Is this spatial data company a buy?
- Luke Donay
- Nov 28, 2021
- 8 min read
It’s time to explore a potential metaverse multibagger. Here is the deep dive on $MTTR, otherwise known as Matterport.
Current Price: $27.27
52/Wk High: $30.80
52/Wk Low: $10.45
Market Cap: $6.6 Billion
Three Month Performance: 82.65%
Read below for the deep dive.
Matterport ( $MTTR ) is a leading spatial data company that offers customers the ability to develop a virtual 3D twin of any space through their unique cloud platform, mobile application, and hardware.
In essence, the company specializes in capturing any space and creating its digital twin, all the while collecting valuable data. The digital twin is then easily accessible through Matterport’s cloud platform.
Speaking of the company’s cloud platform, Matterport’s platform provides customers with a bevy of tools including embedded notes and media, measurement tools, blur settings for privacy, guided tours, floor plan generation, high resolution photos, VR compatibility, and more.
To learn more about the platform's features visit the link below.
matterport.com/digital-twin-features#standard-features
Matterport is able to develop realistic digital twins from scans given their Cortex AI, the company’s specialized artificial intelligence network. Matterport’s AI takes spatial data collected via a bevy of capture devices and processes it into a clean digital twin.
It is important to note that as more spaces are scanned via Matterports platform, more data is collected, which the Cortex AI uses to become more accurate with each scan.
Also note that Matterport’s specialized photography algorithms are part of the process and allow for a fully automated processing pipeline and higher quality digital twins.
Regarding application, Matterport’s platform and hardware has a variety of applications within a multitude of industries, including real estate, architecture and engineering, property management, retail, insurance, restoration or home management, and engineering.
Shifting into revenue generation the company generates revenue through four key segments; subscription, license, product, and services revenue.
Breaking down each segment, Matterport offers clients four key subscription plans that enable customers to access their cloud platform, those plans being; Free, Starter, Pro & Business, and Enterprise.
Quickly describing the subscription plans, pricing increases as the number of active spaces and active users ascends.
Digging into the licensing segment, Matterport leverages their database of spatial data, the largest in the world, to generate revenue. In short, Matterport offers data license solutions to certain customers enabling clients access to Matterport’s digital twin and high quality analytics.
Moving on to the next segment, Matterport provides clients with the tools to capture, which includes their very own 3D capture product Pro2 Camera. Product revenue is revenue generated from sales of the Pro2 Camera and other third party capture devices.
Finally, Matterport also offers clients scanning as a service, Matterport Capture Services, where Matterport professionals can be scheduled on-demand to scan properties. On a final note, Matterport’s in-app purchases made by subscribers are also counted as services revenue.
Rounding out Matterport’s hardware and cloud platform applications, it is only right to study the company’s total addressable market.
According to management, the company’s total addressable market (TAM) stands at $240 billion, with 4 billion scannable buildings and 20 billion spaces. Leadership projects that at just 1% penetration, 200 million spaces, the company can deliver an annual recurring revenue (ARR) of over $2.4 billion.
Furthermore, at 5% penetration, or 1 billion scanned spaces, leadership projects an ARR of over $12 billion. It is important to note that both ARR estimates are using a $1 per space per month rate and that after further monetization with scale, management believes that rate could multiply by five times.
Infact, management believes that with further monetization and a $5 per space per month rate, the company could potentially generate over $12 billion in ARR at 1% penetration and $60 billion in ARR at just 5% penetration.
Matterport is led by chief executive officer (CEO) and chairman RJ Pittman, who joined the company as CEO in 2018. Pittman boasts an impressive resume, previously holding senior positions at eBay, Google, and Apple.
Behind Pittman is an experienced management team boasting prior experience from the likes of Google, Seagate, eBay, PayPal, Apple, The RealReal, Bentek, and Hewlett-Packard.
In recent news, the company launched Matterport for Mobile on Android, enabling Android users to create digital twins of space and building via their smartphone.
The company noted that the app on Android is now available in 175 countries and expands Matterport’s mobile platform to potentially over a billion devices.
Leadership was upbeat.
“The future of the built world is in the palm of our hands. Matterport for Mobile delivers big value in a small package, increasing productivity with every space we digitize,” CEO RJ Pittman said.
You can read more about the mobile Android launch through the link below.
Pushing into partnerships, Matterport in recent months has been building and expanding on strong partnerships. Most recently the company announced a partnership with Meta ( $FB ) AI Research.
To quickly summarize Matterport’s partnership with Meta, the two companies will collaborate to make the largest dataset of 3D indoor spaces ever available for academic and non-commercial uses.
Many believe the partnership is just the start between the two companies and that given Meta’s metaverse ambitions the two companies could work more closely in the future.
“We believe this was the first step towards a much broader Facebook and Matterport relationship as Zuckerberg & Co. head down the metaverse path,” Wedbush analyst Daniel Ives said (Benzinga).
To get more details on the company’s partnership with Meta, follow the links below.
Furthermore, Matterport also recently partnered with In-Q-Tel to develop a government cloud platform that will be deployed on the AWS GovCloud. The partnership will address cybersecurity concerns and provide agencies with a secure cloud of spatial data.
“Our technology will enable the capture of hundreds of thousands of spaces, including critical infrastructure, which the U.S. government protects, manages and operates to keep our country running,” Pittman said.
To read more on the partnership follow the link below.
Digging into the numbers, Matterport beat Q3 2021 expectations with a non-GAAP EPS of $-0.06, better than the analysts consensus estimate of $-0.07. Do note that GAAP EPS landed at $-0.86 in the third quarter.
On the revenue front Matterport delivered another quarter of growth, with Q3 total revenue landing at $27.7 million. On a year-over-year basis, revenue expanded by 10%, representing in-line growth with Q2.
Further exploring revenue, total revenue declined quarter-over-quarter from $29.503 million in Q2. Management attributed some declines in revenue to “supply chain constraints” and shortages in key high demand products.
Breaking down revenue by segment Matterport delivered $15.677 million in subscription revenue, representing a solid jump over the same time 2020 level of $11.517 million.
The quarter’s total subscription revenue also represents QoQ growth when compared to the $15.281 million in the second quarter.
Shifting into license revenue, the segment experienced a sizable decline, with Q3 license revenue totaling just $118,000 compared to $3 million a year ago. Leadership noted that license revenue is lumpy quarter to quarter and that transaction timing has large effects on the metric.
On the services front, Matterport delivered $3.292 million in services revenue throughout the quarter, representing a strong improvement over the same time 2020 level of $2.341 million. Services revenue also expanded quarter-over-quarter from $2.232 million.
Quickly analyzing the services segment, management noted in the Q3 call that the company successfully expanded Capture Services On-Demand into over 80 cities across the US and four cities internationally.
Rounding out revenue, product revenue totaled $8.568 million in Q3, representing slim 4% growth year-over-year. On the flip side, product revenue fell quarter-over-quarter from the Q2 2021 level of $9.244 million.
The decline in product revenue was attributed to the combination of supply chain woes and high demand. Leadership noted that without supply chain issues, the company could have delivered 15% more in products throughout the third quarter.
Splitting revenue by region, Matterport finished the quarter with $16.383 million in revenue via the United States and $11.272 million in revenue via their international segment. Compared to same time 2020 levels, US revenue declined by roughly $255,000 while international revenue expanded by $2.836 million.
Rotating onto annual recurring revenue (ARR), Matterport delivered a record $62.7 million in ARR at the end of the third quarter. While YoY ARR growth was solid, ARR minimally expanded QoQ from the Q2 2021 level of $61.1 million.
Alongside ARR, Matterport’s net dollar expansion rate, which is a measure of revenue generated by existing subscribers, landed at 114% in Q3. Do note, Matterports NDER declined both year-over-year and quarter-over-quarter when compared to the same time 2020 level of 119% and Q2 2021 level of 132%.
Shifting into profits, Matterport delivered $14.181 million in gross profit, representing a decline year-over-year when compared to the same time 2020 level of $15.066 million. Gross profit was also down from the second quarter level of $17.814 million.
Investigating margins, total gross margin declined in the third quarter from 60% to 55%. Furthermore, subscription gross margin improved to 77% from 74%, license gross margin improved to 100% from 98%, services gross margin improved to 33% from 26%, while product gross margin declined from 37% to 23%.
The decline in gross margins, led by product margins, was due to multiple factors. According to leadership, use of the Pro2 Camera for subscription on-ramping and promotions, coupled with supply chain bottlenecks were the source of margin decline.
Although it is important to note that on the Q3 call, leadership noted the decline in product margins was “consistent” with growth plans.
Shifting into income, Matterport delivered a net loss of $167.989 million in Q3, representing a large decline when compared to the Q3 2020 net income of $906,000.
On the operations front, the company delivered a loss from operations of $44.356 million, representing a sizable decline from the $1.263 million income from operations in Q3 of 2020.
Both the decline in net income and income from operations were attributed to increased spending and investment. Leadership noted that with a strong focus on scaling and rapid growth, the company will continue to spend big on research and development and marketing initiatives.
Rounding out quarterly financial metrics, Matterport reported a Q3 free cash flow (FCF) of $-26.860 million, representing a decline when compared to the same time 2020 level of $-10.784 million.
Shifting into platform metrics, Matterport expanded their subscriber base by 116% year-over-year to 439,000 subscribers at the end of Q3. While total subscriber growth was solid, the truly important metric is paid subscriber growth.
Digging into paid subscriber metrics, paid subscribers rose by 35% year-over-year to 54,000 paying subscribers. While 35% expansion is great, the company’s conversion rate declined year-over-year from 20% in Q3 of 2020 to just 12% in Q3 2021.
Furthermore, spaces under management expanded to 6.2 million spaces in Q3, representing a strong improvement over the Q3 2020 level of 3.8 million spaces. Do note, a space under management is defined as any space scanned via the Matterport platform.
Leadership was upbeat on the quarter.
“We made significant advances in all of our objectives, including strategic product launches, key industry partnerships, expanded service offerings, and the scaling of our global workforce to address the huge opportunity ahead,” Pittman said.
Looking to the future Matterport lowered FY2021 revenue guidance to a range of $107 million to $110 million from a range of $120 million to $126 million. The company also narrowed FY2021 EPS guidance to a range of $-0.21 to $-0.25 from a range of $-0.17 to $-0.25.
Management noted that the lower guidance is a direct result of component shortages, extended lead times, and lumpy licensing revenue. Leadership also noted hiring challenges as a headwind that will slow capture services growth.
Shifting into the balance sheet the numbers are solid.
Total Debt: None
Total Liabilities: $448 Million
Total Assets: $653 Million
Cash & Short Term Inv: $323 Million
Compared to Q2 2021, cash levels significantly increased, total assets rose dramatically, and debts declined reasonably.
On a valuation basis, Matterport does trade at a premium.
Price to Sales: 76.83x
Price to Book: 32.15x
EV to Revenue: 76.54x
Given the numbers the analysts are neutral with a mean price target of $27.25/share, representing less than 1% downside.
The high price target is $34.00/share, representing 24.68% upside, while the low price target is $20.00/share, representing -26.6% downside.
The big money is less involved with just 34.46% of Matterport being owned by institutions. Top holders include Lux Capital Management, DCM, and Tiger Global Management.
On a technical basis Matterport has been trending to the upside. According to the six-month charts the MACD is moving with slowing upside momentum within a range of 1.94 down to 1.75.
The six-month charts are also indicating an RSI of 60.09 and CCI of 72.06, both of which are elevated.
Summarizing investor sentiment, the bulls believe Matterport’s leading technology, big time partnerships, and the potential of massive Metaverse growth are reasons to expect future upside.
Meanwhile, the bears believe a stretched valuation, increasing competition, and the overly hyped Metaverse theme are reasons to expect future downside.
In short, Matterport ( $MTTR ) is a solid long term play with a lot of potential given their leading spatial data technology, potential growth verticals such as the Metaverse, reliable management, expanding revenues, and an accelerating customer base.
On the flip side, the company is far from perfect, and key issues such as a decelerating conversion rate, declining margins, and quickly growing net loss are issues that investors should look to see solved as the company scales.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.
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