Mattersight Announces Fourth Quarter 2012 Results

Marketwired

CHICAGO, IL--(Marketwire - Feb 13, 2013) - Mattersight Corporation (NASDAQ: MATR) today announced financial results for the fourth quarter ended December 31, 2012. 

Mattersight's total services revenue was $8.6 million, including $6.9 million of subscription revenues. The Company realized an "Adjusted Earnings1" loss of $2.8 million for the fourth quarter of 2012. 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 $4.6 million in the fourth quarter of 2012 and its operating loss from continuing operations2 was $4.7 million. 

Q4 Highlights

  • Increased subscription revenues by 6% sequentially
  • Increased total services revenues by 8% sequentially
  • Recorded managed services bookings of $4.1 million
  • Signed five new pilots with two new logos

Full Year Highlights

  • Grew subscription revenues by 24%, to $27.3 million
  • Increased total services revenues by 16%, to $33.4 million
  • Increased gross margins by over 700 bps
  • Signed 7 new logos as compared to 1 in 2011
  • Ended the year with managed services backlog3 of $89.1 million
  • Signed 18 total pilots as compared to 6 in 2011

Q1 Guidance

Mattersight currently expects its total subscription revenues will be approximately flat in the first quarter of 2013.

Conference Call Information

Mattersight management will host a conference call at 5:00 p.m. ET on Wednesday, February 13, 2013. 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: 95215703. 

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 13, 2013, by dialing 855.859.2056 (domestic) or 404.537.3406 (international), conference ID: 95215703.  

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's Behavioral Analytics service captures and analyzes customer and employee interactions, employee desktop data, and other contextual information to 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 applications 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.

2 On May 28, 2011, the company divested its Integrated Contact Solutions ("ICS") business unit and "eLoyalty" registered trademark / trade name to a subsidiary of TeleTech Holdings, Inc. As a result of this divestiture, the company has classified the ICS business unit as discontinued operations and the associated results of operations, financial position, and cash flows have been separately recorded as appropriate.

3 Mattersight uses the term "backlog" to reflect the estimated future amount of Managed services revenue related to its Managed services contracts. The value of these contracts is based on anticipated usage volumes over the anticipated term of the agreement. The anticipated term of the agreement is based on the contractually agreed fixed term of the contract, plus agreed upon, but optional, extension periods. Anticipated volumes may be greater or less than anticipated. In addition, these contracts typically are cancellable without cause based on the customer making a substantial early termination payment or forfeiture of prepaid contract amounts. 

                         
MATTERSIGHT CORPORATION  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited and in thousands, except per share data)  
                         
    For the     For the  
    Three Months Ended     Twelve Months Ended  
    Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,  
    2012     2011     2012     2011  
Revenue:                                
  Behavioral Analytics revenue   $ 8,343     $ 8,260     $ 32,138     $ 27,257  
  Other revenue     285       309       1,314       1,519  
    Total services revenue     8,628       8,569       33,452       28,776  
  Reimbursed expenses     97       79       411       319  
Total revenue     8,725       8,648       33,863       29,095  
Operating expenses:                                
  Cost of Behavioral Analytics revenue     3,211       3,503       12,174       12,188  
  Cost of other revenue     156       200       702       1,000  
    Cost of services     3,367       3,703       12,876       13,188  
  Reimbursed expenses     97       79       411       319  
Total cost of revenue, exclusive of depreciation and amortization:     3,464       3,782       13,287       13,507  
  Sales, marketing and development     6,560       5,195       23,131       19,954  
  General and administrative     2,341       1,791       8,255       9,144  
  Severance and related costs     --       40       693       (336 )
  Depreciation     915       875       3,419       3,218  
Amortization of intangibles     17       26       81       177  
Total operating expenses     13,297       11,709       48,866       45,664  
                                 
Operating loss     (4,572 )     (3,061 )     (15,003 )     (16,569 )
Interest and other (expense) income, net     (81 )     (56 )     (384 )     125  
Loss from continuing operations before income taxes     (4,653 )     (3,117 )     (15,387 )     (16,444 )
Income tax (provision) benefit     (8 )     604       (38 )     5,884  
Loss from continuing operations     (4,661 )     (2,513 )     (15,425 )     (10,560 )
Income from discontinued operations, net of tax     21       1,210       249       28,920  
Net (loss) income     (4,640 )     (1,303 )     (15,176 )     18,360  
Series B Stock fair value over stated value     --       (6,555 )     (69 )     (6,555 )
Dividends related to Series B Stock     (147 )     (302 )     (591 )     (1,252 )
Net (loss) income available to Common Stock holders   $ (4,787 )   $ (8,160 )   $ (15,836 )   $ 10,553  
                                 
Per share of Common Stock:                                
Basic loss from continuing operations   $ (0.30 )   $ (0.64 )   $ (1.01 )   $ (1.29 )
Basic income from discontinued operations   $ --     $ 0.08     $ 0.02     $ 2.03  
Basic net (loss) income available to Common Stock holders   $ (0.30 )   $ (0.56 )   $ (0.99 )   $ 0.74  
                                 
Per share of Common Stock:                                
Diluted loss from continuing operations   $ (0.30 )   $ (0.64 )   $ (1.01 )   $ (1.29 )
Diluted income from discontinued operations   $ --     $ 0.08     $ 0.02     $ 2.03  
Diluted net (loss) income available to Common Stock holders   $ (0.30 )   $ (0.56 )   $ (0.99 )   $ 0.74  
                                 
Shares used to calculate basic net (loss) income per share     16,223       14,538       16,002       14,225  
Shares used to calculate diluted net (loss) income per share     16,223       14,538       16,002       14,225  
                                 
Stock-based compensation, primarily restricted stock, is included in individual line items above:                                
  Cost of Behavioral Analytics revenue   $ 2     $ 3     $ 16     $ 20  
  Sales, marketing and development     530       787       2,308       3,387  
  General and administrative     349       345       1,405       2,013  
  Severance and related costs     --       --       268       --  
  Discontinued operations     --       (393 )     �--       1,175  
                         
                         
MATTERSIGHT CORPORATION  
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME  
(Unaudited and in thousands)  
                         
    For the     For the  
    Three Months Ended     Twelve Months Ended  
    Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,  
    2012     2011     2012     2011  
Net (loss) income   $ (4,640 )   $ (1,303 )   $ (15,176 )   $ 18,360  
Other comprehensive loss:                                
Effect of currency translation     2       �(10 )     (1 )     (350 )
Comprehensive net (loss) income   $ (4,638 )   $ (1,313 )   $ (15,177 )   $ 18,010  
             
             
MATTERSIGHT CORPORATION  
CONSOLIDATED BALANCE SHEETS  
(Unaudited and in thousands, except share and per share data)  
             
    December 31,     December 31,  
    2012     2011  
ASSETS:                
Current Assets:                
  Cash and cash equivalents   $ 14,419     $ 29,408  
  Restricted cash     --       1,500  
  Receivables (net of allowances of $12 and $13)     2,395       2,540  
  Prepaid expenses     4,404       5,302  
  Other current assets     305       288  
    Total current assets     21,523       39,038  
Equipment and leasehold improvements, net     4,727       4,271  
Goodwill     972       972  
Intangibles, net     236       238  
Other long-term assets     3,776       4,746  
    Total assets   $ 31,234     $ 49,265  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY:                
Current Liabilities:                
  Short-term debt   $ 3,703     $ 3,567  
  Accounts payable     781       812  
  Accrued compensation and related costs     1,335       1,382  
  Unearned revenue     5,680       9,783  
  Other current liabilities     2,889       3,673  
    Total current liabilities     14,388       19,217  
Long-term unearned revenue     2,374       3,036  
Other long-term liabilities     1,231       1,401  
    Total liabilities     17,993       23,654  
                 
Series B Stock, $0.01 par value; 5,000,000 shares authorized and designated; 1,649,201 and 1,670,696 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively, with a liquidation preference of $8,705 and $8,819 at December 31, 2012 and December 31, 2011, respectively    


8,411
     


8,521
 
                 
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; 18,407,848 and 18,037,552 shares issued at December 31, 2012, and at December 31, 2011, respectively; and 17,114,880 and 16,935,204 outstanding at December 31, 2012 and December 31, 2011, respectively    


184
     


180
 
  Additional paid-in capital     216,667       212,618  
  Accumulated deficit     (200,955 )     (185,779 )
  Treasury stock, at cost, 1,292,968 and 1,102,348 shares at December 31, 2012 and December 31, 2011, respectively    
(7,027
)    
(5,891
)
  Accumulated other comprehensive loss     (4,039 )     (4,038 )
    Total stockholders' equity     4,830       17,090  
    Total liabilities and stockholders' equity   $ 31,234     $ 49,265  
             
             
MATTERSIGHT CORPORATION  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited and in thousands)  
             
    For the Twelve Months Ended  
    Dec. 31,     Dec 31,  
    2012     2011  
Cash Flows from Operating Activities:                
  Net (loss) income   $ (15,176 )   $ 18,360  
  Less: net income from discontinued operations     249       28,920  
  Net loss from continuing operations     (15,425 )     (10,560 )
  Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:                
    Depreciation and amortization     3,500       3,395  
    Stock-based compensation     3,729       5,420  
    Severance and related costs     268       --  
    Other     2       14  
  Changes in assets and liabilities:                
    Receivables     146       (554 )
    Prepaid expenses     1,834       (2,254 )
    Other assets     (50 )     128  
    Accounts payable     (31 )     445  
    Accrued compensation and related costs     (47 )     (264 )
    Unearned revenue     (4,765 )     275  
    Other liabilities     (177 )     (6,554 )
      Total adjustments     4,409       51  
        Net cash used in continuing operations     (11,016 )     (10,509 )
        Net cash provided by (used in) discontinued operations     24       (5,787 )
        Net cash used in operating activities     (10,992 )     (16,296 )
                 
Cash Flows from Investing Activities:                
  Capital expenditures and other     (2,160 )     (833 )
        Net cash used in continuing investing activities     (2,160 )     (833 )
        Net cash provided by discontinued investing activities     --       37,427  
        Net cash (used in) provided by investing activities     (2,160 )     36,594  
                 
Cash Flows from Financing Activities:                
  Proceeds from line of credit     3,691       --  
  Decrease in restricted cash     1,500       960  
  Proceeds from stock compensation and employee stock purchase plans, net     802       126  
  Purchase of shares of Series B Stock     (3,743 )     (12,547 )
  Principal payments under capital lease obligations     (2,311 )     (1,862 )
  Acquisition of treasury stock     (1,136 )     (1,008 )
  Payment of Series B Stock dividends     (595 )     (2,221 )
  (Fees) proceeds from issuance of Common Stock     (49 )     6,000  
        Net cash used in continuing financing activities     (1,841 )     (10,552 )
        Net cash used in discontinued financing activities     --       (678 )
        Net cash used in financing activities     (1,841 )     (11,230 )
                 
Effect of exchange rate changes on cash and cash equivalents by continuing operations     4       (299 )
Effect of exchange rate changes on cash and cash equivalents by discontinued operations     --       (233 )
Effect of exchange rate changes on cash and cash equivalents     4       (532 )
(Decrease) increase in cash and cash equivalents     (14,989 )     8,536  
Cash and cash equivalents, beginning of period     29,408       20,872  
Cash and cash equivalents of continuing operations, end of period.   $ 14,419     $ 29,408  
                 
Non-Cash Investing and Financing Transactions:                
  Capital lease obligations incurred   $ 1,793     $ 2,517  
  Capital equipment purchased on credit     1,793       2,517  
Supplemental Disclosures of Cash Flow Information:                
  Interest paid   $ 371     $ 187  
   
   
MATTERSIGHT CORPORATION  
CALCULATION OF ADJUSTED EARNINGS MEASURE  
(Unaudited and in thousands)  
                         
    For the     For the  
    Three Months Ended     Twelve Months Ended  
    Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,  
    2012     2011     2012     2011  
GAAP -- Operating loss   $ (4,572 )   $ (3,061 )   $ (15,003 )   $ (16,569 )
                                 
Add back (reduce) the effect of:                                
Stock-based compensation     881       1,135       3,729       5,420  
Severance and related costs     --       40       693       (336 )
Depreciation and amortization     932       901       3,500       3,395  
Adjusted earnings measure -- (loss)   $ (2,759 )   $ (985 )   $ (7,081 )   $ (8,090 )
Contact:
Mark Iserloth
Vice President and Chief Financial Officer
312.454.3613
ir@mattersight.com

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