MATTERPORT, INC. The following discussion and analysis provides information thatMatterport's management believes is relevant to an assessment and understanding ofMatterport's condensed consolidated results of operations and financial condition. The discussion should be read together with our unaudited interim condensed consolidated financial statements, the respective notes thereto, and other financial information included elsewhere within this Report. The discussion and analysis should also be read together with the audited consolidated financial statements for the year endedDecember 31, 2021 and the related notes in the 2021 Form 10-K. This discussion contains forward-looking statements based uponMatterport's current expectations, estimates and projections that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed under "Risk Factors", "Forward-Looking Statements" and other disclosures included in this Report. Unless the context otherwise requires, all references in this section to "we," "our," "us," "the Company" or "Matterport" refer to the business ofMatterport, Inc. , aDelaware corporation, and its subsidiaries both prior to the consummation of and following the Merger (as defined below).
Overview
Matterport is leading the digitization and datafication of the built world. We believe the digital transformation of the built world will fundamentally change the way people interact with buildings and the physical spaces around them. Our Company's website is www.matterport.com. Since its founding in 2011,Matterport's pioneering technology has set the standard for digitizing, accessing and managing buildings, spaces and places online. Our platform's innovative software, spatial data-driven data science, and 3D capture technology have broken down the barriers that have kept the largest asset class in the world, buildings and physical spaces, offline and underutilized for many years. We believe the digitization and datafication of the built world will continue to unlock significant operational efficiencies and property values, and thatMatterport is the platform to lead this enormous global transformation. The world is rapidly moving from offline to online. Digital transformation has made a powerful and lasting impact across every business and industry today. Nevertheless, the global building stock remains largely offline today, and we estimate that less than 0.1% is penetrated by digital transformation. We were among the first to recognize the increasing need for digitization of the built world and the power of spatial data, the unique details underlying buildings and spaces, in facilitating the understanding of buildings and spaces. With approximately 7.3 million spaces under management as ofMarch 31, 2022 , we are continuing to penetrate the estimated$327 trillion global building stock and expand our footprint across various end markets, including residential and commercial real estate, facilities management, retail, architecture, engineering and construction ("AEC"), insurance and repair, and travel and hospitality. We estimate our total addressable market to be more than four billion buildings and 20 billion spaces globally, yielding a more than$240 billion market opportunity. We believe the total addressable market for the digitization and datafication of the built world could expand beyond$1 trillion as our spatial data platform continues to grow, powered by the following: •Bringing offline buildings online: Traditionally, our customers needed to conduct site visits in-person to understand and assess their buildings and spaces. With the AI-powered capabilities of Cortex, our proprietary AI software engine, the world's building stock can move from offline to online and be accessible to our customers real-time and on demand from anywhere. •Driven by spatial data: Cortex uses the breadth of the billions of data points we have accumulated over the years to improve the 3D accuracy of our digital twins. Our sophisticated algorithms also deliver significant commercial value to our subscribers by generating data-based insights that allow them to confidently make assessments and decisions about their properties. With approximately 7.3 million spaces under management as ofMarch 31, 2022 , our spatial data library is the clearinghouse for information about the built world. •Powered by AI and ML: Artificial intelligence ("AI") and machine learning ("ML") technologies effectively utilize spatial data to create a robust virtual experience that is dynamic, realistic, interactive, informative and permits multiple viewing angles. AI and ML also make costly cameras unnecessary for everyday scans-subscribers can now scan their spaces by simply tapping a button on their smartphones. As a result,Matterport is a device agnostic platform, helping us more rapidly scale and drive towards our mission of digitizing and indexing the built world. 40
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We believe thatMatterport has tremendous growth potential ahead. After securing market-leading positions in a variety of geographies and vertical markets, we have demonstrated our repeatable value proposition and the ability of our sales growth model to scale. The magnitude of our total addressable market is so large that even with leading market share, we believe our penetration rates today are a small fraction of the opportunity forMatterport . With a mature and tested go-to-market playbook and team in place, we are focused on scaling execution across a carefully selected set of growth vectors, including: scaling the enterprise across industry verticals, expanding internationally, investing in R&D, and expanding partner integrations and third-party developer platforms.
Our Business Model
We generate revenue by selling subscriptions to our AI-powered spatial data platform to customers, licensing our data to third parties, selling capture devices (including our Matterport Pro2 camera) and by providing services to customers from our technicians and through in-application purchases. We are focused on driving substantial annual growth in subscription revenue and maintaining modest growth in license, product and services revenue.
We serve customers of all sizes, at every stage of maturity, from individuals to large enterprises, and we see opportunities for growth across all of our customer segments. We are particularly focused on increasing sales efficiency and driving customer growth and recurring revenue growth from large enterprises.
Subscription Revenue
Our AI-powered spatial data platform creates high-fidelity and high-accuracy digital twins of physical spaces and generates valuable data analytics and insights for customers. We derive subscription revenue from the sale of subscription plans to subscribers of all sizes ranging from individuals to large enterprises. Our subscription plans are priced from free to custom plans tailored to the needs of larger-scale businesses. Our standard subscription plans for individuals and small businesses range from a free online Matterport account with a single user and a single active space that can be captured with an iPhone or an Android smartphone to multiple-user accounts that provide for the capture of unlimited active spaces. The pricing of our subscription plans increases as the number of users and active spaces increase. The wide variety and flexibility of our subscription plans enable us to retain existing subscribers and grow our subscriber base across diverse end markets, with particular focus on large enterprise subscribers. Subscription revenue accounted for approximately 60% and 51% of our total revenue for the three months endedMarch 31, 2022 and 2021, respectively. The majority of our subscription services are billed either monthly or annually in advance and are typically non-refundable and non-cancellable. Consequently, for month-to-month subscriptions, we recognize the revenue monthly, and for annual or longer subscriptions, we record deferred revenue on our condensed consolidated balance sheet and recognize the deferred revenue ratably over the subscription term. License Revenue We also offer data license solutions that allow certain customers to use our digital twin data for their own needs. We began offering these solutions in 2020. License revenue accounted for less than 1% and approximately 8% of our total revenue for the three months endedMarch 31, 2022 and 2021. Data licenses to date have been granted as perpetual licenses and are therefore recognized at a point in time upon transfer of control when the customer accepts delivery of the licensed data or other property. We expect our license revenue to fluctuate from quarter to quarter based on the number of new licenses purchased by our customers as we obtain new customers for our license solutions and the delivery of our licensed content is accepted by our customers during each quarter.
Product Revenue
We offer a comprehensive set of solutions designed to provide our customers with
access to state-of-the-art capture technology that produces the high-quality
data necessary to process images into dimensionally accurate digital twins. We
derive product revenue from sales of our innovative 3D capture product, the Pro2
Camera, which has played an integral part in shaping the 3D building and
property visualization ecosystem. Recently, we also have begun to offer capture
devices and accessories manufactured by third parties. The Pro2 Camera has
driven adoption of our solutions and has generated the unique high-quality and
scaled data set that has enabled Cortex to become the pioneering software engine
for digital twin creation, and we expect that future sales of our Pro2 Camera
and third party capture devices will continue to
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drive increased adoption of our solutions. Product revenue accounted for
approximately 26% and 30% of our total revenue for the three months ended
Services Revenue
Most of our customers are able to utilize the Pro2 Camera or other compatible capture devices to scan digital twins without external assistance, as the camera is relatively easy to configure and requires minimal training. However, our customers sometimes may also request professional assistance with the data capture process. We generate professional services revenue fromMatterport Capture Services, a fully managed solution for enterprise subscribers worldwide that require on-demand scheduling of experienced and reliableMatterport professionals to scan their properties. In addition, we derive services revenue from in-app purchases, made by subscribers using our smartphone applications or by logging in to their subscriber account. Services revenue accounted for approximately 14% and 10% of our total revenue for the three months endedMarch 31, 2022 and 2021, respectively.
The Merger
OnJuly 22, 2021 , we consummated the previously announced merger (collectively with the other transactions described in the Merger Agreement (defined below), the "Merger", "Closing", or "Transactions") pursuant to an Agreement and Plan of Merger, datedFebruary 7, 2021 (the "Merger Agreement"), by and among the Company (at such time namedGores Holding VI, Inc. , aDelaware Corporation ("Gores", or "GHVI")), First Merger Sub, Second Merger Sub and LegacyMatterport . In connection with the consummation of the Merger, the registrant changed its name fromGores Holdings VI, Inc. toMatterport, Inc. 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 ." In connection with the Closing, we changed our name toMatterport, Inc. OnJuly 23, 2021 , our Class A common stock and warrants began trading on the Nasdaq Global Market under the symbols "MTTR" and "MTTRW," respectively. In connection with the Merger, the Company raised gross proceeds of$640.1 million , including the contribution of$345.1 million of cash held in Gores' trust account from its initial public offering and an aggregate purchase price of$295.0 million in a private placement pursuant to the subscription agreements ("Private Investment in Public Equity" or "PIPE") at$10.00 per share of Gores' Class A common stock. The Company paid$0.9 million to Gores' stockholders who redeemed Gores' Class A common stock immediately prior to the Closing. The Company and Gores incurred$10.0 million and$26.3 million transaction costs, respectively. The total transaction cost was$36.3 million , consisting of underwriting, legal, and other professional fees, of which$35.7 million was recorded to additional paid-in capital as a reduction of proceeds and the remaining$0.6 million was expensed immediately upon the Closing. The aggregate consideration paid to Legacy Matterport stockholders in connection with the Merger (excluding any potentialEarn-Out Shares ), was 218,875,000 shares of the Company Class A common stock, par value$0.0001 per share. The Per Share Matterport Stock Consideration was equal to approximately 4.1193 (the "Exchange Ratio"). The Merger was accounted for as a reverse recapitalization in accordance withU.S. GAAP. Under this method of accounting, Gores was treated as the "acquired" company for financial reporting purposes. This determination was primarily based on holders ofMatterport capital stock comprising a relative majority of the voting power of the combined entity upon consummation of the Merger and having the ability to nominate the majority of the governing body of the combined entity,Matterport's senior management comprising the senior management of the combined entity, andMatterport's operations comprising the ongoing operations of the combined entity. Accordingly, for accounting purposes, the financial statements of the combined entity upon consummation of the Merger represented a continuation of the financial statements ofMatterport with the Merger being treated as the equivalent ofMatterport issuing stock for the net assets of Gores, accompanied by a recapitalization. The net assets of Gores were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Merger were presented as those ofMatterport in this report of the combined entity. All periods prior to the Merger have been retroactively adjusted using the Exchange Ratio for the equivalent number of shares outstanding immediately after the Merger to effect the reverse recapitalization. See Note 1 and Note 3, in Part I, Item 1. "Financial Statements" for additional detail about the Merger. 42
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Key Metrics
We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions. The calculation of the key metrics discussed below may differ from other similarly titled metrics used by other companies, analysts, investors and other industry participants.
Spaces Under Management
We track the number of spaces that have been scanned and filed on theMatterport platform, which we refer to as spaces under management, because we believe that the number of spaces under management is an indicator of market penetration and the growth of our business. A space can be a single room or building, or any one contiguous scan of a discrete area, and is composed of a collection of imagery and spatial data that is captured and reconstructed in a dimensionally accurate digital twin of the scanned space. For tracking purposes, we treat each scanned and filed space as a unique file or model. We have a history of growing the number of our spaces under management and, as ofMarch 31, 2022 , we had approximately 7.3 million spaces under management. The scale of our spaces under management allows us to directly monetize each space managed for our paid subscribers as well as increase our ability to offer new and enhanced services to subscribers, which in turn provides us with an opportunity to convert subscribers from free subscription plans to paid plans. We believe our spaces under management will continue to grow as our business expands with our current customers and as we add new free and paid subscribers.
The following chart shows our spaces under management for each of the periods presented (in millions):
Three Months Ended March 31,
2022 2021
Spaces under management 7.3 4.9
Total Subscribers
We believe that our ability to increase the number of subscribers on our platform is an indicator of market penetration, the growth of our business and future revenue trends. For purposes of our business, a "subscriber" is an individual or entity that has signed up for a Matterport account during the applicable measurement period. We include both free and paid subscribers in our total subscriber count. We refer to a subscriber that has signed up for a free account and typically scans only one free space allocated to the account as a "free subscriber." We refer to a subscriber that has signed up for one of our paid subscription levels and typically scans at least one space as a "paid subscriber." Our paid subscribers typically enter into monthly subscriptions with us. We generally consider a single organization to be a single subscriber if the organization has entered into a discrete enterprise agreement with us, even if the organization includes multiple divisions, segments or subsidiaries that utilize our platform. If multiple individuals, divisions, segments or subsidiaries within an organization have each entered into a discrete subscription with us, we consider each individual account to be a separate subscriber. We believe the number of paid subscribers on our platform is an important indicator of future revenue trends, and we believe the number of free subscribers on our platform is important because free subscribers may over time become paid subscribers on our platform and are therefore another indicator of our future revenue trend. We continue to demonstrate strong growth in the number of free and paid subscribers on our platform as indicated by our results for the three endedMarch 31, 2022 .
The following chart shows the number of our free subscribers, paid subscribers and total subscribers for each of the periods presented (in thousands):
Three Months Ended March 31,
2022 2021
Free subscribers 504 282
Paid subscribers 58 49
Total subscribers 562 331
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Net Dollar Expansion Rate
We believe our ability to retain and grow the subscription revenue generated by
our existing subscribers is an important measure of the health of our business
and our future growth prospects. We track our performance in this area by
measuring our net dollar expansion rate from the same set of customers across
comparable periods. We calculate this metric on a quarterly basis by comparing
the aggregate amount of subscription revenue attributable to a subscriber cohort
for the most recent quarter divided by the amount of subscription revenue
attributable to the same subscriber cohort for the same quarter in the previous
fiscal year. Our calculation for the applicable quarter includes any subscriber
in the cohort that upgrades or downgrades the subscriber's respective
subscription level or churns. Our net dollar expansion rate can fluctuate from
quarter to quarter due to a number of factors, including, but not limited to,
the number of subscribers that upgrade or downgrade their respective
subscription levels or a higher or lower churn rate during any given quarter.
Three Months Ended March 31,
2022 2021
Net dollar expansion rate 107 % 129 %
Non-GAAP Financial Measures
In addition to our results of operations below, we report certain financial
measures that are not required by, or presented in accordance with, U.S.
generally accepted accounting principles ("GAAP"). These measures have
limitations as analytical tools when assessing our operating performance and
should not be considered in isolation or as a substitute for GAAP measures,
including gross profit and net income. We may calculate or present our non-GAAP
financial measures differently than other companies who report measures with
similar titles and, as a result, the non-GAAP financial measures we report may
not be comparable with those of companies in our industry or in other
industries.
Non-GAAP Loss from Operations
We calculate non-GAAP loss from operations as GAAP loss from operations excluding stock-based compensation expenses, acquisition-related costs for completed transactions, amortization expense of acquired intangible assets, and the tax impact related to contingent earn-out share issuance, which we do not consider to be indicative of our overall operating performance. We believe this measure provides our management and investors with consistency and comparability with our past financial performance and is an important indicator of the performance and profitability of our business.
The following table presents our non-GAAP loss from operations for each of the periods presented (in thousands):
Three months ended March 31,
2022 2021
GAAP loss from operations $ (84,942) $ (2,355)
Add back: stock based compensation expense, net 56,088 658
Add back: acquisition-related costs 172 -
Add back: Amortization expense of acquired intangible assets 260 -
Add back: Payroll tax related to contingent earn-out share issuance
1,164 - Non-GAAP loss from operations$ (27,258) $ (1,697) Free Cash Flow We calculate free cash flow as net cash used in operating activities less purchases of property and equipment and capitalized software and development costs. We believe this metric provides our management and investors with an important indicator of the ability of our business to generate additional cash from our business operations or our need to access additional sources of cash, in order to fund our operations and investments.
The following table presents our free cash flow for each of the periods presented (in thousands):
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Three months ended March 31,
2022 2021
Net cash used in operating activities $ (25,478) $ 1,056
Less: purchases of property and equipment 448 162
Less: capitalized software and development costs 3,596 1,344
Free cash flow $ (29,522) $ (450) Factors Affecting Our Performance
We believe that our growth and financial performance are dependent upon many factors, including the key factors described below, which are in turn subject to significant risks and challenges.
Penetrating a Largely Undigitized Global Property Market
Despite the rapid pace of digital transformation in today's world, the massive global building stock, estimated by Savills to be$327 trillion in total property value as ofMarch 31, 2022 , remains largely undigitized today, and we estimate that less than 0.1% is penetrated by digital transformation. As a first mover in digital twin creation and spatial data library construction, we see significant opportunities to continue leading the digitization and datafication of the built world. We estimate that there are more than 4 billion buildings and 20 billion spaces in the world globally, yielding a more than$240 billion market opportunity. We believe that asMatterport's unique spatial data library and property data services continue to grow, this opportunity could increase to more than$1 trillion based on the size of the building stock and the untapped value creation available to buildings worldwide. The constraints created by the COVID-19 pandemic have only reinforced and accelerated the importance of the solutions that we have developed for diverse markets over the past decade. Through providing a comprehensive set of solutions from cutting-edge capture technology and high-accuracy digital twins to valuable property insights, our AI-powered platform delivers value across the property lifecycle to subscribers from various end markets, including residential and commercial real estate, facilities management and retail, AEC, insurance and repair, and travel and hospitality. As ofMarch 31, 2022 , we had over 562,000 subscribers on our platform and approximately 7.3 million spaces under management, which we believe represents more than 100 times number of spaces under management by the rest of the market, and we aim to continue scaling our platform and strengthen our foothold in various end markets and geographies to deepen our market penetration. We believe that the breadth and depth of theMatterport platform along with the strong network effect from our growing spatial data library will lead to increased adoption of our solutions across diverse end markets, enabling us to drive further digital transformation of the built world.
Adoption of our Solutions by Enterprise Subscribers
We are pioneering the transformation of the built world from offline to online. We provide a complete, data-driven set of solutions for the digitization and datafication of the built world across a diverse set of use cases and industries. We take a largely offline global property market to the online world using a data-based approach, creating a digital experience for subscribers to interact with buildings and spaces and derive actionable insights. Our Cortex AI-driven engine and software platform uses the breadth of the billions of data points we have accumulated over the years to improve the 3D accuracy of our digital twin models. Our machine learning algorithms also deliver significant commercial value to our subscribers by generating data-based insights that allow them to confidently make assessments and decisions about their properties. We provide enterprise subscribers with a comprehensive solution that includes all of the capture, design, build, promote, insure, inspect and manage functionality of our platform. We believe that our scale of data, superior capture technology, continued focus on innovation and considerable brand recognition will drive a continued adoption of our all-in-one platform by enterprise subscribers. We are particularly focused on acquiring and retaining large enterprise subscribers due to the significant opportunities to expand our integrated solutions to different parts of an organization and utilize digital twins for more use cases within an organization. We will continue improving our proprietary spatial data library and AI-powered platform while increasing investments in direct sales and account-based marketing to enhance enterprise adoption of our solutions.
Retention and Expansion of Existing Subscribers
Our ability to increase revenue depends in part on retaining our existing
subscribers and expanding their use of our platform. We offer an integrated,
comprehensive set of solutions including spatial data capturing, digital twin
creation, publication, vertical-market specific content, and property analytics.
We have a variety of subscription plans to meet the
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needs of every subscriber, including free subscription plans and several standard paid subscription plans, and we are able to provide customized subscription plans tailored to the specific needs of large enterprises. As we seek to develop long-term subscriber relationships, our value proposition to subscribers is designed to serve the entirety of the property lifecycle, from design and build to maintenance and operations, promotion, insure, repair, restore, secure and finance. As a result, we believe we are uniquely positioned to grow our revenue with our existing subscribers as our platform helps them discover opportunities to drive short and long term returns on their property investments. Given the all-in-one nature of our platform and its ease of use, we are also able to drive adoption of our solutions across various parts of an organization. For example, we started a long-term relationship with a large commercial real estate client when we were engaged to create digital twins for available office spaces for promotion and leasing. We were then able to expand the relationship by working with the subscriber's construction team to redesign office spaces through integrating our digital twins with the construction team's design software. Most recently, we signed a global agreement with the client's real estate acquisition team to conduct due diligence of potential real property acquisitions. As a result of our long-term focus and expansion strategy, we have been able to consistently retain our subscribers and drive increased usage of our platform. Our net dollar expansion rate of 107% and 129% for the three months endedMarch 31, 2022 and 2021 demonstrates the stickiness and growth potential of our platform.
Scaling Across Various Industry Verticals
Matterport's fundamental go-to-market model is built upon a subscription first approach. We have invested aggressively to unlock a scalable and cost-effective subscription flywheel for customer adoption. With our large spatial data library and pioneering AI-powered capabilities, we pride ourselves on our ability to deliver value across the property lifecycle to subscribers from various end markets, including residential and commercial real estate, facilities management and retail, AEC, insurance and repair, and travel and hospitality. Going forward, we will continue to improve our spatial data library and AI-powered platform to address the workflows of the industries we serve, while expanding our solutions and reaching new real estate segments. We also plan to increase investments in industry-specific sales and marketing initiatives to increase sales efficiency and drive subscriber and recurring revenue growth. While we expect that these investments will result in a considerable increase in our operating expenses, we expect operating margins to improve over the long term as we continue to scale and gain higher operating leverage. International Expansion We are focused on continuing to expand our AI-powered spatial data platform to all corners of the world. Given that the global building stock remains largely undigitized today and with the vast majority of the world's buildings located outside ofthe United States , we expect significant opportunities in pursuing the digitization and datafication of the building stock worldwide. We use a "land and expand" model to capitalize on the potential for geographic expansion. As we continue to seek to further penetrate our existing geographies in order to add their spatial data to our platform. In the second half of 2021, we expanded availability of our industry-leading Matterport Pro2 camera in theUnited Kingdom ,France ,Italy andSpain and introducedMatterport for Android, making 3D capture available to anyone with a compatible Android device in more than 170 countries around the world. InFebruary 2022 , we started partnering with Midland Holdings, one of the largest residential real estate (RRE) brokerages in theGreater China region, and became the first brokerage firm in the region to useMatterport digital twins to create virtual 3D experiences for its entire portfolio of properties. InMarch 2022 , we expanded our presence in the Brazilian market via two strategic partners, Guandalini Posicionamento and PARS, to offerMatterport's spatial data platform to their enterprise customers in the AEC markets. We continued expansion of Capture Services™ On-Demand to 12 countries and 183 cities as ofMarch 31, 2022 . Subscribers outsidethe United States accounted for more than 44% of our subscription revenues for three months endedMarch 31, 2022 . Given the flexibility and ease of use of our platform and capture device agnostic data capture strategy, we believe that we are well-positioned to further penetrate existing and additional geographies. To scale our international penetration, we plan to continue to increase our investment in sales and marketing efforts across the globe, including building up sales and marketing teams inNorth America ,Europe , theMiddle East andAfrica , and theAsia Pacific region. With multiple sales attachment points and a global marketing effort, we believe that we can further penetrate enterprises and businesses worldwide through channel partnerships and direct sales. Such international expansion efforts will also involve additional investments in our market research teams to tailor platform solutions, subscription plans and pricing for each market. These international expansion activities may impact our near-term profitability as we lay the foundation for international growth. Nevertheless, we believe that customers around the world 46
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will derive value from the universal utility and flexibility of our spatial data platform which transforms how customers interact with their physical spaces in the modern age.
Investing in Research and Innovation for Growth
We will continue to invest in research and development to improve Cortex, expand our solutions portfolio, and support seamless integration of our platform with third-party software applications. We plan to concentrate on in-house innovation and expect to consider acquisitions on an opportunistic basis. We have been continuously developing a robust pipeline of new product releases since the launch ofMatterport for iPhone inMay 2020 . InApril 2021 ,Matterport announced the official release of the Android Capture app, giving Android users the ability to quickly and easily capture buildings and spaces in immersive 3D. We see significant potential for future subscriber growth as we release more products and create additional upselling opportunities. We will also strengthen our AI and ML capabilities as we enlarge our spatial data library, enabling continuous improvement of the fidelity and accuracy of digital twins and enhancing the commercial value from data-driven analytics. InJune 2021 ,Matterport announced a collaboration with Facebook AI (now known as Meta) to release the world's largest dataset of 3D spaces for academic research and a partnership with Apex, a national provider of advanced store surveys, to enable retail brands across theU.S. andCanada to access, collect and evaluate building data and information. InAugust 2021 , we announced a new integration with Xactimate that allows property professionals to order a TruePlan of aMatterport 3D model with a single click inVerisk's Xactimate solution. Also inAugust 2021 , we launched Notes, an interactive collaboration and communication tool for its digital twins to unlock big productivity gains for teams. InOctober 2021 , we launchedMatterport for Mobile, making 3D capture freely available to more than one billion Android mobile device users worldwide. These investments may impact our operating profitability in the near term, but we expect our operating margins to improve over the long term as we solidify our scale and reach. InJanuary 2022 , we completed the acquisition ofEnview, Inc. , a pioneer in scalable artificial intelligence (AI) for 3D spatial data, which will accelerate our development of artificial intelligence algorithms to identify natural and man-made features in geospatial data using various techniques, including deep learning, neural networks and physics-based modeling. InFebruary 2022 , we introduced Axis, a new hands-free motor mount for precision 3D capture for smartphones to enable a hands-free solution that produces reliable, high-fidelity results with just a click of a button. While we plan to concentrate on in-house innovation, we may also pursue acquisitions of products, teams and technologies on an opportunistic basis to further expand the functionality of and use cases for our platform. As with organic research and development, we adopt a long-term perspective in the evaluation of acquisition opportunities in order to ensure sustainable value creation for our customers.
Expanding Partner Integrations and Third-Party Developer Platform
We aim to foster a strong network of partners and developers around ourMatterport platform. Through integration with our open, scalable and secure enterprise platform, organizations across numerous industries have been able to automate workflows, enhance subscriber experiences and create custom extensions for high-value vertical applications. For example, inMay 2020 , we rolled out integration capability with Autodesk to assist construction teams with streamlining documentation across workflows and collaborate virtually. InJuly 2021 , by partnering with PTC, we offer a joint solution that gives customers a highly visual and interactive way to deliver digital content onto the environments captured by our platform. Going forward, we plan to develop additional strategic partnerships with leading software providers to enable more effective integrations and enlarge our marketplace of third-party software applications. InNovember 2021 , we launched a new plugin for Autodesk Revit customers, allowing them to upload a Matterport Scan-to-BIM file into Autodesk Revit and start creating and managing information on a construction or design project across its different stages. InDecember 2021 , we extended the availability of theMatterport platform inAWS Marketplace so that AWS customers will be able to accessMatterport's digital twin technology with AWS add-ons that potentially increase the value of digitization. We believe that our future growth and scale depend partially upon our ability to develop a strong ecosystem of partners and developers which can augment the value of our platform. Going forward, we plan to establish additional strategic partnerships with leading software providers through the Matterport Platform Partner Program, in which our industry partners and developers can build, develop, and integrate with our spatial data library. We will also invest in the Matterport Developer Program to enlarge our marketplace of value-added third-party applications built on top of theMatterport platform. We expect that monetization opportunities from partner integrations and the third-party developer marketplace will allow us to drive subscriber growth and develop a more loyal subscriber base, and the revenue derived from the marketplace will grow over time. 47
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Components of Results of Operations
Revenue
Our revenue consists of subscription revenue, license revenue, services revenue and product revenue.
Subscription revenue-We provide our software as a service on ourMatterport platform. Subscribers use our platform under different subscription levels based on the number of active scanned spaces. We typically bill our subscribers monthly in advance based on their subscription level and recognize revenue on a monthly basis based on the subscription level.
License revenue-We provide spatial data to customers in exchange for payment of a license fee. Under these license arrangements, customers take right to possession of the spatial data and pay a fee for an agreed scope of use.
Services revenue-Services revenue consist of capture services and add-on services. Capture services consist of professional services in which aMatterport -qualified third-party technician will provide on-site digital capture services for the customer. Under these arrangements, we will pay the third-party technician directly and bill the customer directly. Add-on services consist of additional software features that the customer can purchase. These services are typically provided by third parties under our direction and oversight and we pay the third party directly and bill the subscriber directly for the provisions of such services. Product revenue-Product revenue consists of revenue from the sale of capture devices, including our Pro2 Camera, and out-of-warranty repair fees. Customers place orders for the capture devices, and we fulfill the order and ship the devices directly to the customer or, in some cases, we arrange for the shipment of devices from third parties directly to the customer. We recognize product revenue associated with a sale in full at the time of shipment of the capture device. In some cases, customers prepay for the ordered device and, in other cases we bill the customer upon shipment of the device. Customers purchasing capture devices from us also typically subscribe to theMatterport platform for use with their captured spaces. However, we do not require Pro2 Camera owners to have a subscription when purchasing a Pro2 Camera. We will also repair Pro2 Cameras for a fee if the nature of the repair is outside the scope of the applicable warranty.
Cost of Revenue
Cost of revenue consists of cost of subscription revenue, cost of license revenue, cost of services revenue, and cost of product revenue.
Cost of subscription revenue-Cost of subscription revenue consists primarily of costs associated with hosting and delivery services for our platform to support our subscribers and other users of our subscribers' spatial data, along with our customer support operations. Cost of subscription revenue also includes amortization of internal-use software and stock-based compensation.
Cost of license revenue-Cost of license revenue consists primarily of costs associated with data curation and delivery costs associated with providing spatial data to customers.
Cost of services revenue-Cost of services revenue consists primarily of costs
associated with capture services and costs for add-on features. Costs for
capture services are primarily attributable to services rendered by third-party
technicians that digitally capture spaces on behalf of the applicable customer,
as well as administration and support costs associated with managing the
program. Costs for add-on features are primarily attributable to services
rendered by third-party contractors that develop the floor plans or
other add-ons applications purchased by our subscribers as well as support costs
associated with delivering the applications.
Cost of product revenue-Cost of product revenue consists primarily of costs
associated with the manufacture of our Pro2 Camera, warranty and repair expenses
relating to Pro2 Cameras and personnel-related expenses associated with
manufacturing employees including salaries, benefits, bonuses, overhead and
stock-based compensation. Cost of product revenue also includes depreciation of
property and equipment, costs of acquiring third-party capture devices, and
costs associated with shipping devices to customers.
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Operating Expenses
Our operating expenses consist primarily of research and development expenses, selling, general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and sales commissions. Operating expenses also include overhead costs. Research and development expenses-Research and development expenses consist primarily of personnel-related expenses associated with our research and development employees, including salaries, benefits, bonuses, and stock-based compensation. Research and development expenses also include third-party contractor or professional services fees, and software and subscription services dedicated for use by our research and development organization. We expect that our research and development expenses will increase in absolute dollars as our business grows, particularly as we incur additional costs related to continued investments in our platform and products. In addition, research and development expenses that qualify as internal-use software development costs are capitalized, the amount of which may fluctuate significantly from period to period. Selling, general and administrative expenses-Selling, general, and administrative expenses consist primarily of personnel-related expenses associated with our sales and marketing, finance, legal, information technology, human resources, facilities, and administrative employees, including salaries, benefits, bonuses, sales commissions, and stock-based compensation. We capitalize and amortize commissions associated with attracting new paid subscribers and services revenue equal to a period of three years, which is the estimated period for which we expect to benefit from the sales commissions. Selling, general and administrative expenses also include external legal, accounting, and other professional services fees, software and subscription services, and other corporate expenses. Following the closing of the Merger, we have incurred and expect to incur in the future additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for insurance, investor relations, and professional services. We expect that our selling, general and administrative expenses will continue to increase in absolute dollars as our business grows. See "The Merger" above.
Interest Income
Interest income consists of interest income earned on our cash and cash equivalents and investments.
Interest Expense
Interest expense consists primarily of interest payments for our debt facilities.
Change in fair value of warrants liabilities
The public and private warrants are subject to fair value remeasurement at each balance sheet date if outstanding, or upon the time immediately before the exercise or redemption. All Public Warrants have been exercised or redeemed. As ofMarch 31, 2022 , there were 1.7 million Private Warrants outstanding.Matterport expects to incur incremental income (expense) in the condensed consolidated statements of operations for the fair value change for the outstanding private warrants liabilities going forward at the end of each reporting period or through the exercise of such warrants.
Change in fair value of contingent earn-out liability
The contingent obligation to issue Earn-out Shares to Matterport Legacy Stockholders was accounted for as a liability because the Earn-out triggering events determine the number of Earn-out Shares required. The estimated fair value of the total Earn-out Shares was determined based on a Monte Carlo simulation valuation model and is subject to remeasurement to fair value at each balance sheet date. Contingent earn-out liability was accounted for as a liability as of the date of the Merger and remeasured to fair value until the Earnout Triggering Events were met. OnJanuary 18, 2022 , all Earn-out Triggering Events occurred. Upon the occurrence of the triggering events, the Company's common stock price represented the fair value of the Earn-out Awards and the Company reclassified the outstanding Earn-out liability to additional paid-in capital as the Earn-out shares become issuable as a fixed number of Common Shares. There will be no 49
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incremental income (expense) in the consolidated statements of operations for the fair value adjustments for the outstanding earn-out liability as all the Earn-out Shares were issued during the three months endedMarch 31, 2022 .
Other expense, net
Other expense, net consists primarily of amortization of investment premium.
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business. We record income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of existing assets and liabilities. These differences are measured using the enacted statutory tax rates that are expected to apply to taxable income for the years in which differences are expected to reverse. We recognize the effect on deferred income taxes of a change in tax rates in income in the period that includes the enactment date.
We record a valuation allowance to reduce our deferred tax assets and liabilities to the net amount that we believe is more likely than not to be realized. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance.
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RESULTS OF OPERATIONS
The following table sets forth our results of operations for the periods presented based on our condensed consolidated statements of operations data (in thousands, except percentages). The period-to-period comparison of results is not necessarily indicative of results for future periods.
Three Months Ended March 31, Change
2022 2021 Amount %
Revenue:
Subscription $ 17,141 $ 13,800 $ 3,341 24 %
License 23 2,260 (2,237) (99) %
Services 3,973 2,689 1,284 48 %
Product 7,373 8,180 (807) (10) %
Total revenue 28,510 26,929 1,581 6 %
Costs of revenue:
Subscription 5,262 3,251 2,011 62 %
License - - - - %
Services 2,983 2,035 948 47 %
Product 8,356 4,915 3,441 70 %
Total costs of revenue 16,601 10,201 6,400 63 %
Gross profit 11,909 16,728 (4,819) (29) %
Gross margin 42% 62%
Operating expenses:
Research and development 26,002 6,025 19,977 332 %
Selling, general, and administrative 70,849 13,058 57,791 443 %
Total operating expenses 96,851 19,083 77,768 408 %
Loss from operations (84,942) (2,355) (82,587) 3,507 %
Other income (expense):
Interest income 1,295 8 1,287 16,088%
Interest expense - (308) 308 (100)%
Change in fair value of warrants liabilities 21,433 - 21,433 - %
Change in fair value of contingent earn-out
liability 136,043 - 136,043 - %
Other expense, net (1,321) (198) (1,123) 567%
Total other income (expense) 157,450 (498) 157,948 (31,716)%
Income (loss) before provision for income
taxes 72,508 (2,853) 75,361 (2,641)%
Provision for income taxes 604 19 585 3,079%
Net income (loss) $ 71,904 $ (2,872) $ 74,776 (2,604)%
Revenues
Total revenue increased by $1.6 million , or 6%, to $28.5 million during the
three months ended March 31, 2022 , from $26.9 million during the three months
ended March 31, 2021 . The increase in revenue is attributable to growth from
subscriptions and service revenues, offset by a decrease in license and product
revenue.
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Three Months Ended March 31,
2022 2021 Change
Amount Amount Amount %
(dollars in thousands)
Subscription $ 17,141 $ 13,800 $ 3,341 24 %
License 23 2,260 (2,237) (99) %
Services 3,973 2,689 1,284 48 %
Product 7,373 8,180 (807) (10) %
Total revenue $ 28,510 $ 26,929 $ 1,581 6 %
Subscription revenue increased for the three months ended March 31, 2022
compared to the same period in 2021, primarily due to higher volume of
subscription plans from both new and existing subscribers. Of the $3.3 million
increase, approximately $2.3 million was attributable to the higher volume of
subscription plans from additional new subscribers and approximately $1.0
million was attributable to additional sales to existing customers during that
period.
License revenue can fluctuate from period to period, depending on the timing of
completed transactions and any associated implementation work that we must
perform to recognize revenue. License revenue decreased for the three months
ended March 31, 2022 compared to the same period in 2021, primarily due to not
having substantial license transactions move to the revenue recognition phase
during three months ended March 31, 2022 .
Services revenue increased for the three months ended March 31, 2022 compared to
the same periods in 2021. The increase was primarily attributable to increased
sales of capture services and add-on services, primarily driven by our
investment in growing our capture services business and the increase in the
number of our subscribers.
Product revenue decreased for the three months ended
Cost of Revenue
Our cost of revenue consists of cost of subscription revenue, cost of license revenue, cost of services revenue and cost of product revenue.
Three Months Ended March 31,
2022 2021 Change
Amount Amount Amount %
(dollars in thousands)
Cost of subscription revenue $ 5,262 $ 3,251 $ 2,011 62 %
Cost of license revenue - - - - %
Cost of services revenue 2,983 2,035 948 47 %
Cost of products revenue 8,356 4,915 3,441 70 %
Total cost of revenue $ 16,601 $ 10,201 $ 6,400 63 %
Total cost of revenue increased by $6.4 million , or 63%, to $16.6 million for
the three months ended March 31, 2022 , from $10.2 million for the three months
ended March 31, 2021 . The increase was primarily attributable to an increase in
cost of products revenue, increase in subscription services provided, and
capture services sold.
Cost of subscription revenue increased by $2.0 million or 62%, to $5.3 million
for the three months ended March 31, 2022 from $3.3 million for the three months
ended March 31, 2021 , primarily due to increased costs related to hosting and
delivery services for our platform to support the growth of subscription
services provided.
Cost of services revenue increased by $0.9 million or 47%, to $3.0 million for
the three months ended March 31, 2022 from $2.0 million for the three months
ended March 31, 2021 , primarily due to an increase in volume and cost related to
capture services sold.
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Cost of products revenue increased by$3.4 million , or 70%, to$8.4 million for the three months endedMarch 31, 2022 from$4.9 million for the three months endedMarch 31, 2021 . The increase was primarily attributable to increased costs related to expediting and securing materials to meet the demand for capture devices in the current supply chain environment as well as increased overhead related to direct labor and manufacturing to support the capture devices sold.
Gross Profit and Gross Margin
Three Months Ended March 31,
2021 2020
(dollars in thousands)
Gross profit $ 11,909 $ 16,728
Gross margin 42% 62%
Gross profit decreased by $4.8 million , or 29%, to $11.9 million for the three
months ended March 31, 2022 , from $16.7 million for the three months ended
March 31, 2021 . Gross margin decreased to 42% during the three months ended
March 31, 2022 from 62% during the three months ended March 31, 2021 . The
decrease in gross profit was primarily due to the decrease in license gross
profit in line with the minimum license revenue transaction and the decrease in
the volume of the product revenue for the three months ended March 31, 2022 . The
decrease in gross profit margin was primarily due to the minimum license revenue
transaction and the decrease in product gross margins as a result of us using
alternative suppliers and alternative parts from time to time to mitigate the
challenges caused by supply chain shortages.
Research and Development Expenses
Three Months Ended March 31,
2022 2021 Change
Amount Amount Amount %
(dollars in thousands)
Research and development expenses $ 26,002 $ 6,025 $ 19,977 332 %
Research and development expenses increased by $20.0 million , or 332%, to
$26.0 million for the three months ended March 31, 2022 from $6.0 million for
the three months ended March 31, 2021 . The increase was primarily attributable
to a $5.5 million increase in salary compensation expenses as a result of
increased headcount, a $12.8 million increase in stock-based compensation, and a
$1.2 million increase in professional services to support our continued
investment into our platform and products.
Selling, General and Administrative Expenses
Three Months Ended March 31,
2022 2021 Change
Amount Amount Amount %
(dollars in thousands)
Selling, general and administrative expenses $ 70,849 $ 13,058 $ 57,791 443 %
Selling, general and administrative expenses increased by $57.8 million , or
443%, to $70.8 million for the three months ended March 31, 2022 , from $13.1
million for the three months ended March 31, 2021 . The increase was primarily
attributable to a $10.9 million increase in personnel-related costs, including a
$6.2 million increase in salaries as a result of increased headcount and a
$40.0 million increase in stock-based compensation.
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Interest Income
Three Months Ended March 31,
2022 2021
(dollars in thousands)
Interest income $ 1,295 $ 8
Interest income increased to $1.3 million for the three months ended March 31,
2022 , from $0.01 million for the three months ended March 31, 2021 . The increase
was primarily attributable to interest earned on our cash equivalents and
investments during the three months ended March 31, 2022 .
Interest Expense
Three Months Ended March 31,
2022 2021
(dollars in thousands)
Interest expense $ - $ (308)
Interest expense decreased for the three months ended March 31, 2022 compared to
the three months ended March 31, 2021 , primarily due to the repayment of our
outstanding loans during the year ended December 31, 2021 . As of March 31, 2022 ,
we had no outstanding debts.
Change in Fair Value of Warrants Liabilities
Three Months Ended March 31,
2022 2021
(dollars in thousands)
Change in fair value of warrants liabilities $ 21,433 $ -
We recognized a change in fair value of warrants liabilities of$21.4 million during the three months endedMarch 31, 2022 due to the decrease in the fair value of our outstanding Public and Private Warrants. As ofMarch 31, 2022 , there were 1.7 million Private Warrants remaining outstanding as a result of the exercise or redemption activities of our Public warrants.
Change in Fair Value of Contingent Earn-out Liability
Three Months Ended March 31,
2022 2021
(dollars in thousands)
Change in fair value of contingent earn-out liability $ 136,043 $ -
We recognized a change in fair value of contingent earn-out liability of$136.0 million for the three months endedMarch 31, 2022 , primarily due to the decrease in the fair value of the Company common stock. As ofJanuary 18, 2022 , all Earn-out triggering events were achieved, and the Company issued a total of 21.5 million shares of common stock for Earn-out Shares, net of tax withholding to eligible recipients onFebruary 1, 2022 . 54
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Other (Expense) Income, Net
Three Months Ended March 31,
2022 2021
(dollars in thousands)
Other expense, net $ (1,321) $ (198)
Other expense increased by $1.1 million , or 567%, to $1.3 million for the three
months ended March 31, 2022 from $0.2 million for the three months ended
March 31, 2021 . The increase was primarily due to the amortization of investment
premium.
Provision for Income Taxes
Three Months Ended March 31,
2022 2021
(dollars in thousands)
Provision for income taxes $ 604 $ 19
For the three months endedMarch 31, 2022 , our provision for income taxes reflects an effective tax rate of 0.83%. Our provision for income taxes for the three months endedMarch 31, 2021 reflects an effective tax rate of (0.67)%. Our effective tax rate for the three months endedMarch 31, 2022 , differs from theU.S. federal statutory tax rate of 21% primarily due to losses that cannot be benefited from due to the valuation allowance on theU.S entity, foreign earnings being taxed at different tax rates and the tax benefit from stock-based compensation activities during the period. Our effective tax rate for the three months endedMarch 31, 2021 differs from theU.S. federal statutory tax rate of 21% primarily due to the tax benefit of pre-tax book losses being offset by a valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity
Our capital requirements will depend on many factors, including the growth and expansion of our paid subscribers, development of our technology and software platform (including research and development efforts), expansion of our sales and marketing activities and sales, general and administrative expenses. As ofMarch 31, 2022 , we had cash, cash equivalents and investments of approximately$600.0 million . Our cash equivalents primarily consist of cash on hand and amounts on deposit with financial institutions. To date, our principal sources of liquidity have been proceeds received from the issuance of equity, the proceeds from the Merger and proceeds from warrant and option exercises for cash. March 31, 2022 December 31, 2021 (dollars in thousands) Cash, cash equivalents, and investments: Cash and cash equivalents$ 92,996 $ 139,519 Restricted cash - 468 Investments 506,991 528,590
Total cash, cash equivalents, and investments
668,577
We believe our existing cash resources are sufficient to support planned operations for the next 12 months. OnJanuary 14, 2022 , the Public Warrants ceased trading on the Nasdaq Global Market. As of the Redemption Date ofJanuary 14, 2022 , 9.1 million shares of Common Stock have been issued upon the exercise of Public Warrants and Private Warrants by the holders thereof at an exercise price of$11.50 per share during the Exercise Period fromDecember 15, 2021 toJanuary 14, 2022 , resulting in aggregate proceeds toMatterport of$104.5 million , including 7.1 million shares issued upon the exercise of Public Warrants and Private Warrants by the holders with a total proceeds of$27.8 million received during the three months endedMarch 31, 2022 . As a result, management believes that its current financial resources are sufficient to continue operating activities for at least one year past the issuance date of the financial statements. 55
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We have incurred negative cash flows from operating activities and significant losses from operations in the past. We expect to continue to incur operating losses at least for the next 12 months due to the investments that we intend to make in our business. Our future capital requirements will depend on many factors, including increase in our customer base, the timing and extent of spend to support the expansion of sales, marketing and development activities, and the impact of the COVID-19 pandemic. As a result, we may require additional capital resources to grow our business. We believe that current cash, cash equivalents and investments will be sufficient to fund our operations for at least the next 12 months. Other commitments We lease office space under operating leases for ourU.S. headquarters and other locations inthe United States that expire at various dates through 2025. In addition, we have purchase obligations, which include contracts and issued purchase orders containing non-cancellable payment terms to purchase third-party goods and services. As ofMarch 31, 2022 , our 12-month lease obligations (throughMarch 31, 2023 ) totaled approximately$1.3 million , or approximately$3.8 million through the year endingDecember 31, 2025 . Our non-cancellable purchase obligations as ofMarch 31, 2022 totaled approximately$14.0 million and are due through the year endingDecember 31, 2024 . Cash Flows
The following table set forth a summary of our cash flows for the three months
ended
Three Months Ended March 31,
2022 2021
Cash provided by (used in):
Operating activities $ (25,478) $ 1,056
Investing activities $ (18,242) $ (2,506)
Financing activities $ (3,226) $ (903) Net Cash Provided by (Used in) Operating Activities
Net cash used in operating activities was$25.5 million for the three months endedMarch 31, 2022 . This amount primarily consisted of net income of$71.9 million , offset by non-cash gains of$98.8 million , and a change in net operating assets and liabilities of$1.4 million . The non-cash gains primarily consisted of$21.4 million of change in fair value of warrants liabilities and$136.0 million of change in fair value of contingent earn-out liability, partially offset by$2.5 million of depreciation and amortization expense,$55.3 million of stock-based compensation expense,$1.0 million of amortization of investment premiums, net of accretion of discounts, and a$0.2 million increase of allowance for doubtful accounts. Changes in net operating assets and liabilities primarily consisted of an increase in accounts payable, deferred revenue, accruals and other liabilities, which was partially offset by an increase in accounts receivable and prepaid expenses and other assets. Net cash used in operating activities was$1.1 million for the three months endedMarch 31, 2021 . This amount primarily consisted of a net loss of$2.9 million , offset by non-cash charges of$2.0 million , and an increase in net operating assets and liabilities of$2.0 million . The non-cash charges primarily consisted of$1.3 million of depreciation and amortization expense and$0.7 million of stock-based compensation expense. Changes of net operating assets and liabilities primarily consisted of an increase in accounts payable and deferred revenue, partially offset by an increase in account receivable and prepaid and other assets.
Net cash used in investing activities was$18.2 million for the three months endedMarch 31, 2022 . This amount primarily consisted of investments in available-for-sale securities of$30.4 million , purchase price (net of cash acquired) for business acquisitions of$30.0 million , capitalized software and development costs of$3.6 million , and purchases of property and equipment of$0.4 million , partially offset by maturities of marketable securities investments of$46.2 million . 56
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Net cash used in investing activities was
Net cash used in financing activities was$3.2 million for the three months endedMarch 31, 2022 . This amount primarily consisted of a$33.3 million payment for taxes related to the net settlement of equity awards, partially offset by$27.8 million of proceeds from the exercise of warrants and$2.2 million of proceeds from the exercise of stock options. Net cash used in financing activities was$0.9 million for the three months endedMarch 31, 2021 . This amount primarily consisted of repayment of debt of$1.1 million and payment of deferred transaction costs of$0.6 million for the Merger, partially offset by proceeds from the exercise of stock options of$0.8 million .
Emerging Growth Company Status
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. The Company is an "emerging growth company" as defined in Section 2(a) of the Securities Act, and has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. The Company will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of common stock that is held by non-affiliates exceeds$700 million as of the end of that year's second fiscal quarter, (ii) the last day of the fiscal year in which the Company has total annual gross revenue of$1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which the Company has issued more than$1 billion in non-convertible debt in the prior three-year period or (iv)December 31, 2025 , and the Company expects to continue to take advantage of the benefits of the extended transition period, although it may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. This may make it difficult or impossible to compare the Company's financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. We evaluated the development and selection of our critical accounting policies and estimates and believe that the following involve a higher degree of judgment or complexity and are most significant to reporting our results of operations and financial position and are therefore discussed as critical. We believe that the critical accounting estimates discussed under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2021 Form 10-K for the fiscal year endedDecember 31, 2021 reflect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements. There have been no material changes to our critical accounting estimates as filed in such report. Refer to Note 2.-Summary of Significant Accounting Policies in Part I, Item 1 of this Report for more information on our adoption of new accounting guidance.
Recent Accounting Pronouncements
For a discussion of the recent accounting pronouncements, refer to "Accounting
Pronouncements" in Note 2. Summary of Significant Accounting Policies in Part I,
Item 1 of this Report.
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