[U] LIVE Results Call: United Healthcare Dropping Its Spend In 2018; “Several Large Deals” Still Not Closed. Now “First Half 2018.”

United Healthcare is going to reduce its spend with Mattersight in 2018, says CFO Mullen. The company will not quantify how much the down bubble will be at United Healthcare, but George Sutton of Craig Hallum just guessed it would be a $3 to $4 million loss of sales, in 2018.

U G L Y. [End, updated portion.]

With rascally old Kelly Conway — it is always “see the next two quarters.”

On call — still waiting for a disclosure of how many big deals STILL haven’t closed.

Ugh — stock is off, and fading, in the after-hours market on NASDAQ OTC.

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4 thoughts on “[U] LIVE Results Call: United Healthcare Dropping Its Spend In 2018; “Several Large Deals” Still Not Closed. Now “First Half 2018.””

  1. Fitting that it was recently Groundhog Day – as we see continued losses, but with no humorous characters.

    I’ll dig into it over the next day or so and produce my performance evaluation for Conway, as promised, but here are some points I’d like to make:

    1. MATR has been doing everything it can to polish up the Q3 and Q4 numbers in prep for going about begging for more money, as for example the just announced JMP conference.
    2. We see the seasonality in full-bloom here with a n upswing in Q4 revenue.
    3. We see the lack of economies of scale in MATR’s solution in full-bloom as well.Revenues go up but costs go up, too. The reduced losses over the past 2 quarters have less to do with the viability of Conway’s business model than from some desperate cost cutting.
    4. A big client shows it will be lowering its spending with MATR this year? I guess those business benefits weren’t all that permanent. $3-$4 mlliion down? How much if United Health leaves completely? This will be a big impediment to winning new customers.
    5. If you are an individual or fund with money to invest, I’d advise against giving it to MATR. It won’t end well.

  2. More comments on earnings release and call slides.
    1. If seasonality is as in the previous 2 years. Q1 revenues should slide between 7% and 10%, perhaps more with UH decline.
    2. Remember Q2 typically shows further decline from Q1, experience shows another 5% to 10% from Q4.
    3. Will Conway be able to trim expenses enough to keep in line? Experience shows he is really terrible at that part of management. Losses look to increase in Q1 and Q2, with Conway, et al, claiming they’ll make it up in Q3 and Q4 2018.
    4. PBR seat count rose from 16,329 in Q3 to 21,307 in Q4, or 30%, while revenue rose only 20%. This means discounting has increased.
    5. They’re still talking about EBITDA for 2018. Hello? We have some major tax law changes and the expenditures they normally would capitalize and depreciate are going to be able to be expensed. Is it even an option for them to continue to depreciate short-lived (<5 years) assets? Perhaps, but does it really even matter? With their carry-forward losses, it doesn't really matter if they account an expense in one year or spread it over 5 years. Frankly, I don't think they'll even exist in 5 years. From a financial analysis perspective, this should be a pure cash-flow evaluation from this point forward.
    6. Their cash position increased from $7.951M to $9.044M, BUT they drew another $2M on their latest long-term debt instrument. AND, this is AFTER they reduced their receivables and prepaid expenses by $1M from Q3 to Q4. Look for cash burn to increase to about $2.5M in Q1 and $3.5M in Q2. I don't think there's that much left on the debt facility to get them very far in Q2 without another cash infusion from investors, or they'll be really running it close to the bone.

    With UH declining and the difficulty landing new large clients (which take forever to get to producing revenue while consuming cost), I can't imagine any sentient being putting more money into this Conway-retirement-program without a very steep discount and downside protection. The stock opened this morning at $1.95/share before the Mattersight Price Protection Program kicked into gear and the stock is now at $2.30, I'd say it'll be trading in the $1.80 to $1.90 per share range fairly soon. The bid is at $2.15 for 200 shares and the ask is at $2.45 for 1700 shares, indicating strong downward pressure. Any new investor should be asking for $1.25 straight up or market-price with firm downside protection.

    As to the Conway retirement – do it now, board of directors. Bite the bullet by paying off the golden parachute (if you haven't already negotiated it away, as reason suggests you should have done). He's taken $30m-$40M or more out of this operation over the past 18 years, I believe and hung losses approaching $300m. Isn't that enough?

    Investors, Conway's departure should also be a condition of any new investment.

    1. I’ve debated about whether I would mention this (at all) — but it is good trivial comment box banter, so here goes:

      No more than about 20 to 30 minutes after the results call ended, Mr. Conway (with fresh Ash Wednesday ashes on his forehead!)… walked right by me, near the Thompson Center.

      I suspect he went to old St. Pete’s on Madison, just west of Clark… the priests there give out ashes, all day… non-stop.

      The ash looked fresh enough to suggest he went and got them — after the results call. And that alone is worthy of the story….

      But… “too late, see me… only the truly penitent… shall pass….

      I am certain he had no idea I saw him… but I did… he was walking north toward Lake Street, and the trains… in a tan LL Bean winter hunting parka, satchel and wool pants… casual shoes (still about eight inches of snow down in spots in the Loop)…

      Hilarious!

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