-- Provides Update on Strategic Review of
Alternatives Process --
Datawatch Corporation (NASDAQ-CM:DWCH), a leading global provider
of self-service data preparation and fast data analytics solutions,
today announced that total revenue for its fourth quarter of fiscal
2016 ended September 30, 2016 was $8.60 million, an increase of 17%
from the $7.40 million recorded in the third quarter of fiscal
2016, and an increase of 7% from total revenue of $8.02 million in
the fourth quarter of fiscal 2015. License revenue for
the fourth quarter of fiscal 2016 was $4.76 million, a 30% increase
from the $3.67 million recorded in the prior quarter this fiscal
year, and a 16% increase from the $4.10 million recorded in the
same quarter a year ago. Deferred revenue as of September 30,
2016 was $9.9 million, compared to $8.6 million as of September 30,
2015.
Net loss for the fourth quarter of fiscal 2016
was ($1.9) million, or ($0.16) per diluted share, compared to a net
loss of ($2.98) million, or ($0.26) 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, and non-cash stock
compensation costs, the Company’s non–GAAP net loss for its fourth
quarter of fiscal 2016 was ($0.75) million, or ($0.06) per diluted
share, compared to a non-GAAP net loss of ($1.70) million, or
($0.15) per diluted share, for the fourth quarter of fiscal
2015.
Total revenue for fiscal 2016 was $30.46
million, a 1% increase from revenue of $30.22 million for fiscal
2015. License revenue for fiscal 2016 was $15.22 million, a
1% decrease compared to $15.30 million for fiscal 2015. Net
loss for 2016 was ($14.63) million, or ($1.24) per diluted share,
as compared to a net loss of ($49.79) million or ($4.38) per
diluted share, for fiscal 2015, a period that included a non-cash
charge for impairment of goodwill of approximately $32 million.
The Company’s non-GAAP net loss for fiscal year 2016 was
($7.82) million, or ($0.66) per diluted share, as compared to
non-GAAP net loss of ($10.46) million, or ($0.92) per diluted
share, for fiscal 2015.
“I am pleased with the improvement in sales
execution that we delivered during the fourth fiscal quarter,” said
Michael A. Morrison, president and chief executive officer of
Datawatch. “We’ve been laying a foundation for better results
through improved execution since we introduced Monarch for
self-service data preparation five quarters ago. The organizational
changes, new sales processes and heightened forecast discipline
introduced by Ken Tacelli, who joined us to become senior vice
president of worldwide sales during Q3, combined to produce solid
results this past quarter.”
Mr. Morrison continued, “We had a particularly
strong quarter with the ‘expand’ aspect of our ‘land and expand’
strategy, expanding deployments in 58 ‘land’ customers during the
quarter, more than our total expands in the first three quarters of
the fiscal year. We are encouraged by the market reception
for our next generation self-service data preparation solution,
both from our heritage customers as well as from many new
customers. We are seeing specific interest in Monarch
being deployed as the core of analytic solutions that deliver
measurable ROI in industries such as financial services,
healthcare, retail and the public sector.”
Mr. Morrison concluded, “During the fourth
fiscal quarter, we announced two major, innovative product releases
that allow us to address the evolving Big Data and fast data
analytics needs of business analysts, data scientists and IT
users. The latest release of Monarch includes support for
additional data sources, including Google Analytics and Salesforce,
new export integrations, including Microsoft Power BI, and advanced
data preparation features for very large data sets. The
latest release of Panopticon is the most significant since the
original launch of the product, and expands upon Datawatch’s
approach to fast data analytics with a Web client architecture that
supports the most challenging real-time visualization requirements
for data in motion.”
James L. Eliason, chief financial officer,
commented, “We reduced our non-GAAP operating loss in the fiscal
fourth quarter to $751,000, the first time our quarterly non-GAAP
loss was less than $1 million in the past 12 quarters. We
continue to manage our expenses toward our goal of achieving
operating profitability, and we continue to manage our balance
sheet in a disciplined manner, with deferred revenue at an all-time
high, accounts receivables in good shape, and $28 million in cash
and equivalents.”
Transition to Subscription
Sales
In the third quarter of fiscal 2015, Datawatch
changed its pricing practice for Monarch, transacting the majority
of 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, and only the ratable 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, current maintenance revenue will be reduced somewhat
as a result.
Fourth Quarter Fiscal 2016 Business
Highlights
- Harley Davidson, one of the most recognized brands for custom,
cruiser and touring motorcycles, became one of the first joint
customers of Datawatch Monarch and IBM Watson Analytics for
self-service data preparation and automated data analysis,
automatic visualization and predictive analysis.
- Datawatch increased its presence in state and local
governments, with sales of Monarch for self-service data
preparation to the Texas Department of Criminal Justice,
Jacksonville Transportation Authority, California Department of
Housing, State of Michigan and New York State Office of the
Comptroller.
- Datawatch extended its reach in the United States Air Force
with expanded sales of Monarch to Hill Air Force Base, Bagram
Airfield, Randolph Air Force Base, Minot Air Force Base and Creech
Air Force Base.
- HSBC, one of the world’s largest banking and financial
institutions, extended its commitment to Datawatch by selecting
Panopticon for surveillance visual analytics.
- Datawatch expanded self-service data preparation deployments
for analytic solutions in healthcare at leading institutions
including Memorial Sloan-Kettering, New England Baptist, Cook
Children’s Hospital, Health First, Baptist Health and Northwell
Health.
Fourth Quarter Fiscal 2016 Financial
Highlights
- Cash and short-term investments were $28.0 million at September
30, 2016, down from $28.8 million at June 30, 2016 and $35.2
million at September 30, 2015.
- Gross margin (excluding IP amortization expense) for the fourth
quarter of fiscal 2016 was 92%, as compared to 90% for the fourth
quarter of fiscal 2015.
- Days sales outstanding were 68 days at September 30, 2016,
compared to 75 days at September 30, 2015.
- There were 8 six-figure deals in the fourth quarter this fiscal
year, the same as in the fourth quarter of fiscal 2015.
- The average deal size in the fourth quarter of fiscal 2016 was
$36,000, a decrease from $50,000 in the fourth quarter of fiscal
2015, primarily due to the increase in the number of ‘land’ deals
year over year.
- Deferred revenue reached $9.9 million at September 30, 2016,
the highest in the company’s history, and a 15% increase from $8.6
million at September 30, 2015.
Strategic Review of Alternatives Process
Update
Datawatch also announced today that the Special
Committee of its Board of Directors recently concluded the
previously-announced review of its strategic alternatives with the
assistance of its financial advisor, Canaccord Genuity, and its
legal counsel, Choate, Hall & Stewart.
Following a comprehensive review process
commenced in July 2016, the Special Committee recommended to the
full Board that it was in the best interests of the Company and its
shareholders for Datawatch to execute on an updated and enhanced
strategic plan for fiscal 2017 as an independent company, and the
Board unanimously accepted the Committee’s
recommendation.
“We engaged in a thorough process and carefully
considered a wide variety of alternatives,” said Michael A.
Morrison, president and chief executive officer of Datawatch. “At
the conclusion of this process, and considering the improved
results the company reported in its fourth quarter of fiscal 2016,
we believe we can best maximize long-term shareholder value by
pursuing a new plan designed to capitalize on the growth
opportunity in the market. We intend to build upon the recent
successes we have demonstrated within the overall self-service data
preparation space, capitalizing on the competitive differentiation
of our market-leading technology and the next generation Monarch
server for ‘data socialization’, the vision for which we announced
today, while exerting tight control over expenses to achieve our
target of reaching operating profitability by the end of fiscal
2017.”
Added Richard D. Osborne, chairman of the Board
and of the special committee, “The Special Committee and its
advisors looked at many strategic options, but in the end, we
believe that the company’s enhanced business plan offers greater
potential for shareholder value creation than any other
alternatives. The clear momentum established last quarter
continues, and we have renewed confidence in Datawatch’s ability to
produce improved market performance and execute on a range of
initiatives to reduce costs and focus on its areas of greatest
opportunity.”
Conference Call
Datawatch’s fourth quarter of fiscal year 2016
earnings conference call will take place on Thursday, November 3,
2016 at 8:30 a.m. Eastern Time. To access the conference call, the
toll-free dial in number is (800) 362-0574. Internationally, the
call may be accessed by dialing (785) 424-1226. The conference call
will be broadcast live on the Internet at:
http://www.investorcalendar.com/IC/CEPage.asp?ID=175366. 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 subsequently filed Form 10-Q
reports. 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 Swedish non-cash deferred tax valuation allowance. 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 Month
Ended |
|
Twelve Months
Ended |
|
|
|
|
September 30, |
|
September 30, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE: |
|
|
|
|
|
|
|
|
|
|
Software licenses |
|
$ |
4,758 |
|
|
$ |
4,101 |
|
|
$ |
15,219 |
|
|
$ |
15,304 |
|
|
|
Maintenance |
|
|
3,498 |
|
|
|
3,513 |
|
|
|
13,915 |
|
|
|
13,529 |
|
|
|
Professional services |
|
|
351 |
|
|
|
408 |
|
|
|
1,328 |
|
|
|
1,388 |
|
|
|
Total revenue |
|
|
8,607 |
|
|
|
8,022 |
|
|
|
30,462 |
|
|
|
30,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
|
Cost of software licenses |
|
|
761 |
|
|
|
709 |
|
|
|
2,828 |
|
|
|
3,002 |
|
|
|
Cost of maintenance and
services |
|
|
470 |
|
|
|
603 |
|
|
|
2,177 |
|
|
|
3,122 |
|
|
|
Sales and marketing |
|
|
5,162 |
|
|
|
5,733 |
|
|
|
20,783 |
|
|
|
27,037 |
|
|
|
Engineering and product
development |
|
|
2,078 |
|
|
|
2,197 |
|
|
|
8,167 |
|
|
|
8,894 |
|
|
|
General and administrative |
|
|
2,183 |
|
|
|
1,825 |
|
|
|
9,636 |
|
|
|
8,599 |
|
|
|
Impairment of goodwill and long
lived intangible assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
32,009 |
|
|
|
Total costs and expenses |
|
|
10,654 |
|
|
|
11,067 |
|
|
|
43,591 |
|
|
|
82,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(2,047 |
) |
|
|
(3,045 |
) |
|
|
(13,129 |
) |
|
|
(52,442 |
) |
|
Other income (expense) |
|
|
(11 |
) |
|
|
(31 |
) |
|
|
(30 |
) |
|
|
(69 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES |
|
|
(2,058 |
) |
|
|
(3,076 |
) |
|
|
(13,159 |
) |
|
|
(52,511 |
) |
|
Income tax (expense) benefit |
|
|
126 |
|
|
|
97 |
|
|
|
(1,473 |
) |
|
|
2,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(1,932 |
) |
|
$ |
(2,979 |
) |
|
$ |
(14,632 |
) |
|
$ |
(49,787 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share -
Basic |
|
$ |
(0.16 |
) |
|
$ |
(0.26 |
) |
|
$ |
(1.24 |
) |
|
$ |
(4.38 |
) |
|
Net loss per share -
Diluted |
|
$ |
(0.16 |
) |
|
$ |
(0.26 |
) |
|
$ |
(1.24 |
) |
|
$ |
(4.38 |
) |
|
Weighted Average Shares
Outstanding - Basic |
|
|
11,835 |
|
|
|
11,541 |
|
|
|
11,758 |
|
|
|
11,368 |
|
|
Weighted Average Shares
Outstanding - Diluted |
|
|
11,835 |
|
|
|
11,541 |
|
|
|
11,758 |
|
|
|
11,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Disclosure - Reconciliation
of Net Loss to Net Loss Excluding the Effects of Certain
Items: |
|
|
|
|
|
|
|
|
|
|
|
GAAP Net Loss |
|
$ |
(1,932 |
) |
|
$ |
(2,979 |
) |
|
$ |
(14,632 |
) |
|
$ |
(49,787 |
) |
|
Add-back Impairment of
Goodwill & Long-Lived Assets |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
32,009 |
|
|
Add-back Amortization
of Intangibles & IP |
|
|
519 |
|
|
|
572 |
|
|
|
2,191 |
|
|
|
2,586 |
|
|
Add-back Share-Based
Compensation |
|
|
662 |
|
|
|
708 |
|
|
|
2,831 |
|
|
|
4,733 |
|
|
Add-back Swedish
Deferred Tax Valuation Allowance |
|
|
- |
|
|
|
- |
|
|
|
1,794 |
|
|
|
- |
|
|
|
Subtotal of additions |
|
|
1,181 |
|
|
|
1,280 |
|
|
|
6,816 |
|
|
|
39,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income (non-GAAP) |
|
$ |
(751 |
) |
|
$ |
(1,699 |
) |
|
$ |
(7,816 |
) |
|
$ |
(10,459 |
) |
|
Net (loss) income per
share - Basic |
|
$ |
(0.06 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.66 |
) |
|
$ |
(0.92 |
) |
|
Net (loss) income per
share - Diluted |
|
$ |
(0.06 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.66 |
) |
|
$ |
(0.92 |
) |
|
Weighted Average Shares
Outstanding - Basic |
|
|
11,835 |
|
|
|
11,541 |
|
|
|
11,758 |
|
|
|
11,368 |
|
|
Weighted Average Shares
Outstanding - Diluted |
|
|
11,835 |
|
|
|
11,541 |
|
|
|
11,758 |
|
|
|
11,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DATAWATCH
CORPORATION |
Condensed
Consolidated Balance Sheets |
Amounts in
Thousands |
(Unaudited) |
|
|
|
|
|
|
|
September 30, |
|
September 30, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
28,034 |
|
|
$ |
35,162 |
|
Accounts receivable, net |
|
|
6,932 |
|
|
|
7,081 |
|
Prepaid expenses and other current assets |
|
|
2,265 |
|
|
|
2,013 |
|
Total current assets |
|
|
37,231 |
|
|
|
44,256 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
1,210 |
|
|
|
614 |
|
Intangible and other assets, net |
|
|
9,990 |
|
|
|
14,061 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
48,431 |
|
|
$ |
58,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
4,077 |
|
|
$ |
4,202 |
|
Deferred revenue - current portion |
|
|
9,630 |
|
|
|
8,452 |
|
Deferred tax liability- current portion |
|
|
- |
|
|
|
274 |
|
Total current liabilities |
|
|
13,707 |
|
|
|
12,928 |
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
766 |
|
|
|
461 |
|
Total long-term liabilities |
|
|
766 |
|
|
|
461 |
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
|
33,958 |
|
|
|
45,542 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
48,431 |
|
|
$ |
58,931 |
|
|
|
|
|
|
|
|
|
|
Source: Datawatch
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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