Total revenues of $7.4 million reflects
subscription pricing model
Datawatch Corporation (NASDAQ-CM: DWCH), a
leading global provider of self-service data preparation and visual
analytics solutions, today announced that total revenue for its
second quarter of fiscal 2016 ended March 31, 2016 was $7.42
million, essentially flat with revenue of $7.46 million for the
second quarter of fiscal 2015. License revenue for the second
quarter of fiscal 2016 was $3.65 million, a 7% decline from the
$3.91 million recorded in the comparable quarter a year ago,
although the 2015 quarter did not reflect the company’s move to
subscription license sales. Net loss for the second quarter
of fiscal 2016 was ($3.36) million, or ($0.29) per diluted share,
compared to a net loss of ($5.81) million, or ($0.51) per diluted
share, for the year ago period. Excluding the effects of the
non-cash amortization associated with the purchase of certain
intellectual property and other intangible assets, non-cash stock
compensation costs, and severance costs, the Company’s non–GAAP net
loss for its second quarter of fiscal 2016 was ($1.64) million, or
($0.14) per diluted share, compared to a non-GAAP net loss of
($3.25) million, or ($0.29) per diluted share, for the second
quarter of fiscal 2015.
“During the second fiscal quarter, we added 178
new customers to the impressive roster of customers of our
market-leading Monarch data preparation solution,” said Michael A.
Morrison, president and chief executive officer of Datawatch.
“We also saw a pick-up in the ‘expand’ activity from self-service
data preparation customers we signed up in the prior two
quarters. Lastly, we are extremely pleased that a top Tier 1
bank, a leading pan-European financial marketplace and a risk and
compliance platform provider all selected our powerful real-time
visualization solution last quarter following lengthy competitive
evaluations, reinforcing our position as the leader in visual
analytics solutions for financial institutions and the capital
markets space.”
Mr. Morrison added, “All of these important
achievements serve to improve our opportunities to deliver revenue
growth in both the near-term and longer term. We are very
pleased with the industry analyst and customer reception to our
latest release of Monarch Complete, which now counts more than 350
customers and well over 1,000 individual users in just three full
quarters in the market. The recent decision by IBM to resell
our Monarch self-service data preparation solution with IBM Watson
Analytics and IBM Cognos Analytics is further testament that
Monarch is the best available solution to address this rapidly
growing market and its business requirements.”
James L. Eliason, chief financial officer,
commented, “Our deferred license revenue at the end of the second
fiscal quarter grew nicely, up almost 300% year-over-year aided by
the subscription pricing model we instituted in Q3 of our last
fiscal year, the growing new customer ‘lands’ for self-service data
preparation and our improving maintenance renewal rates. In
addition, license subscription bookings for the quarter were over
$800,000, an all-time high, and an increase of almost 20%
sequentially and five-fold year-over-year. Recognized revenue
in the fiscal second quarter from our subscription license business
was more than $500,000, representing a $2.0 million annual run rate
that continues to build. We made solid progress in reducing our net
loss in the second fiscal quarter and our balance sheet remains
strong, with nearly $32 million in cash and equivalents. We
remain disciplined about our investments, as reflected in our
sequentially flat operating expenses, and expect to remain so
throughout this fiscal year.”
Transition to Subscription
Sales
In Q3 2015, Datawatch changed its pricing
practice for Monarch, transacting all small volume orders on a
subscription basis only, rather than a perpetual license
basis. The total value over the life of the subscription is
recorded as bookings, but only the portion of the annual
subscription fee earned in the quarter sold is treated as revenue
in that quarter. The balance is deferred and recorded as
revenue over the life of the subscription. This
lowers current reported revenue, but builds deferred revenue that
will be recorded as revenue over the life of the
subscription. Since subscription sales include maintenance,
maintenance revenue will be similarly reduced.
Second Quarter 2016 Business
Highlights
- Datawatch and IBM teamed to deliver better and faster data
access and self-service data preparation to IBM Watson Analytics
and IBM Cognos Analytics users. As part of this agreement,
IBM is reselling Monarch for self-service data
preparation.
- Datawatch scored as one of the leading vendors in the 2016 End
User Data Preparation Market Study published by Dresner Advisory
Services.
- Datawatch expanded self-service data preparation deployments at
leading global firms, including Commerce Bank, Cerner Corporation,
BB&T, TD Bank and PwC.
- HSBC, one of the largest banking and financial services
institutions in the world, selected Datawatch for visualizing trade
and market data in its equities, FX and fixed income groups.
Second Quarter 2016 Financial
Highlights
- Cash and short-term investments were $31.52 million at March
31, 2016, down 5% from $33.02 million at December 31, 2015 and down
18% from $38.49 million at March 31, 2015.
- Gross margin (excluding IP amortization expense) for the second
quarter of fiscal 2016 was 92%, an increase from 83% in the second
quarter of fiscal 2015.
- Days sales outstanding were 63 days at March 31, 2016, compared
to 69 days at March 31, 2015.
- There were 8 six-figure deals in the second quarter this fiscal
year, an increase from 5 in the second quarter of fiscal 2015.
- The average deal size in the second quarter of fiscal 2016 was
$43,000, an increase from $31,000 in the second quarter of fiscal
2015.
- Deferred revenue reached $8.7 million at March 31, 2016, the
highest in the company’s history, and a 26% increase from $6.9
million at March 31, 2015.
Conference Call
Datawatch’s second quarter of fiscal year 2016
earnings conference call will take place on Thursday, April 21,
2016 at 8:30 a.m. Eastern Time. To access the conference call, the
toll-free dial in number is (877) 407-0782. Internationally, the
call may be accessed by dialing (201) 689-8567. The conference call
will be broadcast live on the Internet at:
http://www.investorcalendar.com/IC/CEPage.asp?ID=174918. It
is recommended that listeners register to participate and download
any necessary audio software from the website 15 minutes prior to
the scheduled call. An archived replay of the broadcast will be
available for 90 days at the same location.
About Datawatch Corporation
Datawatch Corporation (NASDAQ-CM: DWCH) enables
ordinary users to deliver extraordinary results with all their
data. Only Datawatch can unlock data from the widest variety
of sources and prepare it for use with visualization tools or other
business processes. When real-time visibility to rapidly
changing data is critical, Datawatch enables you to visualize
streaming data for the most demanding business environments such as
capital markets. Organizations of every size worldwide use
Datawatch products including 93 of the Fortune 100. Datawatch is
headquartered in Bedford, Massachusetts with offices in New York,
London, Frankfurt, Stockholm, Singapore, and Manila, and with
partners and customers in more than 100 countries worldwide.
See how Datawatch can help you by downloading a free version at
www.datawatch.com.
Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995
Any statements contained in this press release
that do not describe historical facts may constitute
forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Any such statements,
including but not limited to those relating to results of
operations, contained herein are based on current expectations, but
are subject to a number of risks and uncertainties that may cause
actual results to differ materially from expectations. The factors
that could cause actual future results to differ materially from
current expectations include the following: risks associated with
the continuing weak global economy; risks associated with
fluctuations in quarterly operating results due, among other
factors, to the long sales cycle with enterprise customers and the
size and timing of large customer orders; risks associated with
acquisitions; the risk that our goodwill resulting from
acquisitions may become impaired and require a write-down;
limitations on the effectiveness of internal controls; rapid
technological change; Datawatch’s dependence on the introduction of
new products and product enhancements and possible delays in those
introductions; competition in the software industry generally, and
in the markets for next generation analytics in particular;
Datawatch's dependence on its principal products, proprietary
software technology and software licensed from third parties;
Datawatch’s concentration of customers in the financial sector;
risks associated with international sales and operations; risks
associated with indirect distribution channels and co-marketing
arrangements, many of which were only recently established; the
adequacy of Datawatch’s sales returns reserve; risks associated
with a subscription sales model; Datawatch’s dependence on its
ability to hire and retain skilled personnel; disruption or failure
of Datawatch’s technology systems that may result from a natural
disaster, cyber-attack, security breach or other catastrophic
event; risks related to actions by activist stockholders, including
the amount of related costs incurred by Datawatch and the
disruption caused to Datawatch’s business activities by these
actions; and uncertainty and additional costs that may result from
evolving regulation of corporate governance and public disclosure.
Further information on factors that could cause actual results to
differ from those anticipated is detailed in various
publicly-available documents, which include, but are not limited
to, filings made by Datawatch from time to time with the Securities
and Exchange Commission, including but not limited to, those
appearing in the Company's Annual Report on Form 10-K for the year
ended September 30, 2015 and its Form 10-Q for the quarter ended
December 31, 2015. Any forward-looking statements should be
considered in light of those factors.
Use of Non-GAAP Financial Information
We define non-GAAP net loss as U.S. Generally
Accepted Accounting Principles (“GAAP”) net loss plus goodwill and
long-lived assets non-cash impairment charges, non-cash
amortization associated with the purchase of certain intellectual
property and other intangible assets, non-cash stock compensation
costs, and severance costs. We discuss non-GAAP net loss in our
quarterly earnings releases and certain other communications as we
believe non-GAAP net loss is an important measure that is not
calculated according to GAAP. We use non-GAAP net loss in internal
forecasts and models when establishing internal operating budgets,
supplementing the financial results and forecasts reported to our
Board of Directors and evaluating short-term and long-term
operating trends in our operations. We believe that non-GAAP net
loss assists in providing an enhanced understanding of our
underlying operational measures to manage the business, to evaluate
performance compared to prior periods and the marketplace, and to
establish operational goals. We believe that these non-GAAP
financial adjustments are useful to investors because they allow
investors to evaluate the effectiveness of the methodology and
information used by management in our financial and operational
decision-making.
Non-GAAP net loss is a non-GAAP financial
measure and should not be considered in isolation or as a
substitute for financial information provided in accordance with
GAAP. This non-GAAP financial measure may not be computed in the
same manner as similarly titled measures used by other companies.
We expect to continue to incur expenses similar to the non-GAAP net
loss financial adjustments described above, and investors should
not infer from our presentation of this non-GAAP financial measure
that these costs are unusual, infrequent or non-recurring.
The table below entitled “Non-GAAP Disclosure -
Reconciliation of Net Loss to Non-GAAP Net Loss” reconciles the
Company’s GAAP net loss to the Company’s non-GAAP net loss.
© 2016 Datawatch Corporation. Datawatch and the
Datawatch logo are trademarks or registered trademarks of Datawatch
Corporation in the United States and/or other countries. All other
names are trademarks or registered trademarks of their respective
companies.
|
DATAWATCH
CORPORATION |
Condensed
Consolidated Statements of Operations |
Amounts in
Thousands (except per share data) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Six Months
Ended |
|
|
March 31, |
|
March 31, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
REVENUE: |
|
|
|
|
|
|
|
|
Software licenses |
|
$ |
3,645 |
|
|
$ |
3,911 |
|
|
$ |
6,792 |
|
|
$ |
7,086 |
|
Maintenance |
|
|
3,480 |
|
|
|
3,296 |
|
|
|
7,082 |
|
|
|
6,705 |
|
Professional services |
|
|
299 |
|
|
|
255 |
|
|
|
605 |
|
|
|
632 |
|
Total revenue |
|
|
7,424 |
|
|
|
7,462 |
|
|
|
14,479 |
|
|
|
14,423 |
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
Cost of software licenses |
|
|
499 |
|
|
|
721 |
|
|
|
1,188 |
|
|
|
1,596 |
|
Cost of maintenance and
services |
|
|
610 |
|
|
|
1,084 |
|
|
|
1,208 |
|
|
|
1,962 |
|
Sales and marketing |
|
|
5,100 |
|
|
|
6,802 |
|
|
|
10,848 |
|
|
|
14,790 |
|
Engineering and product
development |
|
|
2,066 |
|
|
|
2,187 |
|
|
|
3,893 |
|
|
|
4,710 |
|
General and administrative |
|
|
2,626 |
|
|
|
2,434 |
|
|
|
4,860 |
|
|
|
4,575 |
|
Impairment of goodwill and long
lived intangible assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
32,009 |
|
Total costs and expenses |
|
|
10,901 |
|
|
|
13,228 |
|
|
|
21,997 |
|
|
|
59,642 |
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(3,477 |
) |
|
|
(5,766 |
) |
|
|
(7,518 |
) |
|
|
(45,219 |
) |
Other income (expense) |
|
|
9 |
|
|
|
(11 |
) |
|
|
(15 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES |
|
|
(3,468 |
) |
|
|
(5,777 |
) |
|
|
(7,533 |
) |
|
|
(45,221 |
) |
Income tax (expense) benefit |
|
|
106 |
|
|
|
(32 |
) |
|
|
207 |
|
|
|
2,536 |
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(3,362 |
) |
|
$ |
(5,809 |
) |
|
$ |
(7,326 |
) |
|
$ |
(42,685 |
) |
|
|
|
|
|
|
|
|
|
Net loss per share - Basic |
|
$ |
(0.29 |
) |
|
$ |
(0.51 |
) |
|
$ |
(0.63 |
) |
|
$ |
(3.80 |
) |
Net loss per share - Diluted |
|
$ |
(0.29 |
) |
|
$ |
(0.51 |
) |
|
$ |
(0.63 |
) |
|
$ |
(3.80 |
) |
Weighted Average Shares Outstanding
- Basic |
|
|
11,701 |
|
|
|
11,340 |
|
|
|
11,669 |
|
|
|
11,237 |
|
Weighted Average Shares Outstanding
- Diluted |
|
|
11,701 |
|
|
|
11,340 |
|
|
|
11,669 |
|
|
|
11,237 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP Disclosure - Reconciliation
of Net Loss to Non-GAAP Net Loss: |
|
|
|
|
|
|
|
|
|
GAAP Net Loss |
|
$ |
(3,362 |
) |
|
$ |
(5,809 |
) |
|
$ |
(7,326 |
) |
|
$ |
(42,685 |
) |
Add-back Impairment of Goodwill
& Long-Lived Assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
32,009 |
|
Add-back Amortization of
Intangibles & IP |
|
|
568 |
|
|
|
572 |
|
|
|
1,140 |
|
|
|
1,438 |
|
Add-back Share-Based
Compensation |
|
|
1,001 |
|
|
|
798 |
|
|
|
2,024 |
|
|
|
2,539 |
|
Add-back Severance |
|
|
155 |
|
|
|
1,193 |
|
|
|
289 |
|
|
|
1,611 |
|
Subtotal of additions |
|
|
1,724 |
|
|
|
2,563 |
|
|
|
3,453 |
|
|
|
37,597 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net Loss |
|
$ |
(1,638 |
) |
|
$ |
(3,246 |
) |
|
$ |
(3,873 |
) |
|
$ |
(5,088 |
) |
Net loss per share - Basic |
|
$ |
(0.14 |
) |
|
$ |
(0.29 |
) |
|
$ |
(0.33 |
) |
|
$ |
(0.45 |
) |
Net loss per share - Diluted |
|
$ |
(0.14 |
) |
|
$ |
(0.29 |
) |
|
$ |
(0.33 |
) |
|
$ |
(0.45 |
) |
Weighted Average Shares Outstanding
- Basic |
|
|
11,701 |
|
|
|
11,340 |
|
|
|
11,669 |
|
|
|
11,237 |
|
Weighted Average Shares Outstanding
- Diluted |
|
|
11,701 |
|
|
|
11,340 |
|
|
|
11,669 |
|
|
|
11,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DATAWATCH
CORPORATION |
Condensed
Consolidated Balance Sheets |
Amounts in
Thousands |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
September 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
31,516 |
|
|
$ |
35,162 |
|
|
Accounts receivable, net |
|
|
5,410 |
|
|
|
7,081 |
|
|
Prepaid expenses and other current assets |
|
|
2,244 |
|
|
|
2,013 |
|
|
Total current assets |
|
|
39,170 |
|
|
|
44,256 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
1,248 |
|
|
|
614 |
|
|
Intangible and other assets, net |
|
|
12,835 |
|
|
|
14,061 |
|
|
|
|
|
|
|
|
|
|
$ |
53,253 |
|
|
$ |
58,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
3,801 |
|
|
$ |
4,202 |
|
|
Deferred revenue - current portion |
|
|
8,454 |
|
|
|
8,452 |
|
|
Deferred tax liability- current portion |
|
|
- |
|
|
|
274 |
|
|
Total current liabilities |
|
|
12,255 |
|
|
|
12,928 |
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
623 |
|
|
|
461 |
|
|
Total long-term liabilities |
|
|
623 |
|
|
|
461 |
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
|
40,375 |
|
|
|
45,542 |
|
|
|
|
|
|
|
|
|
|
$ |
53,253 |
|
|
$ |
58,931 |
|
|
Investor Contact:
Datawatch Investor Relations
investor@datawatch.com
Phone: (978) 441-2200 ext. 8323
Media Contact:
Erin Hoesly
Datawatch Corporation
Erin_Hoesly@datawatch.com
Phone: (978) 441-2200 ext. 8322
Twitter: @datawatch
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