Mattersight Announces Second Quarter 2012 Results

Marketwired

CHICAGO, IL--(Marketwire -08/08/12)- Mattersight Corporation (MATR) today announced financial results for the second quarter ended June 30, 2012.

Mattersight's total services revenue was $7.9 million, including $6.6 million of subscription revenues. The Company realized an "Adjusted Earnings(1)" loss of $1.8 million for the second 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 $3.6 million in the second quarter of 2012 and its operating loss from continuing operations(2) was $3.5 million.

Q2 Highlights

  • Grew subscription revenues by 32%, year over year, to $6.6 million
  • Increased total service revenues by 20%, year over year, to $7.9 million
  • Recorded managed services bookings of $19.4 million
  • Ended Q2 with a record managed services backlog(3) of $104.6 million
  • Signed 5 new pilots, including 2 new logo customers
  • Ended Q2 with a record 17 pilots
  • Established a $10.0 million credit facility with Silicon Valley Bank

Q3 Guidance

Mattersight currently expects its total services revenues will be between $8.0 million and $8.3 million. Mattersight is currently 100% sold to $8.3 million.

Conference Call Information

Mattersight management will host a conference call at 5:00 p.m. ET on Wednesday, August 8, 2012. 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: 14562298.

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 September 8, 2012, by dialing 855.859.2056 (domestic) or 404.537.3406 (international), conference ID: 14562298.

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 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. The reported backlog is expected to be recognized as follows: $17.0m in 2012; $31.5m in 2013; $23.6m in 2014; $17.3m in 2015; and $15.2m in 2016 and thereafter.

 

MATTERSIGHT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share data)


For the For the
-------------------- --------------------
Three Months Ended Six Months Ended
-------------------- --------------------
June 30, July 2, June 30, July 2,
2012 2011 2012 2011
--------- --------- --------- ---------
Revenue:
Behavioral Analytics revenue $ 7,557 $ 6,288 $ 16,113 $ 12,255
Other revenue 376 339 721 919
--------- --------- --------- ---------
Total services revenue 7,933 6,627 16,834 13,174
Reimbursed expenses 102 76 200 153
--------- --------- --------- ---------
Total revenue 8,035 6,703 17,034 13,327
Operating expenses:
Cost of Behavioral Analytics
revenue 2,947 2,894 6,135 5,656
Cost of other revenue 187 254 391 596
--------- --------- --------- ---------
Cost of services 3,134 3,148 6,526 6,252
Reimbursed expenses 102 76 200 153
--------- --------- --------- ---------
Total cost of revenue, exclusive
of depreciation and
amortization: 3,236 3,224 6,726 6,405
Sales, marketing and
development 5,447 4,764 10,631 9,630
General and administrative 2,007 2,614 3,963 5,369
Severance and related costs 14 (434) 693 (430)
Depreciation and amortization 755 820 1,622 1,595
--------- --------- --------- ---------
Total operating expenses 11,459 10,988 23,635 22,569
--------- --------- --------- ---------

Operating loss (3,424) (4,285) (6,601) (9,242)
Interest and other (expense)
income, net (113) (53) (215) 78
--------- --------- --------- ---------
Loss from continuing operations
before income taxes (3,537) (4,338) (6,816) (9,164)
Income tax (provision) benefit (11) 3,563 (21) 3,628
--------- --------- --------- ---------
Loss from continuing operations (3,548) (775) (6,837) (5,536)
(Loss) income from discontinued
operations, net of tax (23) 28,065 (104) 28,187
--------- --------- --------- ---------
Net (loss) income (3,571) 27,290 (6,941) 22,651
Dividends related to Series B
Stock (148) (317) (297) (634)
--------- --------- --------- ---------
Net (loss) income available to
common stockholders $ (3,719) $ 26,973 $ (7,238) $ 22,017
========= ========= ========= =========

Per common share:
Basic loss from continuing
operations $ (0.23) $ (0.08) $ (0.45) $ (0.44)
========= ========= ========= =========
Basic (loss) income from
discontinued operations $ (0.00) $ 1.99 $ (0.01) $ 2.01
========= ========= ========= =========
Basic net (loss) income
available to common
stockholders $ (0.23) $ 1.91 $ (0.46) $ 1.57
========= ========= ========= =========

Per common share:
Diluted loss from continuing
operations $ (0.23) $ (0.08) $ (0.45) $ (0.44)
========= ========= ========= =========
Diluted (loss) income from
discontinued operations $ (0.00) $ 1.99 $ (0.01) $ 2.01
========= ========= ========= =========
Diluted net (loss) income
available to common
stockholders $ (0.23) $ 1.91 $ (0.46) $ 1.57
========= ========= ========= =========

Shares used to calculate basic
net loss per share 15,966 14,111 15,858 14,032
========= ========= ========= =========
Shares used to calculate diluted
net loss per share 15,966 14,111 15,858 14,032
========= ========= ========= =========

Stock-based compensation,
primarily restricted stock, is
included in individual line
items above:
Cost of Behavioral Analytics
revenue $ 5 $ 7 $ 11 $ 14
Sales, marketing and
development 557 899 1,254 1,771
General and administrative 314 680 714 1,230
Severance and related costs -- -- 268 --
Discontinued operations -- 1,491 -- 1,568



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


For the For the
-------------------- --------------------
Three Months Ended Six Months Ended
-------------------- --------------------
June 30, July 2, June 30, July 2,
2012 2011 2012 2011
--------- --------- --------- ---------
Net (loss) income $ (3,571) $ 27,290 $ (6,941) $ 22,651
Other comprehensive loss:
Effect of currency translation (7) (24) (2) (116)
--------- --------- --------- ---------
Comprehensive net (loss) income $ (3,578) $ 27,266 $ (6,943) $ 22,535
========= ========= ========= =========



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


June 30, December 31,
2012 2011
------------ ------------
ASSETS:
Current Assets:
Cash and cash equivalents $ 20,474 $ 29,408
Restricted cash -- 1,500
Receivables (net of allowances of $10 and $13) 1,822 2,540
Prepaid expenses 6,739 5,302
Other current assets 548 288
------------ ------------
Total current assets 29,583 39,038
Equipment and leasehold improvements, net 4,535 4,271
Goodwill 972 972
Intangibles, net 239 238
Other long-term assets 4,328 4,746
------------ ------------
Total assets $ 39,657 $ 49,265
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Short-term debt $ 3,691 $ 3,567
Accounts payable 1,520 812
Accrued compensation and related costs 1,201 1,382
Unearned revenue 6,381 9,783
Other current liabilities 3,848 3,673
------------ ------------
Total current liabilities 16,641 19,217
Long-term unearned revenue 2,350 3,036
Other long-term liabilities 860 1,401
------------ ------------
Total liabilities 19,851 23,654
------------ ------------

Series B Stock, $0.01 par value; 5,000,000
shares authorized and designated; 1,650,875 and
1,670,696 shares issued and outstanding at June
30, 2012 and December 31, 2011, respectively,
with a liquidation preference of $8,714 and
$8,819 at June 30, 2012 and December 31, 2011,
respectively 8,419 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; 18,174,618 and 18,037,552
shares issued at June 30, 2012, and at
December 31, 2011, respectively; and
16,945,330 and 16,935,204 outstanding at June
30, 2012 and December 31, 2011, respectively 182 180
Additional paid-in capital 214,653 212,618
Accumulated deficit (192,720) (185,779)
Treasury stock, at cost, 1,229,288 and
1,102,348 shares at June 30, 2012 and
December 31, 2011, respectively (6,688) (5,891)
Accumulated other comprehensive loss (4,040) (4,038)
------------ ------------
Total stockholders' equity 11,387 17,090
------------ ------------
Total liabilities and stockholders' equity $ 39,657 $ 49,265
============ ============



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


For the Six Months Ended
--------------------------
June 30, July 2,
2012 2011
------------ ------------
Cash Flows from Operating Activities:
Net (loss) income $ (6,941) $ 22,651
Less: net (loss) income from discontinued
operations (104) 28,187
------------ ------------
Net loss from continuing operations (6,837) (5,536)
Adjustments to reconcile net loss from
continuing operations to net cash used in
operating activities:
Depreciation and amortization 1,622 1,595
Stock-based compensation 1,979 3,015
Severance and related costs 268 --
Other (2) 12
Changes in assets and liabilities:
Receivables 720 (234)
Prepaid expenses (1,035) (2,186)
Other assets (276) 97
Accounts payable 708 731
Accrued compensation and related costs (181) (169)
Unearned revenue (4,088) 435
Other liabilities (195) (4,227)
------------ ------------
Total adjustments (480) (931)
------------ ------------
Net cash used in continuing operations (7,317) (6,467)
Net cash used in discontinued operations (179) (4,685)
------------ ------------
Net cash used in operating activities (7,496) (11,152)
------------ ------------

Cash Flows from Investing Activities:
Capital expenditures and other (900) (605)
------------ ------------
Net cash used in continuing investing
activities (900) (605)
Net cash (used in) provided by
discontinued investing activities -- 33,939
------------ ------------
Net cash (used in) provided by investing
activities (900) 33,334
------------ ------------

Cash Flows from Financing Activities:
Proceeds from line of credit 3,691 --
Decrease (increase) in restricted cash 1,500 (17,140)
Purchase of shares of Series B Stock (3,743) --
Principal payments under capital lease
obligations (1,070) (989)
Acquisition of treasury stock (797) (513)
Payment of Series B Stock dividends (300) (1,901)
Fees from issuance of common stock (49) --
Proceeds from stock compensation and employee
stock purchase plans, net 233 62
------------ ------------
Net cash used in continuing financing
activities (535) (20,481)
Net cash used in discontinued financing
activities -- (678)
------------ ------------
Net cash used in financing activities (535) (21,159)
------------ ------------

Effect of exchange rate changes on cash and cash
equivalents by continuing operations (3) (69)
Effect of exchange rate changes on cash and cash
equivalents by discontinued operations -- (233)
------------ ------------
Effect of exchange rate changes on cash and cash
equivalents (3) (302)
------------ ------------
(Decrease) increase in cash and cash equivalents (8,934) 721
Cash and cash equivalents, beginning of period 29,408 20,872
------------ ------------
Cash and cash equivalents of continuing
operations, end of period $ 20,474 $ 21,593
============ ============

Non-Cash Investing and Financing Transactions:
Capital lease obligations incurred $ 987 $ 2,081
Capital equipment purchased on credit 987 2,081
Supplemental Disclosures of Cash Flow
Information:
Interest paid $ 214 $ 87



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


For the For the
-------------------- --------------------
Three Months Ended Six Months Ended
-------------------- --------------------
June 30, July 2, June 30, July 2,
2012 2011 2012 2011
--------- --------- --------- ---------
GAAP -- Operating loss $ (3,424) $ (4,285) $ (6,601) $ (9,242)

Add back (reduce) the effect of:
Stock-based compensation 876 1,586 1,979 3,015
Severance and related costs 14 (434) 693 (430)
Depreciation and amortization 755 820 1,622 1,595
--------- --------- --------- ---------
Adjusted earnings measure --
(loss) $ (1,779) $ (2,313) $ (2,307) $ (5,062)
========= ========= ========= =========

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

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