SEC Filing | Matterport Inc

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mttr-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

____________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from ____________ to ____________

Commission file number 001-39790

____________________________

MATTERPORT, INC.

(Exact name of registrant as specified in its charter)

____________________________


Delaware									85-1695048
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

352 East Java Drive
Sunnyvale, California 94089
(Address of Principal Executive Offices, including zip code)

(650) 641-2241

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol

Name of each exchange

on which registered

Class A Common Stock, par value of $0.0001 per share

MTTR

The Nasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had 305,660,331 shares of Class A common stock outstanding as of October 31, 2023.

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		Page

	Cautionary Note Regarding Forward-looking Statements	4

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of September 30, 202 3 and December 31, 202 2 (Unaudited)	5

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 202 3 and 202 2 (Unaudited)	6

	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 202 3 and 202 2 (Unaudited)	7

	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 202 3 and 202 2 (Unaudited)	8

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 202 3 and 202 2 (Unaudited)	10

	Notes to the Consolidated Financial Statements (Unaudited)	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51

Item 4.	Controls and Procedures	51

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	54

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	55

Item 3.	Defaults Upon Senior Securities	55

Item 4.	Mine Safety Disclosures	55

Item 5.	Other Information	55

Item 6.	Exhibits	55

Signatures		57

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Report, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements in this Report are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this document, including our ability to grow market share in our existing markets or any new markets we may enter; our ability to respond to general economic conditions; our ability to manage our growth effectively; our success in retaining or recruiting our officers, key employees or directors, or changes required in the retention or recruitment of our officers, key employees or directors; the impact of the regulatory environment and complexities with compliance related to such environment; our ability to maintain an effective system of internal controls over financial reporting; our ability to achieve and maintain profitability in the future; our ability to access sources of capital; our ability to maintain and enhance our products and brand, and to attract customers; our ability to manage, develop and refine our technology platform; the success of our strategic relationships with third parties; our history of losses and whether we will continue to incur continuing losses for the foreseeable future; our ability to protect and enforce our intellectual property rights; our ability to implement business plans, forecasts, and other expectations and identify and realize additional opportunities; our ability to attract and retain new subscribers; the size of the total addressable market for our products and services; the continued adoption of spatial data; any inability to complete acquisitions and integrate acquired businesses; general economic uncertainty and the effect of general economic conditions in our industry; environmental uncertainties and risks related to adverse weather conditions and natural disasters; factors relating to our business, operations and financial performance, including: any continuing impacts of the COVID-19 pandemic or other infectious diseases, health epidemics and pandemics; the volatility of the market price and liquidity of our Class A common stock, and other securities; the increasingly competitive environment in which we operate; and other factors detailed under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2023, and subsequently filed Quarterly Reports on Form 10-Q.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Report will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should read this Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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Part I- Financial Information

Item 1. Financial statements

MATTERPORT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except per share data)


	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	80,142	$	117,128

Short-term investments	327,682		355,815
Accounts receivable, net of allowance of $897 and $1,212, as of September 30, 2023 and December 31, 2022, respectively	17,205		20,844
Inventories	12,342		11,061
Prepaid expenses and other current assets	8,929		13,084
Total current assets	446,300		517,932
Property and equipment, net	32,821		30,559
Operating lease right-of-use assets	1,547		2,515
Long-term investments	21,881		3,959
Goodwill	69,593		69,593
Intangible assets, net	9,562		10,890
Other assets	7,502		4,947
Total assets	$	589,206	$	640,395
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	8,594	$	8,331

Deferred revenue	22,163		16,731
Accrued expenses and other current liabilities	15,344		23,916

Total current liabilities	46,101		48,978
Warrants liability	239		803


Deferred revenue, non-current	2,296		1,201

Other long-term liabilities	514		5,502
Total liabilities	49,150		56,484
Commitments and contingencies (Note 8)
Redeemable convertible preferred stock, $0.0001 par value; 30,000 shares authorized as of September 30, 2023 and December 31, 2022, respectively; nil shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	—		—
Stockholders’ equity:
Common stock, $0.0001 par value; 640,000 shares authorized as of September 30, 2023 and December 31, 2022, respectively; and 305,562 shares and 290,541 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	31		29
Additional paid-in capital	1,275,153		1,168,313
Accumulated other comprehensive loss	(599)		(5,034)
Accumulated deficit	(734,529)		(579,397)
Total stockholders’ equity	540,056		583,911
Total liabilities and stockholders’ equity	$	589,206	$	640,395

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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MATTERPORT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue:
Subscription	$	22,850	$	18,981	$	63,565	$	54,508
License	28		21		82		70
Services	9,936		10,015		29,324		19,001
Product	7,828		8,976		25,232		21,405
Total revenue	40,642		37,993		118,203		94,984
Cost of revenue:
Subscription	7,379		6,592		21,576		17,963
License	—		—		—		—
Services	6,725		6,553		20,978		12,705
Product	6,641		8,457		23,377		24,303
Total cost of revenue	20,745		21,602		65,931		54,971
Gross profit	19,897		16,391		52,272		40,013
Operating expenses:
Research and development	15,577		19,084		52,711		66,604
Selling, general, and administrative	53,719		56,293		164,660		186,527
Total operating expenses	69,296		75,377		217,371		253,131
Loss from operations	(49,399)		(58,986)		(165,099)		(213,118)
Other income (expense):
Interest income	1,573		1,691		4,525		4,470


Change in fair value of warrants liability	513		—		564		26,147
Change in fair value of contingent earn-out liability	—		—		—		136,043
Other income (expense), net	2,669		(981)		5,075		(3,655)
Total other income	4,755		710		10,164		163,005
Loss before provision for income taxes	(44,644)		(58,276)		(154,935)		(50,113)
Provision for (benefit from) income taxes	110		(17)		197		876
Net loss	$	(44,754)	$	(58,259)	$	(155,132)	$	(50,989)
Net loss per share, basic and diluted	$	(0.15)	$	(0.20)	$	(0.52)	$	(0.18)



Weighted-average shares used in per share calculation, basic and diluted	303,432		286,458		298,226		281,729

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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MATTERPORT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net loss	$	(44,754)	$	(58,259)	$	(155,132)	$	(50,989)
Other comprehensive income (loss), net of taxes:

Unrealized gain (loss) on available-for-sale securities, net of tax	514		72		4,435		(6,039)
Other comprehensive income (loss)	$	514	$	72	$	4,435	$	(6,039)
Comprehensive loss	$	(44,240)	$	(58,187)	$	(150,697)	$	(57,028)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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MATTERPORT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, unaudited)


	Common Stock
		Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive loss		Accumulated Deficit		Total Stockholders’ Equity
Balance as of December 31, 2022		290,541	$	29	$	1,168,313	$	(5,034)	$	(579,397)	$	583,911
Net loss		—	—		—		—		(53,842)		(53,842)
Other comprehensive income		—	—		—		2,223		—		2,223
Issuance of common stock in connection with employee equity incentive plans, net of tax withholding		4,910	1		356		—		—		357
Issuance of common stock in connection with acquisitions		249	—		3,921		—		—		3,921
Stock-based compensation		—	—		33,510		—		—		33,510
Balance as of March 31, 2023		295,700	$	30	$	1,206,100	$	(2,811)	$	(633,239)	$	570,080
Net loss		—	—		—		—		(56,536)		(56,536)
Other comprehensive income		—	—		—		1,698		—		1,698
Issuance of common stock in connection with employee equity incentive plans, net of tax withholding		4,871	—		1,509		—		—		1,509
Stock-based compensation		—	—		34,751		—		—		34,751
Balance as of June 30, 2023		300,571	$	30	$	1,242,360	$	(1,113)	$	(689,775)	$	551,502
Net loss		—	—		—		—		(44,754)		(44,754)
Other comprehensive income		—	—		—		514		—		514
Issuance of common stock in connection with employee equity incentive plans, net of tax withholding		4,875	1		1,113		—		—		1,114
Issuance of common stock in connection with acquisitions		116	—		1,827		—		—		1,827
Stock-based compensation		—	—		29,853		—		—		29,853
Balance as of September 30, 2023		305,562	$	31	$	1,275,153	$	(599)	$	(734,529)	$	540,056

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	Common Stock
		Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
Balance as of December 31, 2021		250,173	$	25	$	737,735	$	(1,539)	$	(468,058)	$	268,163
Net income		—	—		—		—		71,904		71,904
Other comprehensive loss		—	—		—		(4,635)		—		(4,635)
Issuance of common stock in connection with employee equity incentive plans, net of tax withholding		6,295	1		(14,498)		—		—		(14,497)
Issuance of common stock upon the reverse recapitalization, net of transaction costs		—	—		76		—		—		76
Issuance of common stock to a customer		100	—		559		—		—		559
Issuance of common stock upon exercise of public warrants		1,994	—		34,055		—		—		34,055
Issuance of common stock in connection with acquisitions		1,215	—		19,118		—		—		19,118
Issuance of earn-out shares upon triggering events, net of tax withholding		21,494	2		(17,738)		—		—		(17,736)
Earn-out liability recognized upon the re-allocation		—	—		(896)		—		—		(896)
Reclassification of remaining contingent earn-out liability upon triggering events		—	—		242,430		—		—		242,430
Stock-based compensation		—	—		61,097		—		—		61,097
Balance as of March 31, 2022		281,271	$	28	$	1,061,938	$	(6,174)	$	(396,154)	$	659,638
Net loss		—	—		—		—		(64,634)		(64,634)
Other comprehensive loss		—	—		—		(1,476)		—		(1,476)
Issuance of common stock in connection with employee equity incentive plans, net of tax withholding		2,340	—		2,701		—		—		2,701
Issuance of common stock to a customer		32	—		179						179


Stock-based compensation		—	—		34,799		—		—		34,799
Balance as of June 30, 2022		283,643	$	28	$	1,099,617	$	(7,650)	$	(460,788)	$	631,207
Net loss		—	—		—		—		(58,259)		(58,259)
Other comprehensive income		—	—		—		72		—		72
Issuance of common stock in connection with employee equity incentive plans, net of tax withholding		3,757	1		399		—		—		400

Issuance of common stock in connection with acquisitions		8	—		101		—		—		101
Stock-based compensation		—	—		32,306		—		—		32,306
Balance as of September 30, 2022		287,408	$	29	$	1,132,423	$	(7,578)	$	(519,047)	$	605,827

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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MATTERPORT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(In thousands, unaudited)


	Nine Months Ended September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(155,132)	$	(50,989)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	14,130		9,237

Amortization of investment premiums, net of accretion of discounts	(5,511)		2,517
Stock-based compensation, net of amounts capitalized	90,674		116,738
Cease use of certain leased facilities	123		—
Change in fair value of warrants liability	(564)		(26,147)
Change in fair value of contingent earn-out liability	—		(136,043)
Deferred income taxes	(185)		(27)


Allowance for doubtful accounts	150		343

Loss of excess inventory and purchase obligation	1,592		52
Other	(60)		629
Changes in operating assets and liabilities, net of effects of businesses acquired:
Accounts receivable	3,489		(7,379)
Inventories	(6,833)		(6,135)
Prepaid expenses and other assets	2,491		(5,348)
Accounts payable	263		(4,154)
Deferred revenue	6,527		3,167
Accrued expenses and other liabilities	529		4,181
Net cash used in operating activities	(48,317)		(99,358)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(112)		(1,417)
Capitalized software and development costs	(7,528)		(9,890)
Purchase of investments	(368,119)		(87,997)
Maturities of investments	388,201		194,241

Business acquisitions, net of cash acquired	(4,116)		(51,874)
Net cash provided by investing activities	8,326		43,063
CASH FLOW FROM FINANCING ACTIVITIES:



Proceeds from sales of shares through employee equity incentive plans	3,309		5,292
Payments for taxes related to net settlement of equity awards	(329)		(34,424)
Proceeds from exercise of warrants	—		27,844


Other	—		76
Net cash provided by (used in) financing activities	2,980		(1,212)
Net change in cash, cash equivalents, and restricted cash	(37,011)		(57,507)
Effect of exchange rate changes on cash	25		(628)
Cash, cash equivalents, and restricted cash at beginning of year	117,128		139,987
Cash, cash equivalents, and restricted cash at end of period	$	80,142	$	81,852




Supplemental disclosures of non-cash investing and financing information
Earn-out liability recognized upon the re-allocation	$	—	$	896
Reclassification of remaining contingent Earn-out liability upon triggering events	$	—	$	242,430



Common stock issued in connection with acquisition	$	5,748	$	19,219
Unpaid cash consideration in connection with acquisition	$	—	$	4,348

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Matterport, Inc., together with its subsidiaries (“Matterport” or the “Company”), is leading the digitization and datafication of the built world. Matterport’s pioneering technology has set the standard for digitizing, accessing and managing buildings, spaces and places online. Matterport’s platform, comprised of innovative software, spatial data-driven data science, and 3D capture technology, has broken down the barriers that have kept the largest asset class in the world, buildings and physical spaces, offline and underutilized for so long. The Company was incorporated in the state of Delaware in 2011. The Company is headquartered at Sunnyvale, California.

On July 22, 2021 (the “Closing Date”), the Company consummated the merger (collectively with the other transactions described in the Merger Agreement, the “Merger”, “Closing”, or “Transactions”) pursuant to an Agreement and Plan of Merger, dated February 7, 2021 (the “Merger Agreement”), by and among the Company (formerly known as Gores Holdings VI, Inc.), the pre-Merger Matterport, Inc. (now known as Matterport Operating, LLC) (“Legacy Matterport”), Maker Merger Sub, Inc. (“First Merger Sub”), a direct, wholly owned subsidiary of the Company, and Maker Merger Sub II, LLC (“Second Merger Sub”), a direct, wholly owned subsidiary of the Company, pursuant to which First Merger Sub merged with and into Legacy Matterport, with Legacy Matterport continuing as the surviving corporation (the “First Merger”), and immediately following the First Merger and as part of the same overall transaction as the First Merger, Legacy Matterport merged with and into Second Merger Sub, with Second Merger Sub continuing as the surviving entity as a wholly owned subsidiary of the Company, under the new name “Matterport Operating, LLC”. Upon the closing of the Merger, we changed our name to Matterport, Inc.

Unless the context otherwise requires, the “Company” refers to the combined company and its subsidiaries following the Merger, “Gores” refers to the Company prior to the Merger and “Legacy Matterport” refers to Matterport, Inc. prior to the Merger.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in “Note 2 - Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 28, 2023. There have been no significant changes to these policies during the three and nine months ended September 30, 2023.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the SEC, regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes in the Company’s 2022 Form 10-K for the fiscal year ended December 31, 2022, which provides a more complete discussion of the Company’s accounting policies and certain other information.

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2023, and its results of operations for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022. The condensed consolidated balance sheet as of December 31, 2022, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts and disclosures in the condensed consolidated financial statements and accompanying notes. Significant estimates include assumptions related to the fair value of common stock before the Merger and other assumptions used to measure stock-based compensation, fair value of assets acquired and liabilities assumed in business combinations, fair value of identified intangibles, goodwill impairment, valuation of deferred tax assets, the estimate of net realizable value of inventory, allowance for doubtful accounts, the fair value of warrants liability, loss contingencies, and the determination of stand-alone selling price of various performance obligations. As a result, many of the Company’s estimates and assumptions required increased judgment and these estimates may change materially in future periods.

Management evaluates its estimates and assumptions on an ongoing basis using historical experience and various other factors, including the current economic environment, which management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company adjusts such estimates and assumptions when dictated by facts and circumstances. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the condensed consolidated financial statements in future periods. Actual results may differ materially from those estimates.

Segment Information

The Company has a single operating segment and reportable segment. The Company’s chief operating decision-maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. Refer to Note 3 for information regarding the Company’s revenue by geography. Substantially all of the Company’s long-lived assets are located in the United States.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, investments, and accounts receivable. The Company maintains its cash balances in accounts held by major banks and financial institutions located in the United States. Such bank deposits from time to time may be exposed to credit risk in excess of the Federal Deposit Insurance Corporation insurance limit, and the Company considers such risk to be minimal.

We invest only in high-quality credit instruments and maintain our cash and cash equivalents and available-for-sale investments in fixed income securities. Management believes that the financial institutions that hold our investments are financially sound and, accordingly, are subject to minimal credit risk. Deposits held with banks may exceed the amount of insurance provided on such deposits.

The Company’s accounts receivable is derived from customers located both inside and outside the United States. The Company mitigates its credit risks by performing ongoing credit evaluations of the financial condition of its customers and requires advance payment from customers in certain circumstances. The Company generally does not require collateral from its customers.

No customer accounted for more than 10% of the Company’s total accounts receivable at September 30, 2023 and December 31, 2022. No customer accounted for more than 10% of the Company’s total revenue for the three and nine months ended September 30, 2023 and 2022.

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Restructuring Costs

The Company’s restructuring costs consist of a one-time payment of termination benefits and the ongoing cost of benefits related to the reduction of its workforce and other costs, and the charges related to the cease use of certain facilities to align with the Company’s anticipated operating needs. The timing of recognition for severance costs depends on whether employees are required to render service until they are terminated in order to receive the termination benefits. If employees are required to render service until they are terminated in order to receive the termination benefits, a liability is recognized ratably over the future service period. Otherwise, a liability is recognized when management has committed to a restructuring plan and has communicated those actions to employees. Employee termination benefit costs covered by existing benefit arrangements are recognized when management has committed to a restructuring plan and has determined the severance costs are probable and estimable. Other costs primarily consist of cease use charges for the related operating lease right-of-use assets for office leases, which are recognized ratably from the decision date to the cease-use date.

Recently Adopted Accounting Standards

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contract with Customers, as if it had originated the contracts. The Company adopted this standard effective January 1, 2023, which did not have a material impact on the Company’s condensed consolidated financial statements.

3. REVENUE

Disaggregated Revenue—The following table shows the revenue by geography for the three and nine months ended September 30, 2023 and 2022, respectively (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue:
United States	$	26,667	$	25,310	$	76,130	$	58,187
International	13,975		12,683		42,073		36,797
Total revenue	$	40,642	$	37,993	$	118,203	$	94,984

No country other than the United States accounted for more than 10% of the Company’s revenue for the three and nine months ended September 30, 2023 and 2022, respectively. The geographical revenue information is determined by the ship-to address of the products and the billing address of the customers of the services.

The following table shows over time versus point-in-time revenue for the three and nine months ended September 30, 2023 and 2022, respectively (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Over time revenue	$	32,786	$	28,996	$	92,889	$	73,509
Point-in-time revenue	7,856		8,997		25,314		21,475
Total	$	40,642	$	37,993	$	118,203	$	94,984

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Contract Asset and Liability Balances—Contract assets consist of unbilled accounts receivable and are recorded when revenue is recognized in advance of scheduled billings. The timing of revenue recognition differs from the timing of invoicing to customers and this timing difference results in contract liabilities (deferred revenue) on the Company’s condensed consolidated balance sheets. The accounts receivable and contract balances as of September 30, 2023 and December 31, 2022 were as follows (in thousands):


	September 30, 2023		December 31, 2022
Accounts receivable, net	$	15,351	$	19,037
Unbilled accounts receivable	$	1,854	$	1,807
Deferred revenue	$	24,459	$	17,932

During the nine months ended September 30, 2023 and 2022, the Company recognized revenue of $13.3 million and $8.6 million that was included in the deferred revenue balance at the beginning of the fiscal year, respectively. Contracted but unsatisfied performance obligations were $62.0 million at the end of September 30, 2023 and consisted of deferred revenue and backlog. The contracted but unsatisfied or partially unsatisfied performance obligations expected to be recognized over the next 12 months at the end of September 30, 2023 were $41.7 million, and the remaining obligations are expected to be recognized thereafter.

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4. ACQUISITIONS

VHT, Inc. Acquisition

On June 10, 2022, the Company entered into an Agreement and Plan of Merger (the “Purchase Agreement”) with VHT, Inc. (“VHT”), known as VHT Studios, a U.S.-based real estate marketing company that offers brokerages and agents digital solutions to promote and sell properties. On July 7, 2022 (the “VHT Acquisition Date”), pursuant to the Purchase Agreement, the Company completed the acquisition of VHT (the “VHT Acquisition”), which expands Matterport Capture Services by bringing together Matterport digital twins with professional photography, drone capture and marketing services. With this acquisition, the Company aims to increase adoption of digital twin technology and expand further into the residential real estate industry while adding marketing services for other key markets such as commercial real estate, travel and hospitality, and the retail sector.

Under the terms of the Purchase Agreement, the consideration consisted of an all-cash purchase price of $23.0 million subject to certain adjustments based on a determination of closing net working capital, transaction expenses, cash and investments and closing indebtedness. The total purchase consideration for the VHT Acquisition was $22.7 million.

The Company has accounted for the VHT Acquisition as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on the estimated fair values at the VHT Acquisition Date, as presented in the following table (in thousands):


	Amount
Goodwill	$	15,603
Identified intangible assets	6,900
Net assets acquired	215
Total	$	22,718

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from leveraging VHT’s customer relationships. The goodwill is not deductible for income tax purposes.

The following table summarizes the preliminary estimated fair values and estimated useful lives of the components of identifiable intangible assets acquired as of the VHT Acquisition Date (in thousands, except years):


	Fair Value		Estimated Useful Life
Customer Relationships	$	6,900	10 years

Customer relationships represent the fair value of future projected revenue that will be derived from sales to existing customers of VHT. The economic useful life was determined based on historical customer turnover rates and industry benchmarks.

The fair value of customer relationships was estimated using the multi-period excess earnings method, an income approach (Level 3), which converts projected revenues and costs into cash flows. Significant assumptions used in the discounted cash flow analysis for direct customer relationships were the revenue growth rate, customer attrition rate, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) margins, and discount rate.

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Unaudited Pro Forma Financial Information

The following table summarizes the pro forma consolidated information for the Company assuming the acquisition of VHT had occurred as of January 1, 2021. The unaudited pro forma information for all periods presented includes the business combination accounting effects resulting from the acquisition, including amortization for intangible assets acquired and acquisition-related charges. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal year 2021.


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022		2022
(in thousands, except per share data)
Total revenue	$	38,345	$	105,432
Net loss	$	(58,118)	$	(50,103)
Basic earnings per share	$	(0.20)	$	(0.18)
Diluted earnings per share	$	(0.20)	$	(0.18)

Enview Inc. Acquisition

On January 5, 2022 (the “Enview Acquisition Date”), the Company completed the acquisition (the “Enview Acquisition”) of Enview, Inc. (“Enview”), a privately-held company engaged in the development of artificial intelligence algorithms to identify natural and man-made features in geospatial data using various techniques. The total purchase consideration for the Enview Acquisition was $64.3 million, including an insignificant working capital adjustment finalized during the measurement period that reduced the purchase price for Enview. The total purchase consideration consisted of the following (in thousands):


	Amount
Cash (1)	$	39,336
Common stock (1.6 million shares) (2)	24,988

Total	$	64,324

(1) The Company paid $2.4 million and $4.3 million in cash consideration during the three and nine months ended September 30, 2023, respectively and nil and $35.0 million in cash consideration during the three and nine months ended September 30, 2022.

(2) On the Enview Acquisition Date, the Company's closing stock price was $15.73 per share. The Company issued 0.1 million and 0.4 million shares during the three and nine months ended September 30, 2023, respectively, and nil and 1.2 million shares during the three and nine months ended September 30, 2022.

The Company has accounted for the Enview Acquisition as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on the fair values at the Enview Acquisition Date. The purchase price allocation includes adjustments for additional information that existed as of the Acquisition Date but at that time was unknown and became known during the measurement period of 12 months from the Acquisition Date. The following table summarizes the allocation of purchase consideration on the Enview Acquisition Date, inclusive of measurement period adjustments (in thousands):


	Amount
Goodwill	$	53,990
Identified intangible assets	5,400
Net assets acquired	4,934


Total	$	64,324

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Goodwill generated from this business combination is primarily attributable to the assembled workforce and expected post-acquisition synergies from integrating Enview technology with Matterport’s products and services. The goodwill is not deductible for income tax purposes.

The following table summarizes the estimated fair values and estimated useful lives of the components of identifiable intangible assets acquired as of the Enview Acquisition Date (in thousands, except years):


	Fair Value		Estimated Useful Life
Developed technology	$	5,400	5 years

Developed technology relates to existing Enview technology of its artificial intelligence algorithms to identify natural and man-made features in geospatial data. The economic useful life was determined based on the technology cycle related to the developed technology of existing services, as well as the cash flows anticipated over the forecasted periods.

The fair value of developed technology was estimated using the multi-period excess earnings method, an income approach (Level 3), which converts projected revenues and costs into cash flows. Significant assumptions used in the discounted cash flow analysis for the developed technology were the revenue growth rates, EBITDA margins, obsolescence technology factor, and discount rate.

Pro forma results of operations have not been presented because the effects of the Enview Acquisition were not material to the Company’s condensed consolidated statements of operations.

Acquisition-related transaction costs are expensed as incurred and are recorded in selling, general, and administrative expenses in the Condensed Consolidated Statements of Operations. The Company incurred $0.2 million and $1.6 million of acquisition-related costs for the three and nine months ended September 30, 2022, respectively. There were no acquisition-related costs incurred for the three and nine months ended September 30, 2023.

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5. GOODWILL AND INTANGIBLE ASSETS

Goodwill—As of September 30, 2023 and December 31, 2022, goodwill was $69.6 million. The Company did not recognize any impairment losses on goodwill during the three and nine months ended September 30, 2023 and 2022, respectively.

Purchased Intangible Assets—The following table presents details of the Company’s purchased intangible assets as of September 30, 2023 and December 31, 2022 (in thousands).


	September 30, 2023						December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Developed technology	$	5,400	$	(1,876)	$	3,524	$	5,400	$	(1,065)	$	4,335
Customer relationships	6,900		(862)		6,038		6,900		(345)		6,555
Total	$	12,300	$	(2,738)	$	9,562	$	12,300	$	(1,410)	$	10,890

The Company recognized amortization expense of $0.4 million and $0.5 million for the three months ended September 30, 2023 and 2022, respectively, and $1.3 million and $1.0 million for the nine months ended September 30, 2023 and 2022, respectively. The Company did not recognize any impairment losses on intangible assets or other long-lived assets during the three and nine months ended September 30, 2023 and 2022, respectively.

The following table summarizes estimated future amortization expense for the Company’s intangible assets as of September 30, 2023 (in thousands):


	Amount
Remaining 2023	$	442
2024	1,770
2025	1,770
2026	1,770
2027	705
2028 and thereafter	3,105
Total future amortization expense	$	9,562

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6. BALANCE SHEET COMPONENTS

Allowance for Doubtful Accounts—Allowance for doubtful accounts as of September 30, 2023 and 2022 and the rollforward for three and nine months ended September 30, 2023 and 2022 were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Balance—beginning of period	$	(933)	$	(421)	$	(1,212)	$	(291)
Increase in reserves	(101)		(148)		(150)		(343)
Write-offs	137		—		465		65
Balance—end of period	$	(897)	$	(569)	$	(897)	$	(569)

Inventories—Inventories as of September 30, 2023 and December 31, 2022, consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Finished goods	$	1,136	$	2,112
Work in process	7,094		3,477
Purchased parts and raw materials	4,112		5,472
Total inventories	$	12,342	$	11,061

Property and Equipment, Net—Property and equipment as of September 30, 2023 and December 31, 2022, consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Machinery and equipment	$	4,060	$	3,948
Furniture and fixtures	355		355
Leasehold improvements	718		734
Capitalized software and development costs	70,630		55,662
Total property and equipment	75,763		60,699
Accumulated depreciation and amortization	(42,942)		(30,140)
Total property and equipment, net	$	32,821	$	30,559

Depreciation and amortization expenses of property and equipment were $4.6 million and $3.3 million for the three months ended September 30, 2023 and 2022, respectively, and $12.8 million and $8.3 million for the nine months ended September 30, 2023 and 2022, respectively.

Additions to capitalized software and development costs, inclusive of stock-based compensation in the three months ended September 30, 2023 and 2022 were $4.7 million and $5.7 million, respectively. Additions to capitalized software and development costs, inclusive of stock-based compensation in the nine months ended September 30, 2023 and 2022 were $15.0 million and $21.4 million, respectively. These are recorded as part of property and equipment, net on the condensed consolidated balance sheets.

Amortization expense was $4.4 million and $3.0 million for three months ended September 30, 2023 and 2022, respectively, of which $4.0 million and $2.8 million was recorded to cost of revenue related to subscription and $0.4 million and $0.2 million to selling, general and administrative in the condensed consolidated statements of operations, respectively. Amortization expense was $12.2 million and $7.8 million for the nine months ended September 30, 2023 and 2022, respectively, of which $11.2 million and $7.0 million was recorded to cost of revenue related to subscription and $1.0 million and $0.8 million to selling, general and administrative in the condensed consolidated statements of operations, respectively.

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Accrued Expenses and Other Current Liabilities—Accrued expenses and other current liabilities as of September 30, 2023 and December 31, 2022, consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Accrued compensation	$	5,002	$	5,609
Tax payable	1,203		1,669
ESPP contribution	871		341
Current unpaid acquisition consideration	—		6,109
Short-term operating lease liabilities	1,293		1,267
Accrued loss on firm inventory purchase commitments	31		3,991
Other current liabilities	6,944		4,930
Total accrued expenses and other current liabilities	$	15,344	$	23,916

7. FAIR VALUE MEASUREMENTS

We categorize assets and liabilities recorded or disclosed at fair value on our condensed consolidated balance sheets based upon the level of judgment associated with inputs used to measure their fair value. The categories are as follows:

Level 1—Inputs are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The inputs require significant management judgment or estimation.

The Company’s financial assets and liabilities that were measured at fair value on a recurring basis were as follows (in thousands):

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


	September 30, 2023
	Level 1		Level 2		Level 3		Total
Financial Assets:
Cash equivalents:
Money market funds	$	60,730	$	—	$	—	$	60,730
Total cash equivalents	$	60,730	$	—	$	—	$	60,730
Short-term investments:
U.S. government and agency securities	$	238,503	$	—	$	—	$	238,503
Non-U.S. government and agency securities	—		19,681		—		19,681
Corporate debt securities	—		41,757		—		41,757
Commercial paper	—		27,741		—		27,741
Total short-term investments	$	238,503	$	89,179	$	—	$	327,682
Long-term investments:
U.S. government and agency securities	$	21,881	$	—	$	—	$	21,881



Total long-term investments	$	21,881	$	—	$	—	$	21,881




Total assets measured at fair value	$	321,114	$	89,179	$	—	$	410,293

Financial Liabilities:
Private warrants liability	$	—	$	—	$	239	$	239
Total liabilities measured at fair value	$	—	$	—	$	239	$	239


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial Assets:
Cash equivalents:
Money market funds	$	51,557	$	—	$	—	$	51,557
Total cash equivalents	$	51,557	$	—	$	—	$	51,557
Short-term investments:
U.S. government and agency securities	$	181,714	$	—	$	—	$	181,714
Non-U.S. government and agency securities	—		24,946		—		24,946
Corporate debt securities	—		114,113		—		114,113
Commercial paper	—		35,042		—		35,042
Total short-term investments	$	181,714	$	174,101	$	—	$	355,815
Long-term investments:


Corporate debt securities	$	—	$	3,959	$	—	$	3,959

Total long-term investments	$	—	$	3,959	$	—	$	3,959




Total assets measured at fair value	$	233,271	$	178,060	$	—	$	411,331

Financial Liabilities:

Private warrants liability	$	—	$	—	$	803	$	803

Total liabilities measured at fair value	$	—	$	—	$	803	$	803

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MATTERPORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Available-for-sale Debt Securities

The following tables summarize the amortized cost, unrealized gains and losses, and fair value of our available-for-sale debt securities as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value



Investments:
U.S. government and agency securities	$	260,661	$	—	$	(277)	$	260,384
Non-U.S. government and agency securities	19,741		—		(60)		19,681
Corporate debt securities	41,934		—		(177)		41,757
Commercial paper	27,774		—		(33)		27,741

Total available-for-sale investments	$	350,110	$	—	$	(547)	$	349,563


	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value



Investments:
U.S. government and agency securities	$	185,371	$	—	$	(3,657)	$	181,714
Non-U.S. government and agency securities	24,989		—		(44)		24,945
Corporate debt securities	119,396		—		(1,324)		118,072
Commercial paper	35,052		—		(9)		35,043

Total available-for-sale investments	$	364,808	$	—	$	(5,034)	$	359,774

As of September 30, 2023, the gross unrealized losses of $0.5 million are substantially all in a continuous unrealized loss position for less than 12 months, which were related to $341.6 million of available-for-sale debt securities. As of December 31, 2022, the gross unrealized losses that have been in a continuous unrealized loss position for less than 12 months were $0.2 million, which were related to $49.4 million of available-for-sale debt securities, and the gross unrealized losses that have been in a continuous unrealized loss position for more than 12 months were $4.8 million, which were related to $291.0 million of available-for-sale debt securities.

Unrealized losses related to these securities are due to interest rate fluctuations as opposed to credit quality. In addition, we do not intend to sell and it is not likely that we would be required to sell these securities before recovery of their amortized cost basis, which may be at maturity. We did not recognize any credit losses related to our available-for sale debt securities during the three and nine months ended September 30, 2023 and 2022.

The following table summarizes the amortized cost and fair value of our available-for-sale debt securities as of September 30, 2023, by contractual years-to-maturity (in thousands):


	September 30, 2023
	Amortized Cost		Fair Value
Due within one year	$	328,208	$	327,682
Due between one and three years	21,902		21,881
Total	$</