Datawatch Corporation
DATAWATCH CORP (Form: 8-K, Received: 11/01/2017 16:03:00)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported)                                        November 1, 2017

 

Datawatch Corporation

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

(State or Other Jurisdiction of Incorporation)

 

000-19960 02-0405716
(Commission File Number) (IRS Employer Identification No.)

 

4 Crosby Drive  
Bedford, Massachusetts   01730
(Address of Principal Executive Offices) (Zip Code)

 

(978) 441-2200

(Registrant’s Telephone Number, Including Area Code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

¨        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨        Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨        Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

 

 

Item 2.02. Results of Operations and Financial Condition

 

On November 1, 2017, Datawatch Corporation (“Datawatch”) issued a press release reporting its financial results for its quarter and year ended September 30, 2017 . A copy of the press release is attached as Exhibit 99.1 to this report and is incorporated herein by reference.

 

The information contained in this Item 2.02, including in Exhibit 99.1 attached hereto and incorporated herein by reference, is intended to be furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information contained herein and in the accompanying exhibits shall not be incorporated by reference into any filing with the U.S. Securities and Exchange Commission (“SEC”) made by Datawatch, whether made before or after the date hereof, regardless of any general incorporation language in such filings.

 

Item 9.01 Financial Statements and Exhibits

 

(d)       Exhibits

 

The following Exhibit is furnished as part of this report:

 

Exhibit No. Description
   
99.1 Press release issued by Datawatch Corporation, dated November 1, 2017.

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

  DATAWATCH CORPORATION
         
         
  By:   /s/ James Eliason  
    Name: James Eliason  
    Title: Chief Financial Officer  

 

Date:  November 1, 2017

 

 

 

 

 

EXHIBIT INDEX

 

Exhibit No. Description
   
99.1 Press release issued by Datawatch Corporation, dated November 1, 2017.

 

 

 

 

 

Exhibit 99.1

 

 

 

Datawatch Announces Fourth Quarter and Year-End Fiscal 2017 Financial Results

 

Bedford, Mass.—November 1, 2017— Datawatch Corporation (NASDAQ-CM: DWCH), a leading global provider of self-service data preparation and fast data analytics solutions, today announced that total revenue for its fourth quarter of fiscal 2017 ended September 30, 2017 was $10.20 million, an increase of 19% from total revenue of $8.61 million in the fourth quarter of fiscal 2016. License revenue for the fourth quarter of fiscal 2017 was $5.89 million, a 24% increase from the $4.76 million recorded in the same quarter a year ago. Deferred revenue as of September 30, 2017 was $11.61 million, an 18% increase compared to $9.87 million as of September 30, 2016. Total bookings for the fourth quarter of fiscal 2017 were $10.77 million, a 12% increase from the $9.58 million of bookings recorded in the same quarter a year ago.

 

Net loss for the fourth quarter of fiscal 2017 was ($0.81) million, or ($0.07) per diluted share, compared to a net loss of ($1.93) million, or ($0.16) per diluted share, for the year ago period. Excluding the effects of the amortization associated with the purchase of certain intellectual property and other intangible assets and share-based compensation, the Company’s non–GAAP net loss for its fourth quarter of fiscal 2017 was $(0.07) million, or ($0.01) per diluted share, compared to a non-GAAP net loss of $(0.75) million, or ($0.06) per diluted share, for the fourth quarter of fiscal 2016.

 

Total revenue for fiscal 2017 was $36.26 million, a 19% increase from revenue of $30.46 million for fiscal 2016.  License revenue for fiscal 2017 was $20.05 million, a 32% increase compared to $15.22 million for fiscal 2016. Net loss for 2017 was ($4.00) million, or ($0.33) per diluted share, as compared to a net loss of ($14.63) million or ($1.24) per diluted share, for fiscal 2016. The Company’s non-GAAP net loss for fiscal year 2017 was ($1.32) million, or ($0.11) per diluted share, as compared to a non-GAAP net loss of ($7.82) million, or ($0.66) per diluted share, for fiscal 2016.

 

“Our fourth quarter results demonstrate continued momentum for our Monarch data preparation and analytics platform, a healthy market for modern analytic solutions, improved engagement with the Datawatch community and disciplined sales execution,” said Michael A. Morrison, president and chief executive officer of Datawatch. “Further, the fourth quarter represents the culmination to a successful year highlighted by 30%+ year-over-year license growth, good progress toward a return to profitability and positive cash flow from operating activities.”

 

Mr. Morrison concluded, “As we enter fiscal 2018, we are encouraged by customer and partner adoption of our Monarch platform and we believe that the market for enterprise data preparation and analytics solutions will continue to grow. In fiscal 2018, we will maintain the discipline to build our business on a profitable basis, with a laser focus on the Datawatch customer community, increased investment in partner opportunities and continued industry-leading innovation as illustrated by general availability for Monarch Swarm, our next generation cloud platform, which we publicly announced today.”

 

James L. Eliason, chief financial officer, commented, “We reduced our operating loss in fiscal 2017, closing out the year at essentially breakeven, and we are comfortably within our targeted position to achieve non-GAAP operating profitability for fiscal year 2018, although we do not expect to be profitable in the first fiscal quarter. We also generated $2.5 million in cash in fiscal 2017, and expect to continue generating cash throughout fiscal 2018. We remain disciplined in how we are approaching investments in the business to ensure that we are building a solid foundation for the long-term.”

 

 

 

 

Exhibit 99.1

 

 

Fourth Quarter Fiscal 2017 Business Highlights

 

· Sysco, the largest food distribution network in the world, and a long-time enterprise customer of Datawatch’s heritage Monarch solution, committed to migrate its hundreds of users to Datawatch’s modern Monarch data preparation and analytics platform.

· The TJX Companies, a leading retailer of apparel and home fashions worldwide, extended the value of its Monarch modern analytic platform through the purchase of Monarch’s automation and governance capabilities.

· Sherwin Williams, a global leader in the manufacture, development, distribution, and sale of paints, coatings and related products, standardized on the Monarch data preparation platform to streamline the integration of back office operations resulting from its acquisition of Valspar Corporation.

· BNY Mellon, a global leader in investment management and investment services, selected Datawatch’s Panopticon fast analytics platform to support its compliance initiatives related to MiFID II best execution regulations.

 

Fourth Quarter Fiscal 2017 Financial Highlights

 

· Cash and short-term investments were $30.5 million at September 30, 2017, up from $29.4 million at June 30, 2017 and $28.0 million at September 30, 2016.

· Gross margin (excluding IP amortization expense) for the fourth quarter of fiscal 2017 was 92%, as compared to 92% for the fourth quarter of fiscal 2016.

· Days sales outstanding were 60 days at September 30, 2017, compared to 68 days at September 30, 2016.

· There were seven six-figure license deals in the fourth quarter this fiscal year, compared to three in the fourth quarter of fiscal 2016.

· The average deal size in the fourth quarter of fiscal 2017 was $47,000, an increase from $36,000 in the fourth quarter of fiscal 2016.

· Deferred revenue reached $11.6 million at September 30, 2017, the highest in the company’s history, and an 18% increase from $9.9 million at September 30, 2016.

 

Conference Call

 

Datawatch’s fourth quarter of fiscal year 2017 earnings conference call will take place today, Wednesday, November 1, 2017 at 5:00 p.m. Eastern Time. The toll-free number to access the conference call is (866) 682-6100 . Internationally, the call may be accessed by dialing (404) 267-0373 . The conference call will be broadcast live on the Internet at:

http://www.investorcalendar.com/event/20649. It is recommended that listeners register to participate and download any necessary audio software from the website 15 minutes prior to the scheduled call. An archived replay of the broadcast will be available for 90 days at the same location.

 

About Datawatch Corporation

Datawatch Corporation (NASDAQ-CM: DWCH) enables ordinary users to deliver extraordinary results with all their data.  Datawatch can unlock data from the widest variety of sources and prepare it for use with visualization tools or other business processes.  When real-time visibility to rapidly changing data is critical, Datawatch enables you to visualize streaming data for the most demanding business environments such as capital markets. Organizations of all sizes in more than 100 countries worldwide use Datawatch products including 93 of the Fortune 100. Datawatch is headquartered in Bedford, Massachusetts with offices in New York, London, Frankfurt, Stockholm, Singapore, and Manila.  To learn more about Datawatch or download a free version of its enterprise software, please visit: www.datawatch.com.

 

 

 

 

Exhibit 99.1

 

 

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

 

Any statements contained in this press release that do not describe historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any such statements, including but not limited to those relating to results of operations, contained herein are based on current expectations, but are subject to a number of risks and uncertainties that may cause actual results to differ materially from expectations. The factors that could cause actual future results to differ materially from current expectations include the following:; risks associated with fluctuations in quarterly operating results due, among other factors, to the long sales cycle with enterprise customers and the size and timing of large customer orders; risks associated with acquisitions; the risk that our goodwill resulting from acquisitions may become impaired and require a write-down; limitations on the effectiveness of internal controls; rapid technological change; Datawatch’s dependence on the introduction of new products and product enhancements and possible delays in those introductions; competition in the software industry generally, and in the markets for next generation analytics in particular; Datawatch's dependence on its principal products, proprietary software technology and software licensed from third parties; Datawatch’s concentration of customers in the financial sector; risks associated with international sales and operations; risks associated with indirect distribution channels and co-marketing arrangements, many of which were only recently established; the adequacy of Datawatch’s sales returns reserve; risks associated with a subscription sales model; Datawatch’s dependence on its ability to hire and retain skilled personnel; disruption or failure of Datawatch’s technology systems that may result from a natural disaster, cyber-attack, security breach or other catastrophic event; risks related to actions by activist stockholders, including the amount of related costs incurred by Datawatch and the disruption caused to Datawatch’s business activities by these actions; and uncertainty and additional costs that may result from evolving regulation of corporate governance and public disclosure. Further information on factors that could cause actual results to differ from those anticipated is detailed in various publicly-available documents, which include, but are not limited to, filings made by Datawatch from time to time with the Securities and Exchange Commission, including but not limited to, those appearing in the Company's Annual Report on Form 10-K for the year ended September 30, 2016 and its subsequently filed Form 10-Q reports. Any forward-looking statements should be considered in light of those factors.

 

Use of Non-GAAP Financial Information

 

We define non-GAAP net loss as U.S. Generally Accepted Accounting Principles (“GAAP”) net loss plus (i) amortization associated with the purchase of certain intellectual property and other intangible assets (ii) share-based compensation and (iii) Swedish deferred tax valuation allowance, minus the payment received in respect of a stockholder’s short-swing stock trading profits. We discuss non-GAAP net loss in our quarterly earnings releases and certain other communications as we believe non-GAAP net loss is an important measure that is not calculated according to GAAP. We use non-GAAP net loss in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our Board of Directors and evaluating short-term and long-term operating trends in our operations. We believe that non-GAAP net loss assists in providing an enhanced understanding of our underlying operational measures to manage the business, to evaluate performance compared to prior periods and the marketplace, and to establish operational goals. We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making.

 

 

 

 

Exhibit 99.1

 

 

Non-GAAP net loss is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with GAAP. This non-GAAP financial measure may not be computed in the same manner as similarly titled measures used by other companies. We expect to continue to incur expenses similar to the non-GAAP net loss financial adjustments described above, and investors should not infer from our presentation of this non-GAAP financial measure that these costs are unusual, infrequent or non-recurring.

 

The table below entitled “Non-GAAP Disclosure - Reconciliation of Net Loss to Non-GAAP Net Loss” reconciles the Company’s GAAP net loss to the Company’s non-GAAP net loss.

 

 

 

 

Exhibit 99.1

 

 

DATAWATCH CORPORATION
 Condensed Consolidated Statements of Operations
 Amounts in Thousands (except per share data)
 (Unaudited)

 

  Three Months Ended     Twelve Months Ended  
  September 30,     September 30,  
    2017     2016     2017     2016  
REVENUE:                        
Software licenses   $ 5,893     $ 4,758     $ 20,051     $ 15,219  
Maintenance     3,629       3,498       14,473       13,915  
Professional services     682       351       1,739       1,328  
Total revenue     10,204       8,607       36,263       30,462  
                                 
COSTS AND EXPENSES:                                
Cost of software licenses     228       761       1,895       2,828  
Cost of maintenance and services     655       470       2,349       2,177  
Sales and marketing     5,731       5,162       19,124       20,783  
Engineering and product development     2,288       2,078       8,888       8,167  
General and administrative     2,207       2,183       8,777       9,636  
Total costs and expenses     11,109       10,654       41,033       43,591  
                                 
LOSS FROM OPERATIONS     (905 )     (2,047 )     (4,770 )     (13,129 )
Other income (expense)     56       (11 )     759       (30 )
                                 
LOSS BEFORE INCOME TAXES     (849 )     (2,058 )     (4,011 )     (13,159 )
Income tax (expense) benefit     35       126       18       (1,473 )
                                 
NET LOSS   $ (814 )   $ (1,932 )   $ (3,993 )   $ (14,632 )
                                 
Net loss per share - Basic   $ (0.07 )   $ (0.16 )   $ (0.33 )   $ (1.24 )
Net loss per share - Diluted   $ (0.07 )   $ (0.16 )   $ (0.33 )   $ (1.24 )
Weighted Average Shares Outstanding - Basic     12,222       11,835       12,073       11,758  
Weighted Average Shares Outstanding - Diluted     12,222       11,835       12,073       11,758  

 

 

Non-GAAP Disclosure - Reconciliation of Net Loss to Non-GAAP Net Loss:

 

GAAP Net Loss   $ (814 )   $ (1,932 )   $ (3,993 )   $ (14,632 )
Add-back Amortization of Intangibles & IP     88       519       1,203       2,191  
Add-back Share-Based Compensation     659       662       2,173       2,831  
Add-back Swedish Deferred Tax Valuation Allowance     -       -       -       1,794  
Exclude payment received from a stockholder's short-swing stock trading profit     -       -       (707 )     -  
Subtotal of adjustments     747       1,181       2,669       6,816  
                                 
Net Loss (non-GAAP)   $ (67 )   $ (751 )   $ (1,324 )   $ (7,816 )
Net loss per share - Basic   $ (0.01 )   $ (0.06 )   $ (0.11 )   $ (0.66 )
Net loss per share - Diluted   $ (0.01 )   $ (0.06 )   $ (0.11 )   $ (0.66 )
Weighted Average Shares Outstanding - Basic     12,222       11,835       12,073       11,758  
Weighted Average Shares Outstanding - Diluted     12,222       11,835       12,073       11,758  

 

 

 

 

Exhibit 99.1

 

 

DATAWATCH CORPORATION

 Condensed Consolidated Balance Sheets
Amounts in Thousands
 (Unaudited)

 

  September 30,     September 30,  
    2017     2016  
                 
Cash and cash equivalents   $ 30,451     $ 28,034  
Accounts receivable, net     7,306       6,932  
Prepaid expenses and other current assets     2,789       2,265  
Total current assets     40,546       37,231  
                 
Property and equipment, net     1,064       1,210  
Intangible and other assets, net     8,795       9,990  
                 
Total assets   $ 50,405     $ 48,431  
                 
Accounts payable and accrued expenses   $ 5,881     $ 4,077  
Deferred revenue - current portion     11,303       9,630  
Total current liabilities     17,184       13,707  
                 
Other long-term liabilities     692       766  
Total long-term liabilities     692       766  
                 
Total shareholders' equity     32,529       33,958  
                 
Total liabilities and shareholders’ equity   $ 50,405     $ 48,431  

 

 

Investor Contact:
Datawatch Investor Relations
investor@datawatch.com
Phone: (978) 441-2200 ext. 8323

 

Media Contact:

Frank Moreno

Datawatch Corporation

Frank_Moreno@datawatch.com

Phone: (978) 441-2200 ext. 8322

Twitter: @datawatch

 

 

 

 

Exhibit 99.1

 

 

© 2017 Datawatch Corporation. Datawatch and the Datawatch logo are trademarks or registered trademarks of Datawatch Corporation in the United States and/or other countries. All other names are trademarks or registered trademarks of their respective companies.