U.S. real estate industry. with rulings against fixed buyer commissions that many consider to stifle buyers' choices. However, we don't need to weigh into the proceedings to see how we got here. The inefficiencies of the legacy marketplace themselves are what drive the behaviors that keep the cost high and the process of buying and selling real estate more cumbersome than it should be in 2023. Given the tremendous technology advancements available to us today, it's not hard to imagine a present-day industry transformation that reshapes how people buy, sell, rent, and manage their properties online and from anywhere in the world. Matterport continues to evolve too. Our platform has evolved from the immersive 3D virtual tour into a powerful property intelligence agent that provides unprecedented details and insights about a home that have never been previously available to buyers and sellers alike. These new capabilities are empowering the marketplace with better home valuation data and more decision-making information, while making it easy to share in the process with family, friends, and agents. Society's expectations today that all industries be fast, efficient, empowering, and digital are ultimately what drives industry change. even if that requires re-pouring a new foundation to get there. At the heart of that change, it happens to be generational. Gen Z and millennial buyers represent the largest generation in human history, with more than $10 trillion in spending power. This generation was born digital and has very high expectations when it comes to the one-click efficiency of commerce, financial services, transportation, and healthcare. Should it really be any more difficult to purchase a home online than it is to purchase a car or a vacuum cleaner? For more than a decade, Matterport has been a catalyst across the real estate industry, pushing it to its inevitable digital destination. In order for the industry to thrive, much less survive, the change starts today. There has never been a better time to be at the intersection of technology and real estate, and we are more optimistic than ever for the future of the real estate industry and Matterport's role in accelerating the digital transformation of the built world. As an industry leader, we are relentlessly committed to our customer success and increasing the value we deliver to them every day. For many years, Matterport has delivered countless new features, functionality, and engaging experiences across the ecosystem. In Q2, we announced our first change to our subscription plan structure and pricing. The new model incorporated robust customer feedback throughout the process. By carefully considering our customers' priorities, we were able to deliver a pricing strategy that balances exceptional value and flexibility at a fair and reasonable price point. In our view, this customer-centric approach should be more common across the industry as it results in your customers strengthening and aligning their vested interests in your products and services over the long term, just as our customers have. The feedback has been very encouraging and confirms the power of customer-centric value-based pricing. The same approach was taken last year with our enterprise customers that helped us grow to over 100 enterprise accounts with over $50,000 in annual recurring revenue today, while expanding our six and seven-figure contract wins along the way. In fact, I am proud to announce that Matterport won its first eight-figure deal in Q3. a testament to the impact our product is having on some of the largest companies in the world. At the core, innovation is driving up revenue per digital twin more than ever before. For example, we've recently signed enterprise customers in construction and manufacturing verticals at a price that ranges between $150 and $2,500 per month per digital twin. That's more than 1,000 times our SMB starter plan pricing of $2 per month per digital twin. This represents the tip of the iceberg of the significant growth opportunities that lie ahead as we continue to double down on innovation and new tools for our customers. Our strategy is intentionally aligned with our customers' goals. The more valuable tools we can deliver to help them improve productivity and reduce costs the faster they can achieve their business goals while simultaneously accelerating adoption for Matterport. Now let's move on to our partnership update. Matterport delivers value by creating efficient workflows, which is why we continue to focus on strategic partnerships to foster connections within the industry ecosystems, fortify our platform's functionality, pave the way for new distribution avenues for our solutions, and drive our pipeline. As you know, Procore, a longtime partner of ours, is a leader in construction management software with millions of users around the globe. In Q3, we were very excited to announce an expansion of our Procore relationship, enabling deeper digital twin integration to streamline the design and construction process. These new features allow Procore customers to use features such as requests for information, observations, and coordination issues directly within Matterport's photorealistic 3D digital twins, creating a visual system of record for site conditions that anyone on a project can track. Users can centralize record keeping, enable better progress tracking, improve quality control, and experience a more efficient closeout process as they transition seamlessly between their Procore project management workspace and a Matterport digital twin of a site. We recently announced our membership as an Autodesk Construction Cloud Premier Partner, helping bring Matterport's 4K digital twins to even more construction professionals. Strategic partnerships like this and other leading enterprise software providers like Autodesk, AWS, and Verisk continue to provide us with significant momentum and pipeline. I mentioned last quarter that we had expanded our global reach by partnering with major distributors like CompuSolutionates in Latin America and Equinox Technologies in the Middle East, Africa, and Asia Pacific. In Q3, we also extended our long-term relationship with Idealista, Southern Europe's largest online real estate platform through a multi-year agreement. Our global momentum remains strong, and I want to take a moment to briefly discuss a couple of notable European customers. These details are available in our earnings slides, and additional case studies can be found on our website. The first is Danone, based in Paris, which operates large food and beverage manufacturing facilities worldwide that include areas that are difficult for visitors and partners to access. Strict safety and quality protocols mean that all visitors who wish to enter the production facilities must undergo safety and quality awareness training and wear protective clothing. Using Matterport Pro3 cameras, Danone has captured its facilities with dimensionally accurate, photorealistic 3D digital twins. Authorized users can now access any production site remotely from their laptop or mobile device in true 3D. This drove a 50% reduction in onsite visits, saving hundreds of employee hours annually for Danone and its partners. as well as reducing expenses and downtime associated with travel. The digital twin also provides convenient, always-on access to insights and collaboration that actually increases the engagement, attention to detail, and quality of work with no added cost, while seamlessly connecting colleagues and workgroups that may be located all across the globe. This deepens the understanding of manufacturing plant conditions and requirements as well as enhances training knowledge for those who will service a facility. The second case study relates to Siemens based in Munich, a Fortune Global 500 company and a manufacturing and technology powerhouse. Siemens has captured thousands of square feet of its manufacturing plants overseas. The high-resolution digital twins enable Siemens personnel to meet virtually with new and existing customers to discuss the company's manufacturing capabilities in exquisite detail. With their digital twins, internal stakeholders and customers can perform thorough reviews of production and assembly line setups for as long as necessary without disrupting operations. Tight spaces that might only accommodate a few people in person can be viewed in unison online. Zooming in on specialized equipment to highlight advanced features requires only the flick of a finger or the click of a mouse. The noise issues of conducting meetings during a production run are eliminated along with physical safety risks and complexities of welcoming visitors in person. Management is particularly interested in conducting digital twin visits using VR headsets, mitigating the risk of unauthorized photography of sensitive data and reducing travel costs and loss of productivity with travel. Large multinational companies continue to find exceptional value in our solution, as do the Fortune 1000, 25% of which we are proud to call our customers. Before I turn it over to JD Fay, I'd like to provide an update on Genesis, our AI initiative that will combine property intelligence with generative AI and our spatial data library to offer unique AI solutions to the built world. Genesis will leverage our 35 billion square feet of digital space to create one of the most powerful spatial computing platforms in the world for homeowners and property managers alike. Genesis is designed to automate interior design space planning, property management, and so much more for spaces across the vertical markets we serve. In the third quarter, we took another step forward in our vision to provide new property insights automatically generated using Cortex, our AI engine that has been powering Matterport Digital Twins since our inception. Now in an oversubscribed public beta, The new property insights for real estate provide automated room measurements, layouts, editing, and rich reporting capabilities automatically. This type of automation marks a significant breakthrough, delivering insights that were previously unavailable or even feasible with detailed on-site assessments. Additionally, these new tools show vast improvement over the accuracy of measurement taken by hand. by automatically processing the millions of 3D data points captured with the Matterport Digital Twin. Instant access to room dimensions, total square footage by room, by floor, and the entire space built upon one of our most popular features, measurement mode. More than 200 million measurements have been taken manually with this powerful tool. With our new intelligent digital twins, our customers get hundreds of useful measurements, room names, print-ready layouts, and more generated automatically. The new digital twin is immensely valuable for any type of building or space across all industries. Every operations manager or property marketer needs this information. In the case of residential real estate, these details allow a buyer to quickly assess a property and confidently understand the value and potential of their new home. Property marketers can accelerate home listings and sales with instant, at-a-glance property overviews and MLS data, saving significant time while modernizing listings with the insights buyers increasingly demand. We have over 1,500 customers registered for the beta, and customer feedback has been phenomenal and super helpful in making our products the best they can be. Driven by popular demand, the wait list continues to grow. and we're working around the clock to get these breakthrough features in the hands of more of our customers. Genesys and our commitment to delivering valuable data insights to our customers is made possible through our comprehensive spatial data library. In the quarter, the library grew to more than 35 billion square feet of digitized physical space. As our customer base grows and the size of spaces being captured grows too, This is fueled by the power of Pro3 to capture super large spaces indoor and out. In the short time that Pro3 has been in market, the average square feet captured by our Pro3 camera is four times greater than that of the Pro2, expanding our industry-leading spatial data library at a record pace. The rapidly growing breadth and depth of our spatial data library is vital to our long-term strategies. This unprecedented level of information enables Cortex, our core AI platform, to train, learn, and deliver so many new insights and recommendations for properties of every kind. This has long provided Matterport with an enormous advantage in the industry. And today, it is unlocking extraordinary innovation for us, fueled by the historic inflection point of game-changing advancements in the field of AI that have only just begun. I would now like to turn it over to J.D. Faith to discuss our financial performance for the third quarter and the outlook for Q4 and the full year 2023.