UPDATED: 08.10.2017 @ 8:35 AM CDT — As the stock opens on the NASDAQ at a new all time low this morning — $2.20 — (essentially even with the 2008 melt-down levels) it is absolutely certain that, even with his sold put strategy — Mr. Singer and Viex are now underwater, on over five per cent of all of Mattersight’s outstandings.
Expect that he won’t suffer this situation in silence, for very long. [End update.]
Bob has written a TON of very astute commentary in comments (to earlier posts) over the past two days, below. DO go read it all.
But this is a headliner: Bob is revising, and tightening, his projections for the balance of 2017.
“…It’s time to update my EPS/(LPS) projections for Q3 and Q4. When I last made projections (Q3 -20 cents and Q4 – 19 cents, they were based on the old share count, before the last stock sale. My prediction for Q2 was a 22 cents per share loss, but as share count expanded by about 15%, that normally would dilute the prediction by a similar amount. it was only by luck when Mattersight got out of the previous loan and incurred the exit cost that the resulting EPS was -22 cents per share.
Getting out of that loan was a good move by Mattersight as they only drew $13.7M on the new $20M credit facility and only pay interest on what they’ve drawn. When I mentioned that cash fell from $22M to $7M, I hadn’t seen they’d only drawn 2/3rds of what they could. so the correct comparison would be considering a full draw or that the cash position changed from $22M to about $13M or so. Still, the amount of cash available to them will decline from that $13M each quarter until they raise more cash somehow (and they’ll need to). From operations, they’ll likely draw $2.5M per quarter and from capital expenditures, they’ll likely draw another $1M per quarter. Absent a financing, their cash position at the end of the year will be $7M or less. A figure that should be concerning.
Now for the predictions:
I don’t think the seasonal upswing will be as significant as they hope and I don’t think operating costs will decline as much as they hope, if any decline occurs (if they do a stock sale, I’m betting costs go up). I think revenues will come in at $10.7m for Q3 and $10.8M for Q4 with losses of $4.7M for Q3 and $4.6M for Q4. Assuming share counts of 31.5M and 31.75M respectively, my LPS estimates are ($0.15) for Q3 and ($0.145) for Q4. These are not that far off from my previous ($0.20) and ($0.19), respectively, if you use the old share counts. Of course, if they do conduct a stock sale, my estimates for Q3 and Q4 will need to be diluted accordingly.
The difficult thing about using EPS as an assessment of company performance over time is that they are only useful if share count remains constant and an argument can be made that you should only use the share count at the start of the year to judge performance for the entire year. They are frankly useless for a company like Mattersight and the focus should be and must be on official GAAP profits or losses as they incorporate real and economic performance of the company. Percent GAAP profit or loss is how the company, any company should be measured.
So, to calibrate, in Q1 they lost 47%, in Q2 they lost 66%, and I project a Q3 loss of 44%, and a Q4 loss of 43%. This is how I will predict in the future. Screw EBITDA, Adjusted EBITDA, EPS, and company-derived adjusted metrics. The company should use full-year GAAP profits on which to base performance compensation. For anyone. No annual profit, no cash or stock bonus, and they only get a portion of the profit in bonus. That’ll get them to focus on the proper things and align their activities for the shareholder’s benefit.
I’ve written enough the past two days in reaction to the results announcement, so I’ll likely respond sparingly unless something new comes up. I do hope something positive comes up for Mattersight, but I’m not holding my breath.
And, as always, I don’t hold, haven’t held and promise not to hold any position in the company, long or short….”
Perfect. Spot on! G’night.