SOURCE: Mattersight Corporation

Mattersight Corporation

November 04, 2015 16:05 ET

Mattersight Announces Third Quarter 2015 Results

CHICAGO, IL--(Marketwired - Nov 4, 2015) -   Mattersight Corporation (NASDAQ: MATR), the pioneer in personality-based software applications, today announced financial results for the third quarter ending September 30, 2015. 

"Mattersight's third quarter was marked by continued growth and innovation," said President and CEO Kelly Conway. "Our record revenues were driven by a healthy combination of new logo growth and deeper partnerships with existing clients. Our third quarter results are another data point supporting the emergence of the market for personality-based software applications. We believe we are in the early stages of growth of this large market opportunity."

Third Quarter 2015 Financial Highlights

  • Bookings: Annual Contract Value (ACV) bookings for the third quarter were $6.9 million. ACV bookings for the last four quarters were $22.6 million, an 82% year-over-year increase.
  • Book of Business: Annualized Book of Business was $53.6 million for the third quarter, up 41% on a year-over-year basis.
  • Revenues: Total revenue for the third quarter was a record $10.5 million, representing a 36% increase on a year-over-year basis. Subscription revenue drove $9.3 million of total revenue, a year-over-year increase of 40%.
  • Gross Margin: Gross margin was 75.8% in the third quarter and 72.8% for the last four quarters.
  • SaaS Metrics: For the last four quarters, subscription revenue retention was 97%, year-over-year existing net account growth was 127% and the customer acquisition cost (CAC) ratio was 126%.

Third Quarter 2015 Highlights

  • Predictive Behavioral Routing drove the addition of two new logo customers, bringing over $50 million in new total account opportunity.
  • Expanded the reach and effectiveness of the sales organization with the addition of five quota carriers and a Vice President of Sales Enablement.
  • Launched Version 3.1 of Mattersight's flagship Predictive Behavioral Routing algorithm, further refining the solution's ability to facilitate optimal caller/agent pairings.
  • Added six new patents, bringing Mattersight's total U.S. patent portfolio to 20 and bolstering the protection of Mattersight's innovative solutions.

Non-GAAP Financial Measures

The Company realized an "Adjusted Earnings1" loss of $0.9 million for the third quarter of 2015. 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 $3.9 million in the third quarter of 2015.

Conference Call Information

Mattersight management will host a conference call at 4:30 p.m. ET on Wednesday, November 4, 2015. The conference call and slide presentation will be available at the Investor Relations section of Mattersight's website at http://www.mattersight.com/about-us/investor-relations. To listen to the conference call via telephone, please call 800.952.4789 (domestic) or 404.665.9579 (international), conference ID: 62977611.

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 4, 2015, by dialing 855.859.2056 (domestic) or 404.537.3406 (international), conference ID: 62977611.

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. In light of Regulation FD, it is our policy not to comment on earnings, financial guidance or operations other than through press releases, publicly announced conference calls, or other means that will constitute public disclosure for purposes of Regulation FD. Mattersight uses its website at www.mattersight.com as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

About Mattersight

Mattersight's mission is to help brands have more effective and effortless conversations with their customers. Using a suite of innovative personality-based software applications, Mattersight can analyze and predict customer behavior based on the language exchanged during service and sales interactions. This insight can then facilitate real-time connections between customers and the agents best capable of handling their needs. Mattersight's patented stack of SaaS applications has influenced hundreds of millions of shorter, more satisfying customer interactions. Organizations across the Financial Services, Healthcare, Technology and Telco industries rely on Mattersight to drive customer retention, employee engagement and operating efficiency. An independent research study documents the average return on investment for these organizations is 344%. To learn more about how Mattersight can help your company, please visit 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,  
    2015     2014     2015     2014  
Revenue:                                
  Subscription revenue   $ 9,313     $ 6,636     $ 26,519     $ 18,996  
  Other revenue     1,169       1,044       3,021       3,037  
Total revenue     10,482       7,680       29,540       22,033  
Operating expenses:                                
  Cost of Subscription revenue     1,930       1,719       5,853       5,163  
  Cost of Other revenue     609       680       1,930       1,730  
Total cost of revenue, exclusive of depreciation and amortization shown below:     2,539       2,399       7,783       6,893  
  Research and development     3,397       3,240       10,185       9,613  
  Sales and marketing     3,773       2,388       10,016       6,693  
  General and administrative     3,108       2,320       8,811       6,851  
  Depreciation and amortization     1,236       792       3,347       2,272  
Total operating expenses     14,053       11,139       40,142       32,322  
                                 
Operating loss     (3,571 )     (3,459 )     (10,602 )     (10,289 )
Interest and other expense, net     (331 )     (711 )     (690 )     (1,021 )
Change in fair value of warrant liability     (22 )     (5 )     3       (91 )
Loss before income taxes     (3,924 )     (4,175 )     (11,289 )     (11,401 )
Income tax provision     (15 )     (7 )     (31 )     (24 )
Net loss     (3,939 )     (4,182 )     (11,320 )     (11,425 )
Dividends related to Series B Stock     (147 )     (147 )     (441 )     (441 )
Net loss available to Common Stock holders   $ (4,086 )   $ (4,329 )   $ (11,761 )   $ (11,866 )
                                 
Per share of Common Stock:                                
Basic net loss available to Common Stock holders   $ (0.17 )   $ (0.21 )   $ (0.52 )   $ (0.61 )
Diluted net loss available to Common Stock holders   $ (0.17 )   $ (0.21 )   $ (0.52 )   $ (0.61 )
                                 
Shares used to calculate basic net loss per share     24,185       20,790       22,698       19,324  
Shares used to calculate diluted net loss per share     24,185       20,790       22,698       19,324  
                                 
Stock-based compensation, primarily restricted stock, is included in individual line items above:                                
  Total cost of revenue   $ 63     $ 40     $ 187     $ 142  
  Research and development     294       376       813       1,127  
  Sales and marketing     391       252       1,112       663  
  General and administrative     728       499       2,146       1,472  
                                   
                                   
                                   
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,  
    2015     2014     2015     2014  
Net loss   $ (3,939 )   $ (4,182 )   $ (11,320 )   $ (11,425 )
Other comprehensive loss:                                
Effect of currency translation     (2 )     2       --       5  
Comprehensive net loss   $ (3,941 )   $ (4,180 )   $ (11,320 )   $ (11,420 )
                                 
                                 
                                 
MATTERSIGHT CORPORATION  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Unaudited and in thousands, except share and per share data)  
   
    September 30,     December 31,  
    2015     2014  
ASSETS:                
Current Assets:                
  Cash and cash equivalents   $ 21,120     $ 14,238  
  Receivables (net of allowances of $19 and $17, respectively)     3,826       3,460  
  Prepaid expenses     4,953       4,449  
  Other current assets     475       236  
    Total current assets     30,374       22,383  
Equipment and leasehold improvements, net     7,901       4,657  
Goodwill     972       972  
Intangibles, net     3,399       571  
Other long-term assets     2,630       3,495  
    Total assets   $ 45,276     $ 32,078  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY:                
Current Liabilities:                
  Accounts payable   $ 1,968     $ 1,183  
  Accrued compensation and related costs     2,451       2,241  
  Unearned revenue     8,143       7,859  
  Capital leases     1,694       1,637  
  Other current liabilities     1,308       2,549  
    Total current liabilities     15,564       15,469  
Long-term unearned revenue     1,796       2,532  
Long-term capital leases     1,495       1,176  
Other long-term liabilities     5,483       282  
    Total liabilities     24,338       19,459  
                 
Series B Stock, $0.01 par value; 5,000,000 shares authorized and designated; 1,644,768 and 1,648,185 shares issued and outstanding, with a liquidation preference of $10,297 and $9,877 at September 30, 2015 and December 31, 2014, respectively     8,388       8,406  
                 
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; 27,635,973 and 24,046,977 shares issued and 25,807,547 and 22,324,093 outstanding at September 30, 2015 and December 31, 2014, respectively     276       240  
  Additional paid-in capital     263,608       243,282  
  Accumulated deficit     (237,724 )     (226,404 )
  Treasury stock, at cost, 1,828,426 and 1,722,884 shares at September 30, 2015 and December 31, 2014, respectively     (9,584 )     (8,879 )
  Accumulated other comprehensive loss     (4,026 )     (4,026 )
    Total stockholders' equity     12,550       4,213  
    Total liabilities and stockholders' equity   $ 45,276     $ 32,078  
                 
                 
                 
MATTERSIGHT CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited and in thousands)  
   
  For the Nine Months Ended  
  Sept. 30,     Sept. 30,  
  2015     2014  
Cash Flows from Operating Activities:              
  Net loss $ (11,320 )   $ (11,425 )
  Adjustments to reconcile net loss to net cash used in operating activities:              
    Depreciation and amortization   3,347       2,272  
    Stock-based compensation   4,258       3,404  
    Change in fair value of warrant liability   (3 )     91  
  Changes in assets and liabilities:              
    Receivables   (366 )     (376 )
    Prepaid expenses   (957 )     265  
    Other assets   727       213  
    Accounts payable   75       250  
    Accrued compensation and related costs   210       153  
    Unearned revenue   (452 )     1,424  
    Other liabilities   1,656       188  
      Total Adjustments   8,495       7,884  
        Net cash used in operating activities   (2,825 )     (3,541 )
Cash Flows from Investing Activities:              
  Capital expenditures and other   (3,654 )     (647 )
  Intangible assets   (660 )     (199 )
        Net cash used in investing activities   (4,314 )     (846 )
Cash Flows from Financing Activities:              
  Proceeds from issuance of Common Stock, net   15,942       11,138  
  Proceeds from line of credit   15,000       7,000  
  Repayments from line of credit   (15,000 )     (7,000 )
  Principal payments under capital lease obligations   (1,552 )     (1,226 )
  Acquisition of treasury stock   (753 )     (718 )
  Proceeds from stock compensation and employee stock purchase plans, net   383       123  
        Net cash provided by financing activities   14,020       9,317  
Effect of exchange rate changes on cash and cash equivalents   1       (7 )
Increase in cash and cash equivalents   6,882       4,923  
Cash and cash equivalents, beginning of period   14,238       13,392  
Cash and cash equivalents, end of period $ 21,120     $ 18,315  
               
Non-Cash Investing and Financing Transactions:              
  Capital lease obligations incurred $ 2,002     $ 1,044  
  Capital equipment purchased on credit   2,002       1,044  
  Fair value of warrants classified as liability   --       326  
  Fair value of intellectual property purchase liability   2,123       --  
Supplemental Disclosures of Cash Flow Information:              
  Interest paid $ 155     $ 211  
                 
                 
                 
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,  
    2015     2014     2015     2014  
GAAP -- Operating loss   $ (3,571 )   $ (3,459 )   $ (10,602 )   $ (10,289 )
Add back (reduce) the effect of:                                
Stock-based compensation     1,476       1,167       4,258       3,404  
Depreciation and amortization     1,236       792       3,347       2,272  
Adjusted earnings measure -- loss   $ (859 )   $ (1,500 )   $ (2,997 )   $ (4,613 )

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