UPDATED: 11:20 AM EDT — And… the SEC Form 10-Q has been filed — but that review and analysis will be a separate post, tonight. Right now, the NASDAQ trading graph, and price chart would indicate that someone (cough! Mr. Singer, and/or Craig Hallum) is out there — using its balance sheet, to defend the price of the company’s stock, this morning — even so, it is down sharply, on high morning volumes. Currently the stock off “only” about 11 per cent, on 75,000 shares changing hands as of 11:20 AM EDT. Whoever it is — that cannot last for very long. Look for additional price declines, at the close, tonight — or in the coming days and weeks, as the stabilization players run out of funds, and/or patience. [End, updated portion.]
As our law firm colleague prepares the securities class action complaint, we have shown him the below. He is rewriting, and updating the complaint at law, as we push send, on this post. [So (for those investors following this blog) it may be a few days, as a notice to the investors involved in that matter, while the complaint is edited and redrafted. We are given to understand that he will be in touch with all of you.]
To the substance, then: to our knowledge, spanning at least five full years, Mr. Conway has never disclosed this before. Mr. Mullen, the board member and CFO just said for the record last night, that 60 per cent, or $600,000 of the loss in Q2 2017 was due to cash the company had to pay to third party technology providers, in delivering the suite of products to Mattersight clients.
[Is this a flat $600,000 the company must pay every quarter, even though the bookings were only a little over $2.3 million in Q2, or is this a variable formula amount, depending on the number of end users actually using the products, in the seats? We have no way of knowing, as the company (in its usual model of opacity, coupled to cliche-laden “happy talk“) hasn’t explained in any detail — and only disclosed it last night, by a “back-handed” non-disclosure.]
In either event, this is a jaw-slackingly belated admission: that all those patent applications (running now into several million dollars in legal spend, over the last ten years) have been largely… for naught. Mattersight must spend heavily on third party licenses, in order to deploy “its” suite of products into customer accounts.
Fully 60 per cent of the “miss“, on (its own “double secret probation” adjusted) EBITDA figure, in Q2 2017, was due to the $600,000 paid to third parties in Q2 2017. Yet he chose to talk about the 40 per cent being severance and lease exits, first — per the edited conference call transcript section, below.
CFO and board member Mullen, last evening:
“…Our EBITDA loss of $1.7 million was $1 million worse than our forecast, with the shortfall all attributed to expenses. Approximately 40% of the expense overrun was a result of conscious efforts to reduce our future spending in the form of severance payments and buyouts of office leases and vacated space. The balance was attributable to underestimating our usage of third-party technology products that we use in delivering our solution….”
Without disclosing this to the markets (until now), it would plainly seem that Mattersight has become simply a[nother] value added reseller, of other peoples’ tech — in the delivery of the PBR “solution” to its Fortune 100 clients.
Disgusting. And likely… actionable. [That is… a total of 17 nesting dolls, at right, by the way — 17 years’ worth, at Mattersight. Hilarious.]
The stock should fall to around $2.45 today, unless either Mr. Singer or Craig Hallum steps up to defend it, in the NASDAQ OTC.
As an acerbically humorous aside, given all the Kremlin like opacity in the numbers at Mattersight, I wonder whether the CEO and CFO are simply using Bob’s projected losses as “cover” — to clear the Red Square, by disclosing expenses, and thus losses — they’ve apparently long been holding-silently in the cut, or in a series of nesting Matryoshka dolls, of some sort.
Now you know.