SOURCE: Mattersight Corporation

Mattersight Corporation

November 05, 2014 16:15 ET

Mattersight Announces Third Quarter 2014 Results

CHICAGO, IL--(Marketwired - Nov 5, 2014) - Mattersight Corporation (NASDAQ: MATR) today announced financial results for the third quarter ended September 30, 2014. 

Mattersight's total services revenue was $7.7 million, including $6.5 million of subscription revenue. The Company realized an "Adjusted Earnings1" loss of $1.5 million for the third quarter of 2014. Adjusted Earnings is a non-GAAP measure. For a reconciliation of operating loss to Adjusted Earnings, see the accompanying schedule. Mattersight's net loss was $4.2 million in the third quarter of 2014. 

Q3 Highlights

  • Grew Revenues 5% sequentially to $7.7 million; up 11% year-over-year, excluding the Vangent / GDIT contract
  • Increased contracted revenues in deployment to a record $1.8 million
  • Grew the Book of Business 7% sequentially to $9.5 million; up ~40% annualized year to date
  • Converted a record 8 pilots, including a record 6 routing pilots
  • Grew routing seats sold by ~45% sequentially; grew routing seats in appliance pilots by 240% year-over-year to ~14,000
  • Ended the quarter with a record 79 pilots, up 139% year-over-year, with a follow-on ACV of ~$39 million, up 84% year-over-year
  • Ended the quarter with $18.3 million in cash, no debt, and $10 million available on our line of credit

Other Notable Recent Milestones

  • Received add-on orders for additional 3,500+ routing seats in October
  • Announced esurance as a new routing customer
  • Received significant recognition for routing: Chicago Innovation Award and CUSTOMER Magazine Innovation Award
  • Announced relationship with ERB to OEM our algorithms to score student essay content
  • Granted two important patents in Q3: one for analyzing personality in all forms of electronic communications, including email, web interactions, digital video and social media; and one for Predictive Behavioral Routing

Conference Call Information

Mattersight management will host a conference call at 5:00 p.m. ET on Wednesday, November 5, 2014. The conference call and slide presentation will be available at the Investment Community section of Mattersight's website at http://www.mattersight.com/investment/. To listen to the conference call via telephone, please call 800.952.4789 (domestic) or 404.665.9579 (international), conference ID: 33607327. 

For those who cannot access the live broadcast, a replay of the conference call will be available beginning approximately two hours after the live call is completed until December 6, 2014, by dialing 855.859.2056 (domestic) or 404.537.3406 (international), conference ID: 33607327.

Safe Harbor for Forward-Looking Statements

Statements in this press release that are not historical facts are "forward-looking statements" that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements, which may be identified by use of words such as "plan," "may," "might," "believe," "expect," "intend," "could," "would," "should," and other words and terms of similar meaning, involve risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. In addition to other factors and matters contained or incorporated in this document, important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements include, among other things, the risks detailed from time to time in Mattersight's SEC filings. You can locate these filings on the Investor Relations page of Mattersight's website, www.mattersight.com. Statements included or incorporated by reference into this press release are based upon information known to Mattersight as of the date of this press release, and the company assumes no obligation to publicly revise or update any forward-looking statement for any reason.

About Mattersight

Mattersight is a leader in enterprise analytics focused on customer and employee interactions and behaviors. Mattersight® Behavioral Analytics captures and analyzes customer and employee interactions, employee desktop data, and other contextual information to optimally route customers to the best available employee, improve operational performance, and predict future customer and employee outcomes. Mattersight's analytics are based on millions of proprietary algorithms and the application of unique behavioral models. The company's SaaS delivery model combines analytics in the cloud with deep customer partnerships to drive significant business value. Mattersight's solutions are used by leading companies in Healthcare, Insurance, Financial Services, Telecommunications, Cable, Utilities, Education, Hospitality, and Government. See What Matters™ by visiting www.Mattersight.com.

1. Mattersight presents Adjusted Earnings, a non-GAAP measure that represents cash earnings performance, excluding the impact of non-cash expenses and expense reduction activities, because management believes that Adjusted Earnings provide investors with a better understanding of the results of Mattersight's operations. Management believes that Adjusted Earnings reflect Mattersight's resources available to invest in its business and strengthen its balance sheet. In addition, expense reduction activities can vary significantly between periods on the basis of factors that management does not believe reflect current-period operating performance. Although similar adjustments for expense reduction activities may be recorded in future periods, the size and frequency of these adjustments cannot be predicted. The Adjusted Earnings measure should be considered in addition to, not as a substitute for or superior to, operating income, cash flows or other measures of financial performance prepared in accordance with GAAP.

 
 
MATTERSIGHT CORPORATION 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(Unaudited and in thousands, except per share data) 
 
    For the Three Months     For the Nine Months  
    Ended     Ended  
    Sept. 30,     Sept. 30,     Sept. 30,     Sept. 30,  
    2014     2013     2014     2013  
Revenue:                                
  Behavioral Analytics revenue   $ 7,518     $ 8,307     $ 21,335     $ 24,067  
  Other revenue     140       302       612       973  
    Total services revenue     7,658       8,609       21,947       25,040  
  Reimbursed expenses     22       56       86       187  
Total revenue     7,680       8,665       22,033       25,227  
Operating expenses:                                
  Cost of Behavioral Analytics revenue     2,356       2,721       6,577       7,958  
  Cost of Other revenue     21       163       230       517  
    Cost of services     2,377       2,884       6,807       8,475  
  Reimbursed expenses     22       56       86       187  
Total cost of revenue, exclusive of depreciation and amortization shown below:     2,399       2,940       6,893       8,662  
  Sales, marketing and development     5,628       4,878       16,306       16,502  
  General and administrative     2,320       2,241       6,851       6,625  
  Severance and related costs     --       154       --       154  
  Depreciation and amortization     792       950       2,272       2,829  
Total operating expenses     11,139       11,163       32,322       34,772  
                                 
Operating loss     (3,459 )     (2,498 )     (10,289 )     (9,545 )
Interest and other expense, net     (711 )     (168 )     (1,021 )     (356 )
Change in fair value of warrant liability     (5 )     43       (91 )     43  
Loss before income taxes     (4,175 )     (2,623 )     (11,401 )     (9,858 )
Income tax (provision) benefit     (7 )     (10 )     (24 )     229  
Net loss     (4,182 )     (2,633 )     (11,425 )     (9,629 )
Dividends related to Series B Stock     (147 )     (147 )     (441 )     (441 )
Net loss available to Common Stock holders   $ (4,329 )   $ (2,780 )   $ (11,866 )   $ (10,070 )
                                 
Per share of Common Stock:                                
Basic net loss available to Common Stock holders   $ (0.21 )   $ (0.17 )   $ (0.61 )   $ (0.61 )
Diluted net loss available to Common Stock holders   $ (0.21 )   $ (0.17 )   $ (0.61 )   $ (0.61 )
                                 
Shares used to calculate basic net loss per share     20,790       16,758       19,324       16,515  
Shares used to calculate diluted net loss per share     20,790       16,758       19,324       16,515  
                                 
Stock-based compensation, primarily restricted stock, is included in individual line items above:
  Cost of Behavioral Analytics revenue   $ 40     $ 149     $ 142     $ 208  
  Sales, marketing and development     628       943       1,790       3,094  
  General and administrative     499       596       1,472       1,653  
  Severance and related costs     --       29       --       29  
                                 
 
 
MATTERSIGHT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited and in thousands)
 
    For the Three Months     For the Nine Months  
    Ended     Ended  
    Sept. 30,     Sept. 30,     Sept. 30,     Sept. 30,  
    2014     2013     2014     2013  
Net loss   $ (4,182 )   $ (2,633 )   $ (11,425 )   $ (9,629 )
Other comprehensive loss:                                
Effect of currency translation     2       5       5       --  
Comprehensive net loss   $ (4,180 )   $ (2,628 )   $ (11,420 )   $ (9,629 )
                                 
 
 
MATTERSIGHT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share data)
 
    September 30,     December 31,  
    2014     2013  
ASSETS:                
Current Assets:                
  Cash and cash equivalents   $ 18,315     $ 13,392  
  Receivables (net of allowances of $14 and $12, respectively)     2,760       2,384  
  Prepaid expenses     4,001       3,576  
  Other current assets     214       427  
    Total current assets     25,290       19,779  
Equipment and leasehold improvements, net     4,647       5,158  
Goodwill     972       972  
Intangibles, net     537       409  
Other long-term assets     3,627       4,431  
    Total assets   $ 35,073     $ 30,749  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY:                
Current Liabilities:                
  Accounts payable   $ 1,002     $ 752  
  Accrued compensation and related costs     1,997       1,844  
  Unearned revenue     8,805       7,215  
  Other current liabilities     4,436       4,098  
    Total current liabilities     16,240       13,909  
Long-term unearned revenue     2,700       2,866  
Other long-term liabilities     1,265       1,607  
    Total liabilities     20,205       18,382  
                 
Series B Stock, $0.01 par value; 5,000,000 shares authorized and designated; 1,648,185 and 1,649,122 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively, with a liquidation preference of $9,730 and $9,294 at September 30, 2014 and December 31, 2013, respectively     8,406       8,411  
                 
Stockholders' Equity:                
  Preferred stock, $0.01 par value; 35,000,000 shares authorized; none issued and outstanding     --       --  
  Common Stock, $0.01 par value; 50,000,000 shares authorized; 23,945,423 and 20,465,984 shares issued at September 30, 2014, and December 31, 2013, respectively; and 22,235,918 and 18,886,966 outstanding at September 30, 2014 and December 31, 2013, respectively     239       205  
  Additional paid-in capital     242,648       228,038  
  Accumulated deficit     (223,597 )     (212,172 )
  Treasury stock, at cost, 1,709,505 and 1,579,018 shares at September 30, 2014 and December 31, 2013, respectively     (8,800 )     (8,082 )
  Accumulated other comprehensive loss     (4,028 )     (4,033 )
  Total stockholders' equity     6,462       3,956  
  Total liabilities and stockholders' equity   $ 35,073     $ 30,749  
                 
 
 
MATTERSIGHT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
 
    For the Nine Months Ended  
    Sept. 30,     Sept. 30,  
    2014     2013  
Cash Flows from Operating Activities:                
  Net loss   $ (11,425 )   $ (9,629 )
  Adjustments to reconcile net loss to net cash (used in) provided by operating activities:                
    Depreciation and amortization     2,272       2,829  
    Stock-based compensation     3,404       4,955  
    Severance and related costs     --       29  
    Change in fair value of warrant liability     91       (43 )
    Other     --       2  
  Changes in assets and liabilities:                
    Receivables     (376 )     357  
    Prepaid expenses     265       233  
    Other assets     213       (65 )
    Accounts payable     250       (49 )
    Accrued compensation and related costs     153       (117 )
    Unearned revenue     1,424       4,069  
    Other liabilities     188       486  
      Total Adjustments     7,884       12,686  
        Net cash (used in) provided by operating activities     (3,541 )     3,057  
Cash Flows from Investing Activities:                
  Capital expenditures and other     (647 )     (1,004 )
  Patents and trademarks     (199 )     (164 )
        Net cash used in investing activities     (846 )     (1,168 )
Cash Flows from Financing Activities:                
  Proceeds from issuance of Common Stock, net     11,138       --  
  Proceeds from line of credit     7,000       2,400  
  Repayments from line of credit     (7,000 )     (2,400 )
  Principal payments under capital lease obligations     (1,226 )     (1,723 )
  Acquisition of treasury stock     (718 )     (947 )
  Proceeds from stock compensation and employee stock purchase plans, net     123       106  
        Net cash provided by (used in) financing activities     9,317       (2,564 )
Effect of exchange rate changes on cash and cash equivalents     (7 )     (4 )
Increase (decrease) in cash and cash equivalents     4,923       (679 )
Cash and cash equivalents, beginning of period     13,392       14,419  
Cash and cash equivalents, end of period   $ 18,315     $ 13,740  
                 
Non-Cash Investing and Financing Transactions:                
  Capital lease obligations incurred   $ 1,044     $ 2,767  
  Capital equipment purchased on credit     1,044       2,767  
  Fair value of warrants classified as liability     326       617  
Supplemental Disclosures of Cash Flow Information:                
  Interest paid   $ 211     $ 295  
                 
 
 
MATTERSIGHT CORPORATION
CALCULATION OF ADJUSTED EARNINGS MEASURE
(Unaudited and in thousands)
 
    For the Three Months     For the Nine Months  
    Ended     Ended  
    Sept. 30,     Sept. 30,     Sept. 30,     Sept. 30,  
    2014     2013     2014     2013  
GAAP -- Operating loss   $ (3,459 )   $ (2,498 )   $ (10,289 )   $ (9,545 )
                                 
Add back (reduce) the effect of:                                
Stock-based compensation     1,167       1,688       3,404       4,955  
Severance and related costs     --       154       --       154  
Depreciation and amortization     792       950       2,272       2,829  
Adjusted earnings measure -- (loss)   $ (1,500 )   $ 294     $ (4,613 )   $ (1,607 )
                                 
                                 

Contact Information

  • Contact

    Mark Iserloth
    Vice President and Chief Financial Officer
    312.454.3613
    ir@mattersight.com