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Mattersight Announces First Quarter 2014 Results


May 7, 2014 - Chicago, IL

Mattersight Corporation (NASDAQ: MATR), a leading provider of enterprise analytics, today announced financial results for the first quarter ended March 31, 2014.

Mattersight's total services revenue was $7.0 million, including $5.9 million of subscription revenue. The Company realized an "Adjusted Earnings(1)" loss of $1.6 million for the first quarter of 2014. 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 $4.0 million in the first quarter of 2014.

Q1 Highlights

  • Q1 performance in line with forecast, which reflected the previously announced loss of a contract
  • Booked contracts with incremental ACV of $3.4 million
  • Increased rolling four quarter incremental ACV bookings by 98%
  • Achieved a 9% sequential increase in our book of business
  • Converted three pilots to subscription contracts
  • Added a record 29 new pilots, including 22 routing pilots; 18 of these pilots are with new logo customers
  • Ended the quarter with a record 66 pilots having a record follow-on ACV of ~$34 million
  • Signed a paid pilot with a Fortune 50 company for our performance management application, with large follow-on potential
  • Closed significant add-on orders at several existing large customers

Conference Call Information

Mattersight management will host a conference call at 5:00 p.m. ET on Wednesday, May 7, 2014. The conference call and slide presentation will be available at the Investment Community section of Mattersight's website at http://www.mattersight.com/investment/. To listen to the conference call via telephone, please call 800.952.4789 (domestic) or 404.665.9579 (international), conference ID: 33606370.

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 June 7, 2014, by dialing 855.859.2056 (domestic) or 404.537.3406 (international), conference ID: 33606370.

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.

About Mattersight

Mattersight is a leader in enterprise analytics focused on customer and employee interactions and behaviors. Mattersight® Behavioral Analytics captures and analyzes customer and employee interactions, employee desktop data, and other contextual information to optimally route customers to the best available employee, improve operational performance, and predict future customer and employee outcomes. Mattersight's analytics are based on millions of proprietary algorithms and the application of unique behavioral models. The company's SaaS+ delivery model combines analytics in the cloud with deep customer partnerships to drive significant business value. Mattersight's solutions are used by leading companies in Healthcare, Insurance, Financial Services, Telecommunications, Cable, Utilities, Education, Hospitality, and Government. See What Matters™ by visiting 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 Ended
--------------------------
March 31, March 31,
2014 2013
------------ ------------
Revenue:
Behavioral Analytics revenue $ 6,749 $ 8,194
Other revenue 232 322
------------ ------------
Total services revenue 6,981 8,516
Reimbursed expenses 32 82
------------ ------------
Total revenue 7,013 8,598
Operating expenses:
Cost of Behavioral Analytics revenue 2,098 2,723
Cost of Other revenue 103 156
------------ ------------
Cost of services 2,201 2,879
Reimbursed expenses 32 82
------------ ------------
Total cost of revenue, exclusive of depreciation
and amortization shown below: 2,233 2,961
Sales, marketing and development 5,221 6,230
General and administrative 2,250 2,271
Depreciation and amortization 743 966
------------ ------------
Total operating expenses 10,447 12,428
------------ ------------

Operating loss (3,434) (3,830)
Interest and other expense, net (150) (91)
Change in fair value of warrant liability (370) --
------------ ------------
Loss before income taxes (3,954) (3,921)
Income tax (provision) benefit (9) 248
------------ ------------
Net loss (3,963) (3,673)
Dividends related to Series B Stock (147) (147)
------------ ------------
Net loss available to Common Stock holders $ (4,110) $ (3,820)
============ ============

Per share of Common Stock:
Basic net loss available to Common Stock holders $ (0.22) $ (0.23)
============ ============
Diluted net loss available to Common Stock
holders $ (0.22) $ (0.23)
============ ============

Shares used to calculate basic net loss per
share 18,503 16,320
============ ============
Shares used to calculate diluted net loss per
share 18,503 16,320
============ ============

Stock-based compensation, primarily restricted
stock, is included in individual line items
above:
Cost of Behavioral Analytics revenue $ 56 $ 4
Sales, marketing and development 590 849
General and administrative 442 518



MATTERSIGHT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited and in thousands)

For the Three Months Ended
--------------------------
March 31, March 31,
2014 2013
------------ ------------
Net loss $ (3,963) $ (3,673)
Other comprehensive loss:
Effect of currency translation 5 (8)
------------ ------------
Comprehensive net loss $ (3,958) $ (3,681)
============ ============



MATTERSIGHT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except share and per share data)

March 31, December 31,
2014 2013
------------ ------------
ASSETS:
Current Assets:
Cash and cash equivalents $ 8,101 $ 13,392
Receivables (net of allowances of $12 as of
March 31, 2014 and $12 as of December 31,
2013) 2,435 2,384
Prepaid expenses 4,309 3,576
Other current assets 362 427
------------ ------------
Total current assets 15,207 19,779
Equipment and leasehold improvements, net 4,922 5,158
Goodwill 972 972
Intangibles, net 453 409
Other long-term assets 4,328 4,431
------------ ------------
Total assets $ 25,882 $ 30,749
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 779 $ 752
Accrued compensation and related costs 1,424 1,844
Unearned revenue 5,390 7,215
Other current liabilities 4,694 4,098
------------ ------------
Total current liabilities 12,287 13,909
Long-term unearned revenue 3,210 2,866
Other long-term liabilities 1,584 1,607
------------ ------------
Total liabilities 17,081 18,382
------------ ------------

Series B Stock, $0.01 par value; 5,000,000
shares authorized and designated; 1,649,122
shares issued and outstanding at March 31, 2014
and December 31, 2013, with a liquidation
preference of $9,441 and $9,294 at March 31,
2014 and December 31, 2013, respectively 8,411 8,411

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; 20,750,724 and 20,465,984
shares issued at March 31, 2014, and December
31, 2013, respectively; and 19,074,434 and
18,886,966 outstanding at March 31, 2014 and
December 31, 2013, respectively 208 205
Additional paid-in capital 228,976 228,038
Accumulated deficit (216,135) (212,172)
Treasury stock, at cost, 1,676,290 and
1,579,018 shares at March 31, 2014 and
December 31, 2013, respectively (8,631) (8,082)
Accumulated other comprehensive loss (4,028) (4,033)
------------ ------------
Total stockholders' equity 390 3,956
------------ ------------
Total liabilities and stockholders' equity $ 25,882 $ 30,749
============ ============



MATTERSIGHT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)

For the Three Months Ended
--------------------------
March 31, March 31,
2014 2013
------------ ------------
Cash Flows from Operating Activities:
Net loss $ (3,963) $ (3,673)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 743 966
Stock-based compensation 1,088 1,371
Change in fair value of warrant liability 370 --
Changes in assets and liabilities:
Receivables (51) (614)
Prepaid expenses (664) 30
Other assets 66 (38)
Accounts payable 27 489
Accrued compensation and related costs (420) (147)
Unearned revenue (1,481) 964
Other liabilities 62 (215)
------------ ------------
Total adjustments (260) 2,806
------------ ------------
Net cash used in operating activities (4,223) (867)
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures and other (66) (219)
Patents and trademarks (65) (53)
------------ ------------
Net cash used in investing activities (131) (272)
------------ ------------
Cash Flows from Financing Activities:
Principal payments under capital lease
obligations (422) (629)
Acquisition of treasury stock (549) (195)
Proceeds from stock compensation and employee
stock purchase plans, net 36 36
Fees from issuance of Common Stock (2) --
------------ ------------
Net cash used in financing activities (937) (788)
------------ ------------
Effect of exchange rate changes on cash and cash
equivalents -- (12)
------------ ------------
Decrease in cash and cash equivalents (5,291) (1,939)
Cash and cash equivalents, beginning of period 13,392 14,419
------------ ------------
Cash and cash equivalents, end of period $ 8,101 $ 12,480
============ ============

Non-Cash Investing and Financing Transactions:
Capital lease obligations incurred $ 420 $ 785
Capital equipment purchased on credit 420 785
Fair value of warrants classified as liability 1,155 --
Supplemental Disclosures of Cash Flow
Information:
Interest paid $ 76 $ 71



MATTERSIGHT CORPORATION
CALCULATION OF ADJUSTED EARNINGS MEASURE
(Unaudited and in thousands)

For the Three Months Ended
--------------------------
March 31, March 31,
2014 2013
------------ ------------
GAAP -- Operating loss $ (3,434) $ (3,830)

Add back (reduce) the effect of:
Stock-based compensation 1,088 1,371
Depreciation and amortization 743 966
------------ ------------
Adjusted earnings measure -- loss $ (1,603) $ (1,493)
============ ============

Contact

Mark Iserloth
Vice President and Chief Financial Officer
312.454.3613
ir@mattersight.com

MarketWire

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