Mattersight Announces Third Quarter 2017 Results

Chicago, Illinois, UNITED STATES


CHICAGO, Nov. 07, 2017 (GLOBE NEWSWIRE) -- Mattersight Corporation (NASDAQ:MATR), the pioneer in personality-based software applications, today announced financial results for the third quarter ended September 30, 2017. 

“Mattersight’s third quarter was marked by 9% growth in total revenues and 11% growth in subscription revenue versus the same period last year,” said Mattersight CEO Kelly Conway. “We realized significant savings as a result of the refinancing completed during the second quarter, and we continue to be encouraged by our outlook based on the conversion of our backlog to revenue and our strong pipeline.” 

Third Quarter 2017 Financial Highlights

  • Bookings: Annual Contract Value (ACV) bookings were $5.2 million.
  • Total Revenue: Total revenue was $11.3 million.
  • Subscription Revenue: Total subscription revenue was $10.6 million.
  • Backlog: ACV in deployment was $14.6 million at the end of the quarter.
  • Gross Margin: Gross margin was 73%.

Third Quarter 2017 Business Highlights

  • Higher Margin Bookings: The majority of third quarter bookings related to our more profitable routing business.
  • Patent: Recently issued 39th patent which uncovers and delivers trending topic identification from contact center interactions. The patent, Trend identification and behavioral analytics systems and methods, is the first issued from the trending topics product family and provides a machine learning-based framework for analyzing data trends.

Non-GAAP Financial Measures

Mattersight's net loss was $3.0 million in the third quarter of 2017. The Company realized an "Adjusted EBITDA1" loss of $0.4 million for the third 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, November 7, 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: 7599929.

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 7, 2017, by dialing 855.859.2056 (domestic) or 404.537.3406 (international), conference ID: 7599929.

Safe Harbor for Forward-Looking Statements

Statements in this press release that are not historical facts are “forward-looking statements” and are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). 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, and terms of similar meaning, in connection with any discussion of our prospects, financial statements, business, financial condition, revenues, results of operations, or liquidity, 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 a link to 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 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.

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

MATTERSIGHT CORPORATION 
CONSOLIDATED STATEMENTS OF OPERATIONS 
(Unaudited and in thousands, except per share data) 
      
  Quarter Ended Nine Months Ended 
  September 30, September 30, September 30, September 30, 
   2017   2016   2017   2016  
Revenue:         
Subscription revenue $10,639  $9,574  $30,925  $27,297  
Other revenue  705   838   1,936   2,242  
Total revenue  11,344   10,412   32,861   29,539  
Operating expenses:         
Cost of subscription revenue  2,366   2,781   7,576   7,840  
Cost of other revenue  753   662   2,295   2,044  
Total cost of revenue, exclusive of depreciation and amortization  3,119   3,443   9,871   9,884  
Product development  3,288   2,988   10,195   9,588  
Sales and marketing  3,070   4,625   9,538   13,452  
General and administrative  2,915   2,912   9,325   8,950  
Depreciation and amortization  1,603   1,477   4,874   4,295  
Total operating expenses  13,995   15,445   43,803   46,169  
Operating loss  (2,651)  (5,033)  (10,942)  (16,630) 
Non-operating income (expense):         
Interest and other borrowing costs  (334)  (860)  (2,353)  (1,291) 
Loss on early extinguishment of debt        (1,834)    
Change in fair value of warrant liability  (52)  58   308   58  
Other non-operating income  13   8   54   31  
Total non-operating income (expense)  (373)  (794)  (3,825)  (1,202) 
Loss before income taxes  (3,024)  (5,827)  (14,767)  (17,832) 
Income tax benefit (provision)  8   (11)  (4)  (27) 
Net loss  (3,016)  (5,838)  (14,771)  (17,859) 
Dividends related to 7% Series B convertible preferred stock  (146)  (147)  (438)  (440) 
Net loss available to common stockholders $(3,162) $(5,985) $(15,209) $(18,299) 
Per share of common stock:         
Basic net loss available to common stockholders $(0.10) $(0.24) $(0.51) $(0.73) 
Diluted net loss available to common stockholders $(0.10) $(0.24) $(0.51) $(0.73) 
Shares used to calculate basic net loss per share  31,463   25,244   30,074   25,156  
Shares used to calculate diluted net loss per share  31,463   25,244   30,074   25,156  
Stock-based compensation expense is included in individual line items above:         
Total cost of revenue $39  $112  $276  $298  
Product development  164   194   493   863  
Sales and marketing  95   482   218   1,415  
General and administrative  376   463   1,137   1,718  

 

MATTERSIGHT CORPORATION 
CONSOLIDATED BALANCE SHEETS 
(Unaudited and in thousands, except share and per share data) 
      
  September 30,
2017 
 December 31,
2016 
 
ASSETS     
Current Assets:     
Cash and cash equivalents $7,951  $12,538  
Receivables net of allowances of $39 and $311, at September 30, 2017 and December 31,
  2016, respectively
  7,298   8,508  
Prepaid expenses  6,197   4,440  
Other current assets  149   296  
Total current assets  21,595   25,782  
Equipment and leasehold improvements, net of accumulated depreciation and
  amortization of $23,781 and $19,748, at September 30, 2017 and December 31, 2016,
  respectively
  9,720   9,576  
Goodwill  972   972  
Intangible assets, net of amortization of $4,214 and $3,820, respectively  3,041   3,201  
Other long-term assets (includes $2,975 and $4,210 of restricted cash, at September 30, 2017
  and December 31, 2016, respectively)
  6,721   6,033  
Total assets $42,049  $45,564  
LIABILITIES AND STOCKHOLDERS’ EQUITY     
Current Liabilities:     
Short-term debt $90  $738  
Accounts payable  1,970   1,835  
Accrued compensation and related costs  3,414   2,302  
Unearned revenue  5,071   4,911  
Capital leases  2,145   1,982  
Other current liabilities  3,275   3,374  
Total current liabilities  15,965   15,142  
Long-term debt  15,081   20,839  
Long-term unearned revenue  706   757  
Long-term capital leases  1,559   1,602  
Other long-term liabilities  6,754   5,945  
Total liabilities  40,065   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 September 30,
  2017 and December 31, 2016, respectively, with a liquidation preference of $11,422
  and $10,985, at September 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; 32,789,806 and
  27,511,361 shares issued at September 30, 2017 and December 31, 2016,
  respectively; 32,731,950 and 26,622,706 shares outstanding at September 30, 2017
  and December 31, 2016, respectively
  328   275  
Additional paid-in capital  275,398   264,214  
Accumulated deficit  (277,876)  (263,062) 
Treasury stock, at cost, 57,856 and 888,655 shares at September 30, 2017 and
  December 31, 2016, respectively
  (145)  (4,455) 
Accumulated other comprehensive loss  (4,074)  (4,047) 
Total stockholders’ equity (deficit)  (6,369)  (7,075) 
Total liabilities and stockholders’ equity $42,049  $45,564  
      

 

MATTERSIGHT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
     
  Nine Months Ended
  September 30,
2017 
 September 30,
2016 
Cash Flows from Operating Activities:    
Net loss $(14,771) $(17,859)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization  4,874   4,295 
Stock-based compensation  2,124   4,294 
Discount accretion and other debt-related costs  1,417   173 
Provision for uncollectible accounts  59   25 
Change in fair value of warrant liability  (308)  (58)
Changes in assets and liabilities:    
Receivables  1,151   (609)
Prepaid expenses  (1,261)  (1,448)
Other current assets  142   (484)
Other long-term assets  (1,718)  969 
Accounts payable  (464)  287 
Accrued compensation and related costs  1,112   154 
Unearned revenue  109   (4,787)
Other current liabilities  1,126   1,471 
Other long-term liabilities  765   374 
Total adjustments  9,128   4,656 
Net cash used in operating activities  (5,643)  (13,203)
Cash Flows from Investing Activities:    
Capital expenditures  (2,668)  (2,364)
Investment in intangible assets  (209)  (857)
Net cash used in investing activities  (2,877)  (3,221)
Cash Flows from Financing Activities:    
Proceeds from line of credit  19,900   16,246 
Repayments of line of credit  (5,000)  (16,246)
Proceeds from term loan and other borrowings     28,880 
Repayments of term loan and other borrowings  (23,238)  (6,030)
Debt prepayment costs  (692)  (96)
Fees paid for issuance of debt  (206)  (680)
Proceeds from issuance of common stock, net of costs  14,737    
Cash paid to satisfy tax withholding upon vesting of employee stock awards  (1,060)  (328)
Principal payments on capital lease obligations  (1,894)  (1,727)
Proceeds from employee stock purchase plan  178   223 
7% Series B convertible preferred stock dividend     (3)
Proceeds from exercise of stock options     236 
Net cash provided by financing activities  2,725   20,475 
Effect of exchange rate changes on cash and cash equivalents  (27)  (17)
(Decrease) increase in total cash  (5,822)  4,034 
Cash and cash equivalents  12,538   15,407 
Restricted cash (included in Other long-term assets on the Consolidated Balance Sheets)  4,210    
Total cash, beginning of period  16,748   15,407 
Cash and cash equivalents  7,951   14,652 
Restricted cash (included in Other long-term assets on the Consolidated Balance Sheets)  2,975   4,789 
Total cash, end of period $10,926  $19,441 
Non-Cash Investing and Financing Activities:    
Capital lease obligations incurred $2,014  $2,213 
Capital equipment purchased on credit  2,014   2,213 
Issuance of warrant, at fair value     924 
Supplemental Disclosures of Cash Flow Information:    
Interest paid $2,093  $758 

 

MATTERSIGHT CORPORATION
CALCULATION OF ADJUSTED EBITDA
(Unaudited and in thousands)
         
  Quarter Ended Nine Months Ended
  September 30, September 30, September 30, September 30,
   2017   2016   2017   2016 
GAAP - Net Loss $(3,016) $(5,838) $(14,771) $(17,859)
Depreciation and amortization  1,603   1,477   4,874   4,295 
Interest and other borrowings  334   860   2,353   1,291 
Loss on early extinguishment of debt        1,834    
Interest income  (13)  (8)  (54)  (31)
Income tax provision  (8)  11   4   27 
EBITDA $(1,100) $(3,498) $(5,760) $(12,277)
Stock based compensation  674   1,251   2,124   4,294 
Change in fair value of warrant liability  52   (58)  (308)  (58)
Adjusted EBITDA $(374) $(2,305) $(3,944) $(8,041)