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Mattersight Announces First Quarter 2014 Results

CHICAGO, IL -- (Marketwired) -- 05/07/14 -- Mattersight Corporation (NASDAQ: MATR), a leading provider of enterprise analytics, today announced financial results for the first quarter ended March 31, 2014.

Mattersight's total services revenue was $7.0 million, including $5.9 million of subscription revenue. The Company realized an "Adjusted Earnings(1)" loss of $1.6 million for the first quarter of 2014. Adjusted Earnings is a non-GAAP measure. For a reconciliation of operating loss to Adjusted Earnings, see the accompanying schedule. Mattersight's net loss was $4.0 million in the first quarter of 2014.

Q1 Highlights

  • Q1 performance in line with forecast, which reflected the previously announced loss of a contract
  • Booked contracts with incremental ACV of $3.4 million
  • Increased rolling four quarter incremental ACV bookings by 98%
  • Achieved a 9% sequential increase in our book of business
  • Converted three pilots to subscription contracts
  • Added a record 29 new pilots, including 22 routing pilots; 18 of these pilots are with new logo customers
  • Ended the quarter with a record 66 pilots having a record follow-on ACV of ~$34 million
  • Signed a paid pilot with a Fortune 50 company for our performance management application, with large follow-on potential
  • Closed significant add-on orders at several existing large customers

Conference Call Information

Mattersight management will host a conference call at 5:00 p.m. ET on Wednesday, May 7, 2014. The conference call and slide presentation will be available at the Investment Community section of Mattersight's website at http://www.mattersight.com/investment/. To listen to the conference call via telephone, please call 800.952.4789 (domestic) or 404.665.9579 (international), conference ID: 33606370.

For those who cannot access the live broadcast, a replay of the conference call will be available beginning approximately two hours after the live call is completed until June 7, 2014, by dialing 855.859.2056 (domestic) or 404.537.3406 (international), conference ID: 33606370.

Safe Harbor for Forward-Looking Statements

Statements in this press release that are not historical facts are "forward-looking statements" that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements, which may be identified by use of words such as "plan," "may," "might," "believe," "expect," "intend," "could," "would," "should," and other words and terms of similar meaning, involve risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. In addition to other factors and matters contained or incorporated in this document, important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements include, among other things, the risks detailed from time to time in Mattersight's SEC filings. You can locate these filings on the Investor Relations page of Mattersight's website, www.mattersight.com. Statements included or incorporated by reference into this press release are based upon information known to Mattersight as of the date of this press release, and the company assumes no obligation to publicly revise or update any forward-looking statement for any reason.

About Mattersight

Mattersight is a leader in enterprise analytics focused on customer and employee interactions and behaviors. Mattersight® Behavioral Analytics captures and analyzes customer and employee interactions, employee desktop data, and other contextual information to optimally route customers to the best available employee, improve operational performance, and predict future customer and employee outcomes. Mattersight's analytics are based on millions of proprietary algorithms and the application of unique behavioral models. The company's SaaS+ delivery model combines analytics in the cloud with deep customer partnerships to drive significant business value. Mattersight's solutions are used by leading companies in Healthcare, Insurance, Financial Services, Telecommunications, Cable, Utilities, Education, Hospitality, and Government. See What Matters™ by visiting www.Mattersight.com.

(1) Mattersight presents Adjusted Earnings, a non-GAAP measure that
    represents cash earnings performance, excluding the impact of non-cash
    expenses and expense reduction activities, because management believes
    that Adjusted Earnings provide investors with a better understanding of
    the results of Mattersight's operations. Management believes that
    Adjusted Earnings reflect Mattersight's resources available to invest in
    its business and strengthen its balance sheet. In addition, expense
    reduction activities can vary significantly between periods on the basis
    of factors that management does not believe reflect current-period
    operating performance. Although similar adjustments for expense
    reduction activities may be recorded in future periods, the size and
    frequency of these adjustments cannot be predicted. The Adjusted
    Earnings measure should be considered in addition to, not as a
    substitute for or superior to, operating income, cash flows or other
    measures of financial performance prepared in accordance with GAAP.


                          MATTERSIGHT CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            (Unaudited and in thousands, except per share data)

                                                 For the Three Months Ended
                                                 --------------------------
                                                   March 31,     March 31,
                                                     2014          2013
                                                 ------------  ------------
Revenue:
  Behavioral Analytics revenue                   $      6,749  $      8,194
  Other revenue                                           232           322
                                                 ------------  ------------
    Total services revenue                              6,981         8,516
  Reimbursed expenses                                      32            82
                                                 ------------  ------------
Total revenue                                           7,013         8,598
Operating expenses:
  Cost of Behavioral Analytics revenue                  2,098         2,723
  Cost of Other revenue                                   103           156
                                                 ------------  ------------
    Cost of services                                    2,201         2,879
  Reimbursed expenses                                      32            82
                                                 ------------  ------------
Total cost of revenue, exclusive of depreciation
 and amortization shown below:                          2,233         2,961
  Sales, marketing and development                      5,221         6,230
  General and administrative                            2,250         2,271
  Depreciation and amortization                           743           966
                                                 ------------  ------------
Total operating expenses                               10,447        12,428
                                                 ------------  ------------

Operating loss                                         (3,434)       (3,830)
Interest and other expense, net                          (150)          (91)
Change in fair value of warrant liability                (370)           --
                                                 ------------  ------------
Loss before income taxes                               (3,954)       (3,921)
Income tax (provision) benefit                             (9)          248
                                                 ------------  ------------
Net loss                                               (3,963)       (3,673)
Dividends related to Series B Stock                      (147)         (147)
                                                 ------------  ------------
Net loss available to Common Stock holders       $     (4,110) $     (3,820)
                                                 ============  ============

Per share of Common Stock:
Basic net loss available to Common Stock holders $      (0.22) $      (0.23)
                                                 ============  ============
Diluted net loss available to Common Stock
 holders                                         $      (0.22) $      (0.23)
                                                 ============  ============

Shares used to calculate basic net loss per
 share                                                 18,503        16,320
                                                 ============  ============
Shares used to calculate diluted net loss per
 share                                                 18,503        16,320
                                                 ============  ============

Stock-based compensation, primarily restricted
 stock, is included in individual line items
 above:
  Cost of Behavioral Analytics revenue           $         56  $          4
  Sales, marketing and development                        590           849
  General and administrative                              442           518



                          MATTERSIGHT CORPORATION
          CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                        (Unaudited and in thousands)

                                                 For the Three Months Ended
                                                 --------------------------
                                                   March 31,     March 31,
                                                     2014          2013
                                                 ------------  ------------
Net loss                                         $     (3,963) $     (3,673)
Other comprehensive loss:
Effect of currency translation                              5            (8)
                                                 ------------  ------------
Comprehensive net loss                           $     (3,958) $     (3,681)
                                                 ============  ============



                          MATTERSIGHT CORPORATION
                   CONDENSED CONSOLIDATED BALANCE SHEETS
       (Unaudited and in thousands, except share and per share data)

                                                   March 31,   December 31,
                                                     2014          2013
                                                 ------------  ------------
                     ASSETS:
Current Assets:
  Cash and cash equivalents                      $      8,101  $     13,392
  Receivables (net of allowances of $12 as of
   March 31, 2014 and $12 as of December 31,
   2013)                                                2,435         2,384
  Prepaid expenses                                      4,309         3,576
  Other current assets                                    362           427
                                                 ------------  ------------
    Total current assets                               15,207        19,779
Equipment and leasehold improvements, net               4,922         5,158
Goodwill                                                  972           972
Intangibles, net                                          453           409
Other long-term assets                                  4,328         4,431
                                                 ------------  ------------
    Total assets                                 $     25,882  $     30,749
                                                 ============  ============

      LIABILITIES AND STOCKHOLDERS' EQUITY:
 Current Liabilities:
  Accounts payable                               $        779  $        752
  Accrued compensation and related costs                1,424         1,844
  Unearned revenue                                      5,390         7,215
  Other current liabilities                             4,694         4,098
                                                 ------------  ------------
    Total current liabilities                          12,287        13,909
Long-term unearned revenue                              3,210         2,866
Other long-term liabilities                             1,584         1,607
                                                 ------------  ------------
    Total liabilities                                  17,081        18,382
                                                 ------------  ------------

Series B Stock, $0.01 par value; 5,000,000
 shares authorized and designated; 1,649,122
 shares issued and outstanding at March 31, 2014
 and December 31, 2013, with a liquidation
 preference of $9,441 and $9,294 at March 31,
 2014 and December 31, 2013, respectively               8,411         8,411

Stockholders' Equity:
  Preferred stock, $0.01 par value; 35,000,000
   shares authorized; none issued and
   outstanding                                             --            --
  Common Stock, $0.01 par value; 50,000,000
   shares authorized; 20,750,724 and 20,465,984
   shares issued at March 31, 2014, and December
   31, 2013, respectively; and 19,074,434 and
   18,886,966 outstanding at March 31, 2014 and
   December 31, 2013, respectively                        208           205
  Additional paid-in capital                          228,976       228,038
  Accumulated deficit                                (216,135)     (212,172)
  Treasury stock, at cost, 1,676,290 and
   1,579,018 shares at March 31, 2014 and
   December 31, 2013, respectively                     (8,631)       (8,082)
  Accumulated other comprehensive loss                 (4,028)       (4,033)
                                                 ------------  ------------
    Total stockholders' equity                            390         3,956
                                                 ------------  ------------
    Total liabilities and stockholders' equity   $     25,882  $     30,749
                                                 ============  ============



                          MATTERSIGHT CORPORATION
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (Unaudited and in thousands)

                                                 For the Three Months Ended
                                                 --------------------------
                                                   March 31,     March 31,
                                                     2014          2013
                                                 ------------  ------------
Cash Flows from Operating Activities:
  Net loss                                       $     (3,963) $     (3,673)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Depreciation and amortization                         743           966
    Stock-based compensation                            1,088         1,371
    Change in fair value of warrant liability             370            --
  Changes in assets and liabilities:
    Receivables                                           (51)         (614)
    Prepaid expenses                                     (664)           30
    Other assets                                           66           (38)
    Accounts payable                                       27           489
    Accrued compensation and related costs               (420)         (147)
    Unearned revenue                                   (1,481)          964
    Other liabilities                                      62          (215)
                                                 ------------  ------------
      Total adjustments                                  (260)        2,806
                                                 ------------  ------------
        Net cash used in operating activities          (4,223)         (867)
                                                 ------------  ------------
Cash Flows from Investing Activities:
  Capital expenditures and other                          (66)         (219)
  Patents and trademarks                                  (65)          (53)
                                                 ------------  ------------
        Net cash used in investing activities            (131)         (272)
                                                 ------------  ------------
Cash Flows from Financing Activities:
  Principal payments under capital lease
   obligations                                           (422)         (629)
  Acquisition of treasury stock                          (549)         (195)
  Proceeds from stock compensation and employee
   stock purchase plans, net                               36            36
  Fees from issuance of Common Stock                       (2)           --
                                                 ------------  ------------
        Net cash used in financing activities            (937)         (788)
                                                 ------------  ------------
Effect of exchange rate changes on cash and cash
 equivalents                                               --           (12)
                                                 ------------  ------------
Decrease in cash and cash equivalents                  (5,291)       (1,939)
Cash and cash equivalents, beginning of period         13,392        14,419
                                                 ------------  ------------
Cash and cash equivalents, end of period         $      8,101  $     12,480
                                                 ============  ============

Non-Cash Investing and Financing Transactions:
  Capital lease obligations incurred             $        420  $        785
  Capital equipment purchased on credit                   420           785
  Fair value of warrants classified as liability        1,155            --
Supplemental Disclosures of Cash Flow
 Information:
Interest paid                                    $         76  $         71



                          MATTERSIGHT CORPORATION
                  CALCULATION OF ADJUSTED EARNINGS MEASURE
                        (Unaudited and in thousands)

                                                 For the Three Months Ended
                                                 --------------------------
                                                   March 31,     March 31,
                                                     2014          2013
                                                 ------------  ------------
GAAP -- Operating loss                           $     (3,434) $     (3,830)

Add back (reduce) the effect of:
Stock-based compensation                                1,088         1,371
Depreciation and amortization                             743           966
                                                 ------------  ------------
Adjusted earnings measure -- loss                $     (1,603) $     (1,493)
                                                 ============  ============

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