All right. Good afternoon and thanks for joining us at the Morgan Stanley TMT Conference. My name is Elizabeth Porter. I'm an analyst on the U.S. software team, and I am very pleased to have with us today Matterport's CEO, RJ Pittman. We are going to take some questions, so if anybody wants, there will be mics going around at the end. Then for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. With that, R.J., thanks so much for being with us. Great to be here again. Awesome. To kick it off, I think it'd be really helpful just to get a background on Matterport, kind of what the company does, what the basic value prop was, and kind of what the problem is that you're trying to solve for. Sure. So Matterport has been in the built world industry for 12 years now, working on solving a very distinct problem, and that is to turn buildings into data so that we can create a new value proposition for the way that properties are marketed, for the way that properties are managed, and also for the way that properties are actually designed and constructed. The simple problem that we're solving for is that the largest asset class in the built world, that being property, excuse me, the largest asset class, period, is real estate. At a $350 trillion asset class, it is largely offline. And that's amazing to me in a world with so many industries, from financial services to retail and e-commerce, that have all been transformed by digitization and technology, that the largest asset class of them all has yet to really be disrupted and transformed in the same way. One of the reasons for that is buildings are analog. They're not inherently digital in any way. We invented a technology years ago that allows us to capture the physical world in a very convenient, fast, photorealistic, but also dimensionally accurate fashion, essentially giving us what we call a digital twin of any building of any shape and size. We're most known for creating digital twins and virtual tours of residential real estate, so homes, apartments, and the like. We've also expanded to essentially be able to create a digital twin of any building, so commercial properties, apartment buildings, office high rises, hotels, even in the industrial category, manufacturing facilities, factories, and the like. That's because the technology we built is fairly adaptable, very universal, and it's also quite scalable. Where we sit today, we've now digitized more than 35 billion sq ft of space, in fact, approaching 40 billion now. We're digitizing just about 10 billion sq ft a year, to put it in perspective at just how much we're accelerating our efforts here and how much reach we have. And that's in covering buildings in over 175 countries around the world. So most of the world's countries have digitized at least one building or space using Matterport's technology today, but there are 4 billion buildings out there still to go. So it's an enormous market opportunity for us. Yep. And you hit on some interesting areas: industrials, office. And where I, in my kind of day-to-day life, see you guys often on the virtual home side, I'm a little addicted to Zillow, and often see your guys' logo over there. But I want to understand just a little bit more some of those other verticals, kind of beyond the residential real estate. What are some of the biggest opportunities and use cases, and which ones are you most excited about? Sure. I mean, the world at large and the built world at large is very broad and diverse. There's hundreds of different building types and hundreds of different industries that you could imagine applications for Matterport. And we've really boiled it down to two key value propositions: promote and operate. And in the promote category for us, that's all about property marketing. So where you see us showing up on Zillow and Redfin and Apartments.com and the like, that is a very clear opportunity where we are bringing the world's properties to people's laptops, phones. You can basically be there and see properties as if you were physically in the space. You could imagine that same value proposition being useful in the commercial real estate space as well. So it began with office space. Plenty of companies looking for new office space, this is a way to make that world and that universe of buildings much smaller, where they can go and inspect and explore potential expansion space for new headquarters, what have you. But then it goes even further than that. Because the information we're capturing in a Matterport digital twin is not just great photography. It's not a video walkthrough. It's an actual 3D model, a reference data set for the property itself. So now we're starting to talk about things like facilities management. We're talking about construction remodeling. We're talking about building appraisals, building assessments for insurance purposes, and the like, because the digital twin is so precise. And it's taken us a decade to really perfect the capture capability to be that reliable, that trustworthy, that consistent so that these new opportunities for us in the enterprise and in these commercial applications could really take off. And so for a very simple example, we have retail customers that use Matterport like CVS, Walgreens, Starbucks, Whole Foods. And you might say, "Well, what are they using Matterport for?" It seems like a distance to travel from the Zillow experience. And what they're doing, essentially, is using it for virtual facilities management. Very easy to scan tens of, hundreds of, even thousands of locations with Matterport and our technology. You can do it in minutes. And once you have all of those spaces digitized, building inspectors, space planners, architects, designers can now access their entire portfolio of real estate without leaving their home office. They can do so with precision. They can walk through, they can plan out a new space, they can plan new promotional materials that might go in the storefronts without having to be there. Today, the competition for all of that is not other companies like Matterport. It's boots on the ground. It's pen, paper, and tape measures, the traditional analog building inspection and property management exercise, which is just very labor-intensive, cost-inefficient, and slow, right? Today, we give you access in a scale proposition that literally replaces a field of tens of building and property managers that are out doing that themselves with a software solution that a single person could use. When you're selling to kind of that property manager or somebody on the construction site or going into insurance, does there have to be any sort of shift in kind of the sales force, kind of who you are directing those efforts to, and any sort of changes or opportunities that you have from a product standpoint to go more closely aligned with those specific use cases? Yeah. I mean, we have matured over the last three years into a SaaS-first, enterprise-oriented company. And what does that mean? Well, for the Fortune 1000, of which we have more than 25% of them now using Matterport, there's a different expectation, right? There's a different sales motion. There's a different way to market to them and to basically make them aware of the value proposition that we deliver. And so we've spent the last few years building out all of that infrastructure for enterprise sales, mid-market sales, customer success, and support that's very different from the model that is exclusively focused on residential properties and creating a property marketing solution. We look, again, a lot more like your traditional growth SaaS company. That's what we've always said is the end game for Matterport is come for the digital twin, but stay for the platform of all of our property insights, our Property Intelligence, and property management tools that are one-click convenience for you once you have that digital twin on Matterport. And then going back to the real estate kind of residential market, you've talked about multiple changes that are occurring just in that market more broadly. What are some of these changes, and really, what is the implication for Matterport? Yeah. I mean, there's a lot of things happening in real estate worldwide, especially residential real estate. And right here in the U.S., we're seeing the undercurrents of all sorts of changes where the very commission structure of how buyer and seller agents make money in the game today is come under scrutiny in question, right? The way MLS works, the National Association of Realtors, is not a technology-first ecosystem, and it hasn't been for decades. And when you see these repeated cycles in real estate that happen about every decade, we're in one of the toughest downturns that residential real estate has seen in several decades, right? Interest rates where they're at, housing prices still at all-time high, and no inventory creates scarcity in the market, and it forces change. It's in these periods of time where the entire industry, agents, brokers, buyers, and sellers, are looking for a better way. We know that it's going to be technology-driven, that sets the tone in the future for residential real estate, and not just here in the U.S., but clearly worldwide. What they're looking for is efficiency. When they think about what is a better way to be doing this, technology can solve so many of the challenges that make it cost-prohibitive to scale, make it difficult for agents to become successful, enter Matterport. What we're trying to do is skate to where that puck is going. So if you thought of Matterport today as the property marketing solution with that great virtual open house and definitely a tool that is very valuable even in constrained markets, you will now start thinking of Matterport as your co-pilot for helping you list, manage, and sell or lease a property, whether it's a home, an apartment, a nightly rental, because we're bringing so much automation to the process of property marketing, which is what effectively all of the agents and the industry participants are looking for because it doesn't pencil out for them. Especially if they are an agent that has 1-5 listings a year, the amount of work versus the return on that investment has just proven time and again to not be worthwhile, where with technology in a solution like Matterport, we can have a profound impact on their efficiency. I do want to get back to kind of efficiency, AI, and automation, big topics. Before I do, I think it'd be great just to understand and spend a couple of minutes on the go-to-market. How are customers finding Matterport? You guys are nearing close to 1 million users, not a small base. That's a lot of people. You compare that with your 72,000 kind of paying customers. So how important is the free-to-paid kind of model? What are you seeing on kind of conversion rates? How do you improve those? Sure. Well, let me kind of chart out a little bit of our customer and user ecosystem. So you mentioned 1 million users. That's 1 million subscribers on the platform, right, who have come in and created a Matterport account. And a large percentage of those versus the 72,000 paying are in our free tier. And that is a very powerful flywheel for us because it is from that try-before-you-buy experience that is working for us fairly automatically. It's a very scalable digital solution that on-ramps customers from all over the world. The user base is actually quite a bit larger. We serve over 1 billion virtual tours every year. Those are the people that are coming and taking a Matterport tour, residential real estate, Vacasa for a nightly rental, Marriott for checking out a hotel, and also all of our users in the enterprise and in the commercial spaces, offices, whatever it may be. That is a huge number if you put that in perspective of just how much of a role that Matterport and that digital twin is playing in the category to have 1 billion visitors experiencing our digital twins here. That number is accelerating. So the go-to-market for us is kind of twofold. One, let's continue to harness the ecosystem of the 1 billion properties served and virtual tours served to expand that to 2 billion, 3 billion. Because the more people that we attract as end users, the more we can also convert to subscribers. That helps to build the brand more universally, helps to build it for us globally, very critical. In the enterprise, it's a different motion, right? That's where we've built out a very traditional go-to-market motion with your traditional enterprise sales, enterprise marketing strategies, and very efficient ones as a SaaS business for us. We're able to use our technology. And again, that free tier is not for consumers in the way you might think. It's a fantastic on-ramp for our mid-market and enterprise customers to come and try the product out, evaluate it on their own before getting into the sales cycle, right? So this is how we've landed many big brand companies and enterprises to the platform like Nike, Facebook back when they were Facebook, now Meta, Comcast, Barclays Bank, all started with this on-ramp. We have used very much like the Slack model for driving digital adoption because it's so efficient for us. We also have a great partner network now that we're leaning into that's giving us great scale and reach. Amazon Web Services has made Matterport a premier partner for all of their industrial and commercial customers housing their operational data in the Amazon Cloud. They are basically bringing all of those customers to Matterport so we can digitize their facilities and help manage their operations in the way that we do with the digital twin. I can go across many more industries, whether it's Autodesk for construction, Procore for construction management. By integrating our product with these flagship platforms and their ecosystems of customers, we're now channeling and co-selling with these bigger ecosystems the Matterport solution along with them. That's giving us just tremendous acceleration in our pipeline. Bookings, we're seeing it just continue to pay dividends right into 2024. Great. And so you mentioned the Autodesk, the Amazons, the Procores. Those are helping you kind of get into the door with the relationships. Kind of where are we, do you think, in terms of the progress of these partnerships? Are they still kind of early days? When can we start to see kind of more of the customer ramp kind of come through these guys? Yeah, right now. So short answer is now it's happening. And the way I would describe it is these are big partners. And we're delighted. We're privileged and excited to be working with them. And year one, which was 2023, was really about co-marketing and first establishing the integrations, proving that it works, bringing a few customers on board, and then going to market and creating the awareness around it that this is a great seamless integration. Connect with one of the two customers and you're going to get the other. This year, 2024, is co-selling. And that's where the rubber really meets the road, where we're starting to not only just draw from our own sales force and the co-marketing efforts, but now harnessing the horsepower of our partners, much larger sales forces that are in the industries that are well-established and where they're well-entrenched. That's what's producing now a very encouraging pipeline and bookings for us. Not to make you pick any favorites, but if you had to look across kind of your partner network, where is the one that you are really most excited about that really we should be paying attention to as it's able to drive more volume to the Matterport platform? Yeah. Well, it's hard to look past Amazon Web Services. Their market share is extraordinary. I mean, they're the biggest in the game, and they're up against hardy competition with Azure and Google Cloud, but by far and away with the biggest reach. Our relationship with them started very specifically in a category of enterprise manufacturing and digital twins around real-time information in factories. But it is now quickly progressing to the whole of the Amazon AWS ecosystem. And that representative customer base is massive. And it's not just the top tier. Sure, we've got John Deere and Siemens and a host of Fortune 1000s that have already come from that partnership with AWS, and it's fantastic. But if we look at the Fortune 10,000, you look at mid-market and even small SMBs that are running in AWS Cloud today, it is an enormous channel of business for us. I suppose it's worth mentioning that our entire technology stack and solution runs in AWS Cloud as well. So the ease of integration with all of the customers that are already there is literally point and click. It's hard to find partners and SIs and other integrations when you're building out an enterprise business. We're a small but mighty company. You want to maximize that bang for the buck. Where we're spending our time doing integrations, is that leading to a bigger feeding pond? By far and away, I think AWS represents the biggest feeding pond in that way. But the other two I mentioned are two of tens of partners that we have, Procore and Autodesk, but they're also very important to us because the category of design and construction is one of our fastest-growing categories today. Again, I think many investors and people that have used Matterport will be equating Matterport, the stock, the value, everything against the current state of the residential real estate market. But what we really want to be looking at is the growth of the SaaS business, the growth of the enterprise, and the growth of design and construction, which is north of 30% growth year-over-year in a constrained market and industry is fantastic and really is showing those promising signs. Now that all of these partners that I've mentioned are converting to co-sale motion and really kind of getting on our front feet together with them, again, I think it's the start of real continued acceleration and growth in these important enterprise categories. Great. Over the last couple of years, help us understand just how the competitive landscape has evolved. There's obviously some of the players in the residential real estate market. But within kind of design and construction also, who else is out there that people can be using, or where are customers coming from when they move over to Matterport? Yeah. Maybe I'll start with that one first. The biggest piece of our competition is typically customers that have done nothing before. So there is largely not an incumbent or a technology solution that is helping them digitize or automate facilities management or construction. Our partners like Autodesk and Procore that provide great tools for construction project management and streamlining workflows. But for our specific value proposition, creating that digital twin and all of these capabilities, the closest that we've seen to technology competition seems to stop short or only provide one piece of the solution set that we offer. There are industrial and commercial-grade LiDAR scanners that can go out and create a 3D point cloud of a space, a room, or a building. But it's just a point cloud. It's not a photorealistic, true clone or digital twin of the space. It's usually captured in pieces that have to be reassembled with human beings, building engineers, CAD drafters, and the like. That has sustained for many, many years as a viable solution to getting some digital representation of buildings for the commercial space. Nobody's automated it. I think the important thing to understand about Matterport is in the space that some of these companies have scanned large construction sites or projects, particular companies might do 10,000 construction sites or projects in like 10 years, which is a lot of construction projects, 10,000. 10 years is a long time. We do that many in a day. The reason that we're able to do that is it's completely automated. It's something I think is important to understand. AI has been a core competency of Matterport since the beginning. The only reason that we can create thousands of digital twins and 10 billion sq ft of digital twins a year is because no humans are involved beyond the capture. We've really perfected that ability to reassemble in photorealistic without losing any dimensional accuracy, a terrific horizontally scalable offering. That has really separated us from many lookalike competition. Our biggest effort, as I say, on that enterprise side is bringing a new solution to a market that people just didn't know was possible. I'd say the easy answer in property marketing and what you see out there in residential real estate land, it's kind of a similar answer. The biggest competition is just 2D photos. Even that isn't really an explicit competitor per se. It's just a known truth of the industry that there's 70%-80% of the industry that has yet to embrace the full power of a digital property marketing solution. It's largely due to awareness and understanding. That's an expensive one to market into. We're being very shrewd about and efficient about how we do that. The very simple answer is that free subscription tier that you spoke about earlier is really critical because the best value proposition you can offer a real estate agent, a broker, or even anybody that's in the industry, period, is free. That has been critical for us to convert, I think, a generation where here in the U.S. alone, there's a little less than 2 million real estate agents out there. A large majority of them are not current on the technologies that are one click away from a much higher performing property marketing solution. We're really focused on capitalizing on this low-friction solution we have to touch them as well this year. And so you mentioned a couple of things in your response there that it's a lot of customers that are coming from nothing before. This is a solution that people didn't even know what was possible or not being up to date on kind of the current tech. When we think about the conversations that you're having with investors, how much is it still evangelizing a solution of an education around the process of here what these tools can do today? Where does the budget come from? And how much is it still an education perspective on getting out there versus when can this start to convert to a more? Yeah. The good news is since we have been at this for over a decade and on, I'd say, the hardest one to reach, the more challenged one to reach, like property marketing and residential real estate, we are now very well known and understood for what we offer. In fact, the agents will even tell you almost just off the cuff, "Oh, Matterport's fantastic. You put a Matterport on your real estate listing. It will sell faster for a higher price. And your website will get 3X the engagement." I love it when I hear agents repeating that, "We've done something right in 10 years. The connect the dots is, but gee, we only use it for our higher-end properties over $1 million or $5 million properties because it's an expensive solution." And so to me, there's just one more dot to connect, which is for them to understand how fast we've moved in just the last few years from what was indeed a pro solution and a pricey $700, $800, even $1,000 proposition to get a digital twin to now you can pull out the smartphone out of your own pocket and the agent can go scan an entire house themselves if they so chose, list that property on Zillow or Realtor or wherever else for free until it's sold. And they can do one property a year like that using a smartphone or a 360 camera, bring your own device. You don't have to buy anything from Matterport, and you're in the game. That's a big, I think, a truth that we haven't fully connected on. But that's when it flips. The good news is that's not a challenging marketing undertaking for us to execute, which we're executing full steam now here in 2024 because we've just continued to refine that early adoption, that free tier of capability to be almost best in class. For many people and many realtors, if you scan with your own iPhone, which is an incredible camera on it alone, we turn it into this beautiful 3D model. To the untrained eye, you might not be able to tell the difference between a DIY Matterport space on Zillow and one that was shot by a professional using our $6,000 Pro 3. It's getting that good. Wow. So I want to go back to AI because you have a lot of interesting initiatives going on, Genesis, Property Intelligence. So could you just give us an overview of what exactly you're enabling with these products, any of the early kind of customer feedback, and any metrics that you can share on interest there? Yeah. So we started this year with a bang in February. We launched and hosted our, we call it our winter release for 2024. That was just a few weeks ago, literally just two-plus weeks back. But it was a very important milestone for the company where we have formally entered the era, the next decade of our mission and vision, which is if the first decade was all about mastering the digitization of the Built World, the creation of these great digital twins and Virtual Tours, and really perfecting them for all building types, the second decade has always been about, well, what do you do with all of that data once you have it? And the answer to that is called Property Intelligence. We introduced Property Intelligence to the world with really one value proposition behind it, which was automation, an automation of insights about a home, insights about a building, again, an office, a factory that you could glean from the Matterport model or tour once you had it. But we ought to be able to do that for you. So to automatically do a full inventory of everything that's in the property, using the house as the example, how many appliances are in the house, what types, how many sinks, double sinks, showers, bathtubs, bedrooms at any level, down to how many light switches and plug sockets are in the space. And then I want the dimensions of everything in the space, all the rooms, all the stories, the total dimension, the ceiling heights, a 3D blueprint, and then maybe even the dimensions of all of the furnishings inside as well. Because it's all 3D, because it's a true data model that we've captured all the way from the beginning 10 years ago, that's all for us to just analyze and unlock. And we've been using AI to do this for years. And we're doing it across all 38 billion sq ft of space we have under management. And we're turning it on and making it available for our new customers that come on board at an incredibly high rate of adoption. We've put a lot of these new features and capabilities into our premium subscription tiers. You can try it out all the way down into the free tier. You can get great Property Intelligence, pull out your phone, go capture your house, and you'll be able to see right away what our AI engine can do for you. If you want to publish it, you want to use it and get it out there on Zillow or on MLS, you got to jump up to a premium tier. Customers are already jumping. We've only been in this market for two weeks. We have 50,000 properties that are already using Property Intelligence and over 1 million views and visits of properties with Property Intelligence enabled in a very short period of time. It's already exceeding our expectations. The customers are getting it. They're jumping on it. By the way, not just in residential real estate, this has, again, been designed for universal value delivery all the way to the enterprise. This is going into what we call our premium feature package for the enterprise called Enterprise Essentials. What it means for every property type and customer is we are officially in the era of value-based pricing. It is no longer measured by how many Digital Twins. It's based on the value we deliver, which is a combination of square footage of the space. So the bigger, the more complex it is, the more value we're delivering to you, the higher the price. But all of these new Property Intelligence features, they're not so much even add-ons. We're just building it right into the workflows. But it's accessible to you in the premium tier. So you'll see the capabilities sitting there. You can demo a few of them. But then it's hit a switch to upgrade you and get you into the pro tier or above in enterprise to get you actually using them. Great. And I'm going to ask another question or two and then open up to the audience if there's any questions. But first, to this point on, you're adding more value kind of across the platform, particularly at the high end that'll drive these upgrades. But you're also adding value towards the low end as well. And you recently announced a price increase over the last year to help recognize and capture some of that. So what was the decision on kind of why now, how have customers reacted to the price increase, sort of details on where it was implemented? And just more philosophically looking forward, how do you look at pricing as a lever? Yep. Contrary to a lot of companies that took advantage of the economic climate to say inflation was the reason we have to raise prices, that was not our philosophy and approach. It is all about value-based pricing, even when it comes to what we charge in the baseline subscriptions today. And for six, maybe seven years, we have never changed prices or raised prices for our customers. So if anything, we were behind the curve. And what I mean by that is not raising prices for the sake of it, but have we delivered commensurate value that qualifies for a different pricing tier? And are we about to deliver a bunch more value to our customers that we ostensibly shouldn't be giving away for free? Some of it, you want to tease a little bit of your new stuff into those free tiers to keep accelerating adoption at the top of funnel. But we're not giving away the farm there at all. We're really holding that value for the premium tiers. But at the same time, we put enough of it in the baseline across all subscription tiers that absolutely justifies paying more money for what we offer. And we did that last year, as you said, with our first major price increase when it was across the SMB cohort first, which is the most delicate one of all because they're the most price-sensitive. Many of them have been with us for a long time. They've gotten very used to same old pricing. You're in and you're out. That was a year, as you know, where we managed to do it very successfully and drove NDR up. We also drove customer satisfaction up, two things that usually don't go hand in hand. Price increase, expect everything to tank. And it was a little choppy a little bit as the news came out and customers were processing it. But once they realized, hey, they're actually making this a better overall total cost of ownership for us. And they're handing us a whole bunch of very useful tools that we've been asking for, okay, this makes sense. And what we learned from that, and I think what our customers because we brought them into the process, we showed them what this looked like, what we were building, what the pricing was going to be. So we also didn't do it in a vacuum. A lot of companies did. A lot of companies got stung pretty badly by their customers and the markets, etc. I think we've built a recipe that is repeatable. We're repeating it in the enterprise. We're rolling out a steady series of price adjustments around enterprise. But they're all predicated on huge AI value. You hear all the narrative of companies racing out to add AI features. Someday, that's going to be a revenue driver for them. For us, again, it's been a core competency since 2011. It's been the driver to the value we create. The price increase is last year. They will be for the years going forward. We've got a good rhythm for all of this now, which gives us a great confidence in what we see as nothing but upside and potential acceleration for Matterport in 2024 and 2025. Great. Do we have any audience questions? So I'd love to hit on operating margins. You, like many other companies, have undergone major cost savings programs. So what are some of the key initiatives you made to improve margin? Where can we get most excited about on kind of a go-forward basis? And how do you think about that timeline to break even? Yeah. It's been very important for us to, one, be as smart and shrewd as we can in stewardship of our capital. We've got a very, very strong balance sheet. We have reduced our through very, very, I think, intelligent cost containment in 2023, as well as an aggressive restructuring of the business to drive almost exclusively, we call, profitable growth. That has accelerated our path to profitability by over a year. We've pulled that into the end of 2024. By the way, that's not an easy thing to do and still post double-digit growth in your SaaS business, 30+% growth in your enterprise business when the real estate industry is down 20% and we post 14% growth in our residential real estate business. We have bucked almost every trend while going through one of the most material restructurings, I think, a public company could do relative to our size and still show that acceleration. And so we feel really great about that because the heavy lifting and the work is in the rearview mirror. This is a year that is not going to be ensconced in distractions or the huge internal lift that goes into a reorganization like that that many companies are, you can see, trickling right into 2024. They're still busy contending with. We are just in a very lean mode of execution and just accelerating our path towards profitability. The other thing I would say is it's not just a headcount and a labor force optimization. We're continuing to innovate and use technology and data science to improve the delivery of our offering. This is a cloud-based solution. And anywhere that we can take costs out of the equation, we can boost our gross margins. And if you looked at our gross margins, you looked at our op margins, we have just continued to make huge, huge improvements, not 5%-10%, like 50% improvements. And we're finding ways to optimize our cloud services, our compute services as well so that at that very top end and as I should say, and as we continue to evolve the mix of our revenue, which today stands at 60% of the revenue is SaaS, also ahead of plan and it's accelerating, that is our high-margin business that drives profitability even faster. And so from that perspective, coming out of the work that was a huge lift in 2023, I think we're incredibly uniquely positioned to accelerate in 2024. With the product releases we've just put into the market, we're also extending our market-leading position. If there is any competition out there, I think we're just further away from it than we've ever been. Awesome. Great. So with that, we're time. We're really looking forward to all the things to see in 2024. Great. Thank you, Elizabeth.