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Mattersight Announces Third Quarter 2013 Results

Mattersight Announces Third Quarter 2013 Results 
CHICAGO, IL -- (Marketwired) -- 11/06/13 --  Mattersight Corporation
(NASDAQ: MATR) today announced financial results for the third
quarter ended September 30, 2013.  
Mattersight's total services revenue was $8.6 million, including $6.8
million of subscription revenue. The Company realized an "Adjusted
Earnings(1)" profit of $0.3 million for the third quarter of 2013.
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 $2.7 million in the third quarter of 2013. 
Q3 Highlights 


 
--  Achieved $0.3m of Adjusted Earnings
--  Achieved record gross margin of 68%
--  Recorded incremental ACV bookings of $3.8 million
--  Signed seventeen new routing pilots, which will create potential
    conversion opportunities in 2014; nine of these pilots are new logos
--  Ended the quarter with a record thirty-three pilots
--  Increased the conversion value of the active pilots by 80%
    sequentially
--  Converted two pilots, one of which resulted in Mattersight's first OEM
    agreement

  
Q4 Guidance
 Mattersight currently expects its total subscription
revenues will increase approximately 7% sequentially in the fourth
quarter of 2013. 
Conference Call Information
 Mattersight management will host a
conference call at 5:00 p.m. ET on Wednesday, November 6, 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: 91905725.  
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 6, 2013, by dialing
855.859.2056 (domestic) or 404.537.3406 (international), conference
ID: 91905725.   
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(R) 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(TM) 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               For the       
                                 --------------------  -------------------- 
                                  Three Months Ended     Nine Months Ended  
                                 --------------------  -------------------- 
                                 Sept. 30,  Sept. 29,  Sept. 30,  Sept. 29, 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
Revenue:                                                                    
  Behavioral Analytics revenue   $   8,307  $   7,682  $  24,067  $  23,795 
  Other revenue                        302        308        973      1,029 
                                 ---------  ---------  ---------  --------- 
    Total services revenue           8,609      7,990     25,040     24,824 
  Reimbursed expenses                   56        114        187        314 
                                 ---------  ---------  ---------  --------- 
Total revenue                        8,665      8,104     25,227     25,138 
Operating expenses:                                                         
  Cost of Behavioral Analytics                                              
   revenue                           2,721      2,828      7,958      8,963 
  Cost of other revenue                163        155        517        546 
                                 ---------  ---------  ---------  --------- 
    Cost of services                 2,884      2,983      8,475      9,509 
  Reimbursed expenses                   56        114        187        314 
                                 ---------  ---------  ---------  --------- 
Total cost of revenue, exclusive                                            
 of depreciation and                                                        
 amortization shown below:           2,940      3,097      8,662      9,823 
  Sales, marketing and                                                      
   development                       4,878      5,940     16,502     16,571 
  General and administrative         2,241      1,951      6,625      5,914 
  Severance and related costs          154         --        154        693 
  Depreciation and amortization        950        946      2,829      2,568 
                                 ---------  ---------  ---------  --------- 
Total operating expenses            11,163     11,934     34,772     35,569 
                                 ---------  ---------  ---------  --------- 
                                                                            
Operating loss                      (2,498)    (3,830)    (9,545)   (10,431)
Interest and other expense, net       (125)       (88)      (313)      (303)
                                 ---------  ---------  ---------  --------- 
Loss from continuing operations                                             
 before income taxes                (2,623)    (3,918)    (9,858)   (10,734)
Income tax (provision) benefit         (10)        (9)       229        (30)
                                 ---------  ---------  ---------  --------- 
Loss from continuing operations     (2,633)    (3,927)    (9,629)   (10,764)
Income from discontinued                                                    
 operations, net of tax                 --        332         --        228 
                                 ---------  ---------  ---------  --------- 
Net loss                            (2,633)    (3,595)    (9,629)   (10,536)
Series B Stock fair value over                                              
 stated value                           --         --         --        (69)
Dividends related to Series B                                               
 Stock                                (147)      (147)      (441)      (444)
                                 ---------  ---------  ---------  --------- 
Net loss available to Common                                                
 Stock holders                   $  (2,780) $  (3,742) $ (10,070) $ (11,049)
                                 =========  =========  =========  ========= 
                                                                            
Per share of Common Stock:                                                  
Basic loss from continuing                                                  
 operations                      $   (0.17) $   (0.25) $   (0.61) $   (0.71)
                                 =========  =========  =========  ========= 
Basic income from discontinued                                              
 operations                      $      --  $    0.02  $      --  $    0.01 
                                 =========  =========  =========  ========= 
Basic net loss available to                                                 
 Common Stock holders            $   (0.17) $   (0.23) $   (0.61) $   (0.69)
                                 =========  =========  =========  ========= 
                                                                            
Per share of Common Stock:                                                  
Diluted loss from continuing                                                
 operations                      $   (0.17) $   (0.25) $   (0.61) $   (0.71)
                                 =========  =========  =========  ========= 
Diluted income from discontinued                                            
 operations                      $      --  $    0.02  $      --  $    0.01 
                                 =========  =========  =========  ========= 
Diluted net loss available to                                               
 Common Stock holders            $   (0.17) $   (0.23) $   (0.61) $   (0.69)
                                 =========  =========  =========  ========= 
                                                                            
Shares used to calculate basic                                              
 net loss per share                 16,758     16,069     16,515     15,928 
                                 =========  =========  =========  ========= 
Shares used to calculate diluted                                            
 net loss per share                 16,758     16,069     16,515     15,928 
                                 =========  =========  =========  ========= 
                                                                            
Stock-based compensation,                                                   
 primarily restricted stock, is                                             
 included in individual line                                                
 items above:                                                               
  Cost of Behavioral Analytics                                              
   revenue                       $     149  $       3  $     208  $      14 
  Sales, marketing and                                                      
   development                         943        524      3,094      1,778 
  General and administrative           596        342      1,653      1,056 
  Severance and related costs           29         --         29        268 
                                                                            
                                                                            
                                                                            
                          MATTERSIGHT CORPORATION                           
          CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS           
                        (Unaudited and in thousands)                        
                                                                            
                                        For the               For the       
                                 --------------------  -------------------- 
                                  Three Months Ended     Nine Months Ended  
                                 --------------------  -------------------- 
                                 Sept. 30,  Sept. 29,  Sept. 30,  Sept. 29, 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
Net loss                         $  (2,633) $  (3,595) $  (9,629) $ (10,536)
Other comprehensive loss:                                                   
Effect of currency translation           5         (1)        --         (3)
                                 ---------  ---------  ---------  --------- 
Comprehensive net loss           $  (2,628) $  (3,596) $  (9,629) $ (10,539)
                                 =========  =========  =========  ========= 
                                                                            
                                                                            
                                                                            
                          MATTERSIGHT CORPORATION                           
                   CONDENSED CONSOLIDATED BALANCE SHEETS                
    
       (Unaudited and in thousands, except share and per share data)        
                                                                            
                                               September 30,   December 31, 
                                                    2013           2012     
                                               -------------  ------------- 
                    ASSETS:                                                 
Current Assets:                                                             
  Cash and cash equivalents                    $      13,740  $      14,419 
  Receivables (net of allowances of $14 and                                 
   $12)                                                2,209          2,568 
  Prepaid expenses                                     4,000          4,359 
  Other current assets                                   380            305 
                                               -------------  ------------- 
    Total current assets                              20,329         21,651 
Equipment and leasehold improvements, net              5,487          4,727 
Goodwill                                                 972            972 
Intangibles, net                                         257            236 
Other long-term assets                                 4,627          3,776 
                                               -------------  ------------- 
    Total assets                               $      31,672  $      31,362 
                                               =============  ============= 
                                                                            
    LIABILITIES AND STOCKHOLDERS' (DEFICIT)                                 
                    EQUITY:                                                 
Current Liabilities:                                                        
  Short-term debt                              $       3,696  $       3,703 
  Accounts payable                                       732            781 
  Accrued compensation and related costs               1,218          1,335 
  Unearned revenue                                    10,830          5,853 
  Other current liabilities                            3,876          2,889 
                                               -------------  ------------- 
    Total current liabilities                         20,352         14,561 
Long-term unearned revenue                             1,466          2,374 
Other long-term liabilities                            1,861          1,231 
                                               -------------  ------------- 
    Total liabilities                                 23,679         18,166 
                                               -------------  ------------- 
                                                                            
Series B Stock, $0.01 par value; 5,000,000                                  
 shares authorized and designated; 1,649,122                                
 and 1,649,201 shares issued and outstanding                                
 at September 30, 2013 and December 31, 2012,                               
 respectively, with a liquidation preference                                
 of $9,146 and $8,705 at September 30, 2013                                 
 and December 31, 2012, 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; 18,919,276 and                                        
   18,407,848 shares issued at September 30,                                
   2013, and December 31, 2012, respectively;                               
   and 17,362,740 and 17,114,880 outstanding                                
   at September 30, 2013 and December 31,                                   
   2012, respectively                                    189            184 
  Additional paid-in capital                         222,035        216,667 
  Accumulated deficit                               (210,629)      (201,000)
  Treasury stock, at cost, 1,556,536 and                                    
   1,292,968 shares at September 30, 2013 and                               
   December 31, 2012, respectively                    (7,974)        (7,027)
  Accumulated other comprehensive loss                (4,039)        (4,039)
                                               -------------  ------------- 
    Total stockholders' (deficit) equity                (418)         4,785 
                                               -------------  ------------- 
    Total liabilities and stockholders'                                     
     (deficit) equity                          $      31,672  $      31,362 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
                          MATTERSIGHT CORPORATION                           
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
                        (Unaudited and in thousands)                        
                                                             For the        
                                                     ---------------------- 
                                                        Nine Months Ended   
                                                     ---------------------- 
                                                      Sept. 30,   Sept. 29, 
                                                        2013        2012    
                                                     ----------  ---------- 
Cash Flows from Operating Activities:                                       
  Net loss                                           $   (9,629) $  (10,536)
  Less: net income from discontinued operations              --         228 
                                                     ----------  ---------- 
  Net loss from continuing operations                    (9,629)    (10,764)
  Adjustments to reconcile net loss from continuing                         
   operations to net cash provided by (used in)                             
   operating activities:                                                    
    Depreciation and amortization                         2,829       2,568 
    Stock-based compensation                              4,955       2,848 
    Severance and related costs                              29         268 
    Change in fair value of warrant liability               (43)         -- 
    Other                                                     2           2 
  Changes in assets and liabilities:                                        
    Receivables                                             357        (421)
    Prepaid expenses                                        233        (344)
    Other assets                                            (65)       (219)
    Accounts payable                                        (49)        557 
    Accrued compensation and related costs                 (117)       (162)
    Unearned revenue                                      4,069      (6,044)
    Other liabilities                                       486          86 
                                                     ----------  ---------- 
      Total adjustments                                  12,686        (86
1)
                                                     ----------  ---------- 
        Net cash provided by (used in) continuing                           
         operations                                       3,057     (11,625)
        Net cash used in discontinued operations             --        (179)
                                                     ----------  ---------- 
        Net cash provided by (used in) operating                            
         activities                                       3,057     (11,804)
                                                     ----------  ---------- 
Cash Flows from Investing Activities:                                       
  Capital expenditures and other                         (1,168)     (1,777)
                                                     ----------  ---------- 
        Net cash used in continuing investing                               
         activities                                      (1,168)     (1,777)
        Net cash used in discontinued investing                             
         activities                                          --          -- 
                                                     ----------  ---------- 
        Net cash used in investing activities            (1,168)     (1,777)
                                                     ----------  ---------- 
Cash Flows from Financing Activities:                                       
  Proceeds from line of credit                            2,400       3,691 
  Repayments from line of credit                         (2,400)         -- 
  Decrease in restricted cash                                --       1,500 
  Proceeds from stock compensation and employee                             
   stock purchase plans, net                                106         455 
  Purchase of shares of Series B Stock                       --      (3,743)
  Principal payments under capital lease obligations     (1,723)     (1,685)
  Acquisition of treasury stock                            (947)       (942)
  Payment of Series B Stock dividends                        --        (595)
  Fees from issuance of Common Stock                         --         (49)
                                                     ----------  ---------- 
        Net cash used in continuing financing                               
         activities                                      (2,564)     (1,368)
        Net cash used in discontinued financing                             
         activities                                          --          -- 
                                                     ----------  ---------- 
        Net cash used in financing activities            (2,564)     (1,368)
                                                     ----------  ---------- 
Effect of exchange rate changes on cash and cash                            
 equivalents by continuing operations                        (4)          2 
Effect of exchange rate changes on cash and cash                            
 equivalents by discontinued operations                      --          -- 
                                                     ----------  ---------- 
Effect of exchange rate changes on cash and cash                            
 equivalents                                                 (4)          2 
                                                     ----------  ---------- 
Decrease in cash and cash equivalents                      (679)    (14,947)
Cash and cash equivalents, beginning of period           14,419      29,408 
                                                     ----------  ---------- 
Cash and cash equivalents of continuing operations,                         
 end of period                                       $   13,740  $   14,461 
                                                     ==========  ========== 
                                                                            
                                                                            
                                                             For the        
                                                     -----------------------
                                                        Nine Months Ended   
                                                     -----------------------
                                                      Sept. 30,   Sept. 29, 
                                                         2013        2012   
                                                     ----------- -----------
                                                                            
Non-Cash Investing and Financing Transactions:                              
  Capital lease obligations incurred                 $     2,767 $     1,331
  Capital equipment purchased on credit                    2,767       1,331
  Fair value of warrants classified as liability             617          --
Supplemental Disclosures of Cash Flow Information:                          
  Interest paid                                      $       295 $       294
                                                                            
                                                                            
                                                                            
                          MATTERSIGHT CORPORATION                           
                  CALCULATION OF ADJUSTED EARNINGS MEASURE                  
                        (Unaudited and in thousands)                        
                                                                            
                                     For the                 For the        
                             ----------------------  ---------------------- 
                               Three Months Ended       Nine Months Ended   
                             ----------------------  ---------------------- 
                              Sept. 30,   Sept. 29,   Se
pt. 30,   Sept. 29, 
                                2013        2012        2013        2012    
                             ----------  ----------  ----------  ---------- 
GAAP -- Operating loss       $   (2,498) $   (3,830) $   (9,545) $  (10,431)
                                                                            
Add back (reduce) the effect                                                
 of:                                                                        
Stock-based compensation          1,688         869       4,955       2,848 
Severance and related costs         154          --         154         693 
Depreciation and                                                            
 amortization                       950         946       2,829       2,568 
                             ----------  ----------  ----------  ---------- 
Adjusted earnings measure --                                                
 earnings (loss)             $      294  $   (2,015) $   (1,607) $   (4,322)
                             ==========  ==========  ==========  ========== 

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