Mattersight Announces Fourth Quarter 2017 Results

CHICAGO, Feb. 14, 2018 (GLOBE NEWSWIRE) — Mattersight Corporation (NASDAQ:MATR), the pioneer in personality-based software applications, today announced financial results for the fourth quarter ended December 31, 2017. 

“Mattersight’s fourth quarter was marked by 9% growth in total revenues and 12% growth in subscription revenue versus the same period last year,” said Mattersight CEO Kelly Conway. “We set a new record for quarterly revenue, and saw continued improvement on the cost side resulting from a more favorable product mix and improved operating efficiency.”  

Fourth Quarter 2017 Financial Highlights

  • Bookings: Annual Contract Value (ACV) bookings were $2.8 million.
  • Total Revenue: Total revenue was $13.6 million.
  • Subscription Revenue: Total subscription revenue was $12.8 million.
  • Backlog: ACV in deployment was $8.9 million at the end of the quarter.
  • Gross Margin: Gross margin was 73%.

Fourth Quarter 2017 Business Highlights

  • Routing business:  We saw continued revenue growth with our routing business, and fourth quarter bookings include a new customer that is a Fortune 100 financial services organization.
  • Patents:  Recently issued patents include:
    • Chatbot Communication – Personality-based Chatbot and methods is an invention for a digital assistant, such as Siri, Alexa or Google Home, that will tailor its interactions with users based on their personalities.
    • Face-to-Face Analysis – Face-to-face communication analysis via mono recording system and methods will be able to predict a customer’s personality type just as Mattersight currently predicts personality types for callers into contact centers.
    • Fraud Detection – Two new patents, both titled Methods and Apparatus for Identifying Fraudulent Callers, cover new and more efficient ways of determining if an unknown speaker is a known fraudster.  By leveraging biometrics and analyzing the speaker’s voiceprint, the invention instantly cross-references the speaker’s most distinctive features with a database containing the voiceprints of known fraudsters.

Non-GAAP Financial Measures

Mattersight’s net loss was $1.5 million in the fourth quarter of 2017. The Company realized positive “Adjusted EBITDA1” of $1.0 million for the fourth 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 Wednesday, February 14, 2018. 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: 2685018.

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 March 18, 2018, by dialing 855.859.2056 (domestic) or 404.537.3406 (international), conference ID: 2685018.

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 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   Twelve Months Ended  
    December 31,
    December 31,
    December 31,
    December 31,
   
      2017       2016       2017       2016    
Revenue:                  
Subscription revenue   $   12,787     $   11,423     $   43,712     $   38,720    
Other revenue       862         1,136         2,798         3,377    
Total revenue       13,649         12,559         46,510         42,097    
Operating expenses:                  
Cost of subscription revenue       2,583         2,525         10,159         10,365    
Cost of other revenue       1,099         1,379         3,394         3,423    
Total cost of revenue, exclusive of depreciation and amortization       3,682         3,904         13,553         13,788    
Product development       3,100         2,914         13,295         12,502    
Sales and marketing       3,851         3,397         13,389         16,848    
General and administrative       2,841         2,877         12,166         11,827    
Depreciation and amortization       1,473         1,650         6,347         5,946    
Total operating expenses       14,947         14,742         58,750         60,911    
Operating loss       (1,298 )       (2,183 )       (12,240 )       (18,814 )  
Non-operating income (expense):                  
Interest and other borrowing costs       (432 )       (1,027 )       (2,785 )       (2,319 )  
Loss on early extinguishment of debt       —         —         (1,834 )       —    
Change in fair value of warrant liability       69         109         377         167    
Other non-operating income       2         6         56         39    
Total non-operating expense       (361 )       (912 )       (4,186 )       (2,113 )  
Loss before income taxes       (1,659 )       (3,095 )       (16,426 )       (20,927 )  
Income tax benefit (provision)       110         (24 )       106         (50 )  
Net loss       (1,549 )       (3,119 )       (16,320 )       (20,977 )  
Dividends related to 7% Series B convertible preferred stock       (146 )       (146 )       (584 )       (586 )  
Net loss available to common stockholders   $   (1,695 )   $   (3,265 )   $   (16,904 )   $   (21,563 )  
Per share of common stock:                  
Basic net loss available to common stockholders   $   (0.05 )   $   (0.13 )   $   (0.56 )   $   (0.86 )  
Diluted net loss available to common stockholders   $   (0.05 )   $   (0.13 )   $   (0.56 )   $   (0.86 )  
Shares used to calculate basic net loss per share       31,581         25,366         30,451         25,209    
Shares used to calculate diluted net loss per share       31,581         25,366         30,451         25,209    
Stock-based compensation expense is included in individual line items above:                   
Total cost of revenue   $   77     $   72     $   353     $   371    
Product development       174         271         667         1,134    
Sales and marketing       130         282         348         1,697    
General and administrative       422         404         1,559         2,122    

 

MATTERSIGHT CORPORATION  
CONSOLIDATED BALANCE SHEETS  
(Unaudited and in thousands, except share and per share data)  
           
           
           
    December 31,
2017 
  December 31,
2016 
 
ASSETS          
Current Assets:          
Cash and cash equivalents   $   9,044     $   12,538    
Receivables net of allowances of $41 and $311, at December 31, 2017 and December 31,
  2016, respectively
      6,565         8,508    
Prepaid expenses       5,805         4,440    
Other current assets       65         296    
Total current assets       21,479         25,782    
Equipment and leasehold improvements, net of accumulated depreciation and
  amortization of $24,955 and $19,748, at December 31, 2017 and December 31, 2016,
  respectively
      8,572         9,576    
Goodwill       972         972    
Intangible assets, net of amortization of $4,357 and $3,820, respectively       2,952         3,201    
Other long-term assets (includes $2,675 and $4,210 of restricted cash, at December 31, 2017
  and December 31, 2016, respectively)
      5,960         6,033    
Total assets   $   39,935     $   45,564    
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current Liabilities:          
Short-term debt   $   93     $   738    
Accounts payable       1,474         1,835    
Accrued compensation and related costs       3,312         2,302    
Unearned revenue       3,032         4,911    
Capital leases       1,967         1,982    
Other current liabilities       3,399         3,374    
Total current liabilities       13,277         15,142    
Long-term debt       17,056         20,839    
Long-term unearned revenue       914         757    
Long-term capital leases       1,190         1,602    
Other long-term liabilities       6,475         5,945    
Total liabilities       38,912         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 December 31,
  2017 and December 31, 2016, respectively, with a liquidation preference of $11,568
  and $10,985, at December 31, 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; 33,083,180 and
  27,511,361 shares issued at December 31, 2017 and December 31, 2016,
  respectively; 33,039,713 and 26,622,706 shares outstanding at December 31, 2017
  and December 31, 2016, respectively
      331         275    
Additional paid-in capital       275,963         264,214    
Accumulated deficit       (279,425 )       (263,062 )  
Treasury stock, at cost, 43,467 and 888,655 shares at December 31, 2017 and
  December 31, 2016, respectively
      (117 )       (4,455 )  
Accumulated other comprehensive loss       (4,082 )       (4,047 )  
Total stockholders’ equity (deficit)        (7,330 )       (7,075 )  
Total liabilities and stockholders’ equity    $   39,935     $   45,564    
           

 

MATTERSIGHT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
         
         
         
    Twelve Months Ended
    December 31,
2017 
  December 31,
2016 
Cash Flows from Operating Activities:        
Net loss   $   (16,320 )   $   (20,977 )
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization       6,347         5,946  
Stock-based compensation       2,927         5,324  
Discount accretion and other debt-related costs       1,417         436  
Provision for uncollectible accounts       59         287  
Change in fair value of warrant liability       (377 )       (167 )
Changes in assets and liabilities:        
Receivables       1,884         (3,932 )
Prepaid expenses       (1,089 )       71  
Other current assets       231         (62 )
Other long-term assets       (1,257 )       (3,615 )
Accounts payable       (559 )       375  
Accrued compensation and related costs       1,010         (459 )
Unearned revenue       (1,722 )       (2,307 )
Other current liabilities       1,292         722  
Other long-term liabilities       633         582  
Total adjustments       10,796         3,201  
Net cash used in operating activities       (5,524 )       (17,776 )
Cash Flows from Investing Activities:        
Capital expenditures       (2,998 )       (3,714 )
Investment in intangible assets       (279 )       (349 )
Net cash used in investing activities       (3,277 )       (4,063 )
Cash Flows from Financing Activities:        
Proceeds from line of credit       26,900         16,246  
Repayments of line of credit       (10,000 )       (16,246 )
Proceeds from term loan and other borrowings      —          28,880  
Repayments of term loan and other borrowings       (23,512 )       (6,945 )
Debt prepayment costs       (692 )       (96 )
Fees paid for issuance of debt       (206 )       (628 )
Proceeds from issuance of common stock, net of costs       14,752         —  
Cash paid to satisfy tax withholding upon vesting of employee stock awards       (1,177 )       (440 )
Principal payments on capital lease obligations       (2,498 )       (2,296 )
Proceeds from employee stock purchase plan       240         289  
7% Series B convertible preferred stock dividend      —          (10 )
Proceeds from exercise of stock options      —          236  
Net cash provided by financing activities       3,807         18,990  
Effect of exchange rate changes on cash and cash equivalents       (35 )       (20 )
Decrease in total cash       (5,029 )       (2,869 )
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       9,044         12,538  
Restricted cash (included in Other long-term assets on the Consolidated Balance Sheets)       2,675        —   
Total cash, end of period   $   11,719     $   12,538  
Non-Cash Investing and Financing Activities:        
Capital lease obligations incurred   $   2,071     $   2,447  
Capital equipment purchased on credit       2,071         2,447  
Issuance of warrant, at fair value       —         924  
Supplemental Disclosures of Cash Flow Information:        
Interest paid   $   2,476     $   1,343  

 

MATTERSIGHT CORPORATION
CALCULATION OF ADJUSTED EBITDA
(Unaudited and in thousands)
                 
                 
    Quarter Ended   Twelve Months Ended
    December 31,
    December 31,
    December 31,
    December 31,
 
      2017       2016       2017       2016  
GAAP – Net Loss   $   (1,549 )   $   (3,119 )   $   (16,320 )   $   (20,977 )
Depreciation and amortization       1,473         1,650         6,347         5,946  
Interest and other borrowings       432         1,027         2,785         2,319  
Loss on early extinguishment of debt      —         —          1,834        —   
Interest income       (2 )       (6 )       (56 )       (39 )
Income tax benefit (provision)       (110 )       24         (106 )       50  
EBITDA   $   244     $   (424 )   $   (5,516 )   $   (12,701 )
Stock based compensation       803         1,029         2,927         5,324  
Change in fair value of warrant liability       (69 )       (109 )       (377 )       (167 )
Adjusted EBITDA   $   978     $   496     $   (2,966 )   $   (7,544 )