I won’t unduly belabor this — except to say that it is additional proof that this company has never been able to, and cannot at present forecast (or equally likely, so deeply drinks its own Kool-Aid!), that it is forever (metaphorically) engaged in a self-loathing series of “one-night stands” with predatory (and some occasionally good-natured)… lenders. Crazy. Cra-cra-crazy.
Private Bank is at least the fourth replaced lender in just over five years. As each of the recent lenders leave, in the gray early morning light — they take about $1.8 million in cash, as an exit fee, off the dresser — for these metaphorical one-nighters.
So it is likely to be, with Private Bank. As Bob pointed out just yesterday morning, Mattersight is likely to show net losses, on a GAAP basis of $4.7 million in Q3 — and $4.6 million in Q4. Owing to the fact that the company may need to issue shares in one or both of these quarters, it makes little sense to convert the losses to a per share number, as the ever increasing denominator tends to obscure the severity of the trend.
For example, in Q2 the company lost $6.8 million on a GAAP basis (that. on sales of $10.5 million). We expect some improvement in the back half of the year, but on a GAAP basis it is still likely to lose about another $9.3 to $9.4 million overall.
Meanwhile, it has promised Private Bank that “Adjusted EBITDA” will come in no worse than $1.25 million in Q3, and be… Zero, in Q4 2017. See page 53 of that SEC filed link.
Private Bank will extract a waiver fee, for these misses. And they will occur — to a near certainty. [How on Earth will the CFO save his way to an additional $300,000 per quarter — while paying $600,000 per quarter in third party tech fees, that he “didn’t expect/plan for”?]
Note also that it was only by re-valuing the warrant liability that the company avoided blowing the covenant, in Q2 2017 — adding back $260,000 to get under the promised $2 million top end, on EBITDA losses under the shiny new Private Bank covenant.
Bob is right: at a company like this (one that is bleeding cash — and constantly hitting the public equity bailout button), it makes no sense at all to look at any EBITDA loss level, at least not one the company may “adjust” at will. [As it just did, in Q2 2017.]
The good news is that the Private Bank lending tests EBITDA pretty tightly, and so… Mattersight is likely to have to leave some money on the dresser, in the morning, for its nightly visitor — as she leaves.
We shall see.
But I now think this is a sub-$2 per share NASDAQ stock — for the foreseeable future.
[I am not now, nor have I ever been — nor will I ever be — long or short this stock.]