Friday, May 12, 2017

[U] Friday Trivia: In Which We Look In, Once Again, On That Hapless Small Cap Call Center/Consulting Company

At least a few of the longer term readers will recall that at least twice before, we've offered quick peeks into this company -- since in now nearly 18 years as a public company, it has never posted a single penny of GAAP EPS from continuing operations. That, I think, is unprecedented in the annals of public companies, since at least 1980. [If any reader knows of a US-based public company with 20 years of such unending losses, please alert me to it, in comments. UPDATED: At the backup site, an anonymous commenter points us to Regeneron, thus: "Regeneron, on the other hand, was unprofitable from 1990 to 2011 with the exception of a single year (2004). . . ."] To be clear, I've never been short or long in this company, nor will I ever be.

No. . . I write on this fine, sunny Friday morning -- about that company, anew -- mostly to scratch my head, and wonder. . . why the board hasn't been sued by at least a few of the institutional stockholders (such holders are about 40 per cent of all outstandings), for breach of fiduciary duties. Chief among these, the duty to attempt to earn GAAP net profits from operations, for the long suffering shareholders -- some still in place, from the fall of the year 2000 (then trading above $175 a share), to this very day.

A few weeks ago, I predicted this company would lose ($0.20) per share, in Q1 2017 -- while the "professional analysts" were predicting losses of ($0.15) to ($0.17). [In candor, I was just guessing about a "worst possible case" scenario, for Q1 2017.] Results came out Tuesday night -- and the company lost nineteen cents a share. Mattersight's stock was at $3.40, on the NASDAQ, two weeks ago -- this morning it opens at $2.72. Ouch.

Here is what "Bob" -- a great "amateur" analyst had to say about the balance of 2017, related to that company. He has a long track record of being spot-on, on the numbers -- and far more realistic and accurate than the Wall Street paid analysts. Five years of posts at the other property back that up:

. . . ."Just looked at the conference call transcript.

Q2 will evidence the low point of their seasonality and just as they’ve missed on every objective, this likely means a fairly disastrous quarter, which, as they have a difficult time throttling expenses, means a big cash burn. Since it’s now known that they adjusted the contract terms for a customer, look for other customers to ask for a similar deal, further eroding the top line.

In Q1, they lost $5M on $11M in revenues, burning in the neighborhood of $4M in cash (all the financing translations take more time to sort out than is worth the effort -- ballpark is close enough).

In Q2, they’ll likely generate $10.2M in revenues and lose $5.8M, burning $4.8M in cash. This revenue projection (which could be a best case) -- leads to a $0.22 per share GAAP loss....

Always use GAAP numbers in evaluating a company like MATR. EBITDA is for suckers as that depreciation represents true cost of real cash money spent in the past and is only relevant for one-time events that distort the quarter to quarter comparison. Non-cash compensation is a real economic loss to existing shareholders.

Going forward:

– Q3: $10.6M in rev, loss of $5.5M, 19.8 cents per share loss

– Q4: $11M in rev, loss of $5.4M, 19.3 cents per share loss

By September, they’re going to need to find yet more cash to keep the party going". . . .

The rest of the story is here. Who knows where it will open on the NASDAQ this morning? It is traded under "MATR".

Now you know -- do heartily-enjoy your Mother's Day weekend, one and all. Do call home, to mum. Or, if yours is no longer with us, call anyone's mom. No doubt she will appreciate it. I'm out -- for a walk-about, grinning ear to ear. . . .


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