MATR Mattersight Corp. (delisted)

Mattersight Corporation (NASDAQ:MATR), the pioneer in personality-based software applications, today announced financial results for the second quarter ended June 30, 2017. 

“Mattersight’s second quarter was marked by 16% growth in total revenues and 17% growth in subscription revenue versus the same period last year,” said Mattersight CEO Kelly Conway. “We expect to realize significant savings as a result of the refinancing completed during the quarter, and we continue to be encouraged by our outlook based on the conversion of our backlog to revenue and our strong pipeline.”  

Second Quarter 2017 Financial Highlights

• Bookings: Annual Contract Value (ACV) bookings were $2.5 million.
• Total Revenue: Total revenue was $10.6 million.
• Subscription Revenue: Total subscription revenue was $9.9 million.
• Backlog: ACV in deployment was $13.1 million at the end of the quarter.
• Gross Margin: Gross margin was 69%.

Second Quarter 2017 Business Highlights

• Line of Credit:  Entered into new three-year, $20 million revolving line of credit agreement with The Private Bank and retired more expensive mezzanine debt, lowering our borrowing costs.
• Patent: Received a new patent that combines Mattersight’s speech analytics and predictive behavior models to create artificial intelligence (AI) algorithms capable of generating chatbot communication that is both humanized and personalized.

Non-GAAP Financial Measures

Mattersight's net loss was $6.8 million in the second quarter of 2017. The Company realized an "Adjusted EBITDA1" loss of $1.7 million for the second quarter of 2017. Adjusted EBITDA is a non-GAAP measure. For a reconciliation of net loss to Adjusted EBITDA, see the accompanying schedule.

Conference Call Information

Mattersight management will host a conference call at 5:00 p.m. ET on Tuesday, August 8, 2017. 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: 57891222.

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 September 9, 2017, by dialing 855.859.2056 (domestic) or 404.537.3406 (international), conference ID: 57891222.

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.  A reader can identify these forward-looking statements because they are not limited to historical fact or they  use words such as “scheduled,” “will,” “anticipate,” “project,” “estimate,” “forecast,” “goal,” “objective,” “committed,” “intend,” “continue,” “plan,” “may,” “might,” “believe,” “expect,” “intend,” “could,” “would,” “should,” or “will likely result,” and other similar expressions, words and terms of similar meaning, involving 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 MattersightMattersight unleashes the power of personality to improve every interaction with every customer every time. With tools to learn, analyze, and predict customer behavior based on customer conversations, Mattersight helps brands create chemistry with their customers through shorter, more satisfying conversations that increase loyalty. To learn how Mattersight can help you click better with your customers visit www.mattersight.com.

1 Mattersight presents Adjusted EBITDA, 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 EBITDA provides investors with a better understanding of the results of Mattersight's operations. Management believes that Adjusted EBITDA reflects 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 EBITDA measure should be considered in addition to, not as a substitute for or superior to other measures of financial performance prepared in accordance with GAAP.

MATTERSIGHT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)
		Quarter Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
			2017				2016				2017				2016
Revenue:
Subscription revenue		$	9,943			$	8,501			$	20,286			$	17,723
Other revenue			615				573				1,231				1,404
Total revenue			10,558				9,074				21,517				19,127
Operating expenses:
Cost of subscription revenue			2,492				2,579				5,210				5,059
Cost of other revenue			821				616				1,542				1,382
Total cost of revenue, exclusive of depreciation and amortization			3,313				3,195				6,752				6,441
Product development			3,586				3,350				6,907				6,600
Sales and marketing			3,018				4,197				6,468				8,827
General and administrative			3,115				2,872				6,410				6,038
Depreciation and amortization			1,726				1,417				3,271				2,818
Total operating expenses			14,758				15,031				29,808				30,724
Operating loss			(4,200	)			(5,957	)			(8,291	)			(11,597	)
Non-operating income (expense):
Interest and other borrowing costs			(1,050	)			(250	)			(2,019	)			(431	)
Loss on early extinguishment of debt			(1,834	)			—				(1,834	)			—
Change in fair value of warrant liability			263				—				360				—
Other non-operating income			31				13				41				23
Total non-operating income (expense)			(2,590	)			(237	)			(3,452	)			(408	)
Loss before income taxes			(6,790	)			(6,194	)			(11,743	)			(12,005	)
Income tax provision			(13	)			(6	)			(12	)			(16	)
Net loss			(6,803	)			(6,200	)			(11,755	)			(12,021	)
Dividends related to 7% Series B convertible preferred stock			(146	)			(147	)			(292	)			(293	)
Net loss available to common stockholders		$	(6,949	)		$	(6,347	)		$	(12,047	)		$	(12,314	)
Per share of common stock:
Basic net loss available to common stockholders		$	(0.22	)		$	(0.25	)		$	(0.41	)		$	(0.49	)
Diluted net loss available to common stockholders		$	(0.22	)		$	(0.25	)		$	(0.41	)		$	(0.49	)
Shares used to calculate basic net loss per share			31,336				25,161				29,379				25,112
Shares used to calculate diluted net loss per share			31,336				25,161				29,379				25,112
Stock-based compensation expense is included in individual line items above:
Total cost of revenue		$	156			$	112			$	237			$	186
Product development			195				340				329				669
Sales and marketing			—				454				123				933
General and administrative			407				512				761				1,255

 

MATTERSIGHT CORPORATION
CONSOLIDATED BALANCE SHEET
(Unaudited and in thousands, except share and per share data)
		June 30, 2017				December 31, 2016
ASSETS
Current Assets:
Cash and cash equivalents		$	7,138			$	12,538
Receivables net of allowances of $151 and $311, at June 30, 2017 and December 31, 2016, respectively			7,756				8,508
Prepaid expenses			5,242				4,440
Other current assets			105				296
Total current assets			20,241				25,782
Equipment and leasehold improvements, net of accumulated depreciation and   amortization of $22,432 and $19,748, at June 30, 2017 and December 31, 2016, respectively			10,588				9,576
Goodwill			972				972
Intangible assets, net of amortization of $4,070 and $3,820, respectively			3,088				3,201
Other long-term assets (includes $3,400 and $4,210 of restricted cash, at June 30, 2017 and December 31, 2016, respectively)			5,753				6,033
Total assets		$	40,642			$	45,564
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term debt		$	88			$	738
Accounts payable			1,732				1,835
Accrued compensation and related costs			3,016				2,302
Unearned revenue			4,701				4,911
Capital leases			2,322				1,982
Other current liabilities			2,373				3,374
Total current liabilities			14,232				15,142
Long-term debt			13,703				20,839
Long-term unearned revenue			517				757
Long-term capital leases			2,007				1,602
Other long-term liabilities			5,665				5,945
Total liabilities			36,124				44,285
7% Series B convertible preferred stock, $0.01 par value; 5,000,000 shares authorized   and designated; 1,637,786 and 1,637,948 shares issued and outstanding at June 30,   2017 and December 31, 2016, respectively, with a liquidation preference of $11,276   and $10,985, at June 30, 2017 and December 31, 2016, respectively			8,353				8,354
Stockholders’ Equity:
Preferred stock, $0.01 par value; 35,000,000 shares authorized; none issued			—				—
Common stock, $0.01 par value; 50,000,000 shares authorized; 32,769,960 and   27,511,361 shares issued at June 30, 2017 and December 31, 2016,   respectively; 32,748,831 and 26,622,706 shares outstanding at June 30, 2017   and December 31, 2016, respectively			328				275
Additional paid-in capital			274,828				264,214
Accumulated deficit			(274,860	)			(263,062	)
Treasury stock, at cost, 21,129 and 888,655 shares at June 30, 2017 and   December 31, 2016, respectively			(58	)			(4,455	)
Accumulated other comprehensive loss			(4,073	)			(4,047	)
Total stockholders’ equity (deficit)			(3,835	)			(7,075	)
Total liabilities and stockholders’ equity		$	40,642			$	45,564

 

MATTERSIGHT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
		Six Months Ended
		June 30, 2017				June 30, 2016
Cash Flows from Operating Activities:
Net loss		$	(11,755	)		$	(12,021	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			3,271				2,818
Stock-based compensation			1,450				3,043
Discount accretion and other debt-related costs			1,417				—
Provision for uncollectible accounts			(160	)			26
Change in fair value of warrant liability			(360	)			—
Changes in assets and liabilities:
Receivables			912				(900	)
Prepaid expenses			(537	)			(1,138	)
Other current assets			187				(12	)
Other long-term assets			(325	)			88
Accounts payable			(303	)			377
Accrued compensation and related costs			714				(434	)
Unearned revenue			(450	)			(2,793	)
Other current liabilities			(6	)			(179	)
Other long-term liabilities			(192	)			522
Total adjustments			5,618				1,418
Net cash used in operating activities			(6,137	)			(10,603	)
Cash Flows from Investing Activities:
Capital expenditures			(2,152	)			(973	)
Investment in intangible assets			(105	)			(472	)
Net cash used in investing activities			(2,257	)			(1,445	)
Cash Flows from Financing Activities:
Proceeds from line of credit			13,500				16,246
Repayments of line of credit			—				(9,200	)
Proceeds from term loan			—				6,000
Repayments of term loan and other borrowings			(23,006	)			—
Debt prepayment costs			(692	)			—
Fees paid for issuance of debt			(206	)			(60	)
Proceeds from issuance of common stock, net of costs			14,736				—
Cash paid to satisfy tax withholding upon vesting of employee stock awards			(973	)			(211	)
Principal payments on capital lease obligations			(1,269	)			(1,107	)
Proceeds from employee stock purchase plan			120				145
7% Series B convertible preferred stock dividend			—				(3	)
Proceeds from exercise of stock options			—				236
Net cash provided by financing activities			2,210				12,046
Effect of exchange rate changes on cash and cash equivalents			(26	)			(5	)
Decrease in total cash			(6,210	)			(7	)
Cash and cash equivalents			12,538				15,407
Restricted cash (included in Other long-term assets)			4,210				—
Total cash, beginning of period			16,748				15,407
Cash and cash equivalents			7,138				15,400
Restricted cash (included in Other long-term assets)			3,400				500
Total cash, end of period		$	10,538			$	15,900
Non-Cash Investing and Financing Activities:
Capital lease obligations incurred		$	2,014			$	2,111
Capital equipment purchased on credit			2,014				2,111
Supplemental Disclosures of Cash Flow Information:
Interest paid		$	1,806			$	279

 

MATTERSIGHT CORPORATION
CALCULATION OF ADJUSTED EBITDA
(Unaudited and in thousands)
		Quarter Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
			2017				2016				2017				2016
GAAP - Net Loss		$	(6,803	)		$	(6,200	)		$	(11,755	)		$	(12,021	)
Depreciation and amortization			1,726				1,417				3,271				2,818
Interest and other borrowings			1,050				250				2,019				431
Loss on early extinguishment of debt			1,834				—				1,834				—
Interest income			(31	)			(13	)			(41	)			(23	)
Income tax provision			13				6				12				16
EBITDA		$	(2,211	)		$	(4,540	)		$	(4,660	)		$	(8,779	)
Stock based compensation			758				1,418				1,450				3,043
Change in fair value of warrant liability			(263	)			—				(360	)			—
Adjusted EBITDA		$	(1,716	)		$	(3,122	)		$	(3,570	)		$	(5,736	)

 

Contact
David Mullen
Chief Financial Officer
312.954.7380
dave.mullen@mattersight.com