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) January 26, 2016
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.) |
Quorum Office Park | |
271 Mill Road | |
Chelmsford, Massachusetts | 01824 |
(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):
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition |
On January 27, 2016, Datawatch Corporation (“Datawatch”) issued a press release reporting its financial results for its quarter ended December 31, 2015. 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 made by Datawatch, whether made before or after the date hereof, regardless of any general incorporation language in such filings.
Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
(e) Compensatory Plans and Arrangements
On January 26, 2016, the Compensation and Stock Committee (the “Committee”) of the Board of Directors of Datawatch approved an amendment to the performance-based cash bonus structure for Sanjay Mistry, Vice President and Controller of Datawatch, under the fiscal 2016 Corporate Officers Compensation Plan (the “2016 Compensation Plan”).
As disclosed in Datawatch’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 16, 2015, the 2016 Compensation Plan initially provided that Mr. Mistry’s aggregate target cash bonus of $50,000 under the 2016 Compensation Plan would be split evenly between a $25,000 target cash bonus amount payable based on the extent to which Datawatch achieves its fiscal 2016 revenue target (such target, the “Annual Revenue Target”, and such bonus, an “Annual Revenue Target Bonus”) and a $25,000 aggregate target cash bonus amount payable quarterly based on the extent to which certain management bonus objectives are met or exceeded.
As amended, 100% of Mr. Mistry’s $50,000 target cash bonus under the 2016 Compensation Plan is an Annual Revenue Target Bonus eligible for payout if Datawatch achieves at least 80% of the Annual Revenue Target. Bonus eligibility at performance representing 80% of the Annual Revenue Target is 60% of the Annual Revenue Target Bonus amount, with bonus eligibility scaling up linearly as performance improves between 80% and 100% of the Annual Revenue Target. Performance at 100% of the Annual Revenue Target will result in eligibility for 100% of the Annual Revenue Target Bonus. Performance over 100% of the Annual Revenue Target will increase Annual Revenue Target Bonus eligibility at a 2 to 1 rate up to maximum eligibility of 150% of the Annual Revenue Target Bonus amount, based on performance at 125% of the Annual Revenue Target.
Mr. Mistry’s Annual Revenue Target Bonus will be paid quarterly on the following basis:
· | With respect to the first, second and third quarters of fiscal 2016, target payouts will equal one-quarter of his Annual Revenue Target Cash Bonus, or $12,500 (the “Quarterly Target Bonus Amount”), with eligibility based on achievement of the Corporation’s year to date quarterly revenue targets (each, a “YTD Quarterly Revenue Target”). Quarterly payout eligibility at performance representing 80% of the applicable YTD Quarterly Revenue Target is 60% of the Quarterly Target Bonus Amount, or $7,500, with quarterly payout eligibility scaling up linearly as performance improves between 80% and 100% of the applicable YTD Quarterly Revenue Target, up to a maximum quarterly payout of $12,500 for performance at or higher than 100% of the applicable YTD Quarterly Revenue Target. |
· | The payout, if any, with respect to the fourth quarter of fiscal 2016 will be an amount equal to (i) the Annual Revenue Target Cash Bonus earned based on the Corporation’s revenue for the full fiscal year relative to the Annual Revenue Target, as described above, minus (ii) the sum of the quarterly payouts made to Mr. Mistry with respect to the Corporation’s revenue performance for the first, second and third quarters of fiscal 2016. |
The Committee retains the discretion at any time to change the above cash bonus criteria (including bonus amounts and targets), including based on individual performance or in the event any operating changes are approved during the fiscal year that materially impact Datawatch’s fiscal 2016 financial plan.
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 January 27, 2016. |
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: January 27, 2016
EXHIBIT INDEX
Exhibit No. | Description |
99.1 | Press release issued by Datawatch Corporation, dated January 27, 2016. |
Exhibit 99.1
Datawatch Announces First Quarter 2016 Financial Results
Bedford, Mass.—January 27, 2016—Datawatch Corporation (NASDAQ-CM: DWCH), a leading global provider of self-service data preparation and visual analytics solutions, today announced that total revenue for its first quarter of fiscal 2016 ended December 31, 2015 was $7.06 million, an increase of 1% from revenue of $6.96 million in the first quarter of fiscal 2015. License revenue for the first quarter of fiscal 2016 was $3.15 million, a 1% decline from the $3.17 million recorded in the comparable quarter a year ago. Net loss for the first quarter of fiscal 2016 was ($3.96) million, or ($0.34) per diluted share, compared to a net loss of ($36.88) million, or ($3.31) per diluted share, for the year ago period, which included a $32 million non-cash charge for impairment of goodwill. Excluding the effects of the non-cash amortization associated with the purchase of certain intellectual property and other intangible assets, non-cash stock compensation costs, and severance costs, the Company’s non–GAAP net loss for its first quarter of fiscal 2016 was ($2.24) million, or ($0.19) per diluted share, compared to net loss of ($2.54) million, or ($0.23) per diluted share in the first quarter of fiscal 2015.
“In the first quarter of fiscal 2016, we continued to build momentum in penetrating the self-service data preparation market, adding 131 new customers for our market-leading Monarch data preparation solution, more than double rate of the previous quarter,” said Michael A. Morrison, president and chief executive officer of Datawatch. “At the same time, the business we typically see from our extensive Monarch base was lower than usual due to the timing of a few of the larger forecasted opportunities. We have implemented specific programs and initiatives targeted at the Monarch installed base to ensure the proper degree of focus on this important segment of our business. Furthermore, we continue to make significant progress with our powerful visualization platform, with its unique real-time capabilities, although the timing of larger visualization transactions can be difficult to predict.”
Mr. Morrison added, “We are capitalizing on our momentum in self-service data preparation by maintaining a rapid cycle of agile innovation with the release of Monarch v13.2 at the end of the December, which added significant new transformation and calculation capabilities, expanded data acquisition options and a more powerful engine and ‘just-in-time’ data preparation for large Big Data information sets. Our Monarch for data preparation solution is receiving excellent reviews from analysts and customers alike, and we are more encouraged than ever that our outstanding and highly differentiated solution is the best available to address this rapidly growing market and its business requirements.”
James L. Eliason, chief financial officer, commented, “Our balance sheet at the end of our first fiscal quarter remains strong, with our deferred license revenue up nearly 200% year over year, aided by the new subscription pricing model we instituted in Q3 of our last fiscal year, and the growing new customer ‘lands’ for self-service data preparation. We continue to be prudent in our investments, as reflected in our sequentially flat operating expenses, and we expect to maintain our targeted investment philosophy this year at approximately the same pace for the remainder of the fiscal year.”
First Quarter 2016 Business Highlights
· | Datawatch extended its leadership in the financial services industry with more than 40 firms adopting Monarch for self-service data preparation, including Wells Fargo, Cigna, SunGard, China Construction Bank, Zurich North America, Bank of America and Citizens Financial Group. |
· | Imagine Software, an award-winning provider of real-time portfolio, risk management and regulatory solutions for financial firms, entered into an OEM agreement to embed Datawatch’s real-time visualization software in its platform. |
· | Datawatch entered into an exclusive partnership with DFOCUS, a Korea-based IT consulting and services provider founded by former PwC consultants, to bring Datawatch technology to the Korean market. DFOCUS has expertise with data preparation, visualization and Big Data solutions, and its customers include brand names such as Samsung, Hyundai and Allianz. |
· | The Marbridge Foundation, a non-profit residential community for adults with cognitive challenges, was awarded the 2015 Ventana Research Business Technology Leadership Award for its use of Datawatch’s self-service data preparation software to meet regulatory reporting requirements under the Affordable Care Act. |
First Quarter 2016 Financial Highlights
· | Cash and short-term investments were $33.02 million at December 31, 2015, down 6% from $35.16 million at September 30, 2015 and down 24% from $43.19 million at December 31, 2014. |
· | Gross margin (excluding IP amortization expense) for the first quarter of fiscal 2016 was 89%, an increase from 85% in the first quarter of fiscal 2015. |
· | Days sales outstanding were 78 days at December 31, 2015, compared to 81 days at December 31, 2014. |
· | There were 4 six-figure deals in the first quarter this fiscal year, the same as in the first quarter of fiscal 2015. |
· | The average deal size in the first quarter of fiscal 2016 was $29,000, compared to $36,000 in the first quarter of fiscal 2015. |
Conference Call
Datawatch’s first quarter of fiscal year 2016 earnings conference call will take place on Thursday, January 28, 2016 at 8:30 a.m. Eastern Time. To access the conference call, the toll-free dial in number is (877) 407-0782. Internationally, the call may be accessed by dialing (201) 689-8567. The conference call will be broadcast live on the Internet at: http://www.investorcalendar.com/IC/CEPage.asp?ID=174613. 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. Only
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 every size 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, and with partners and customers in more than 100 countries worldwide. See how Datawatch
can help you by downloading a free version at www.datawatch.com.
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 the continuing weak
global economy; 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; 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, 2015. Any forward-looking statements
should be considered in light of those factors.
# # #
Investor Contact:
Datawatch Investor Relations
investor@datawatch.com
Phone: (978) 441-2200 ext. 8323
Media Contact:
Erin Hoesly
Datawatch Corporation
Erin_Hoesly@datawatch.com
Phone: (978) 441-2200 ext. 8322
Twitter: @datawatch
© 2016 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.
DATAWATCH CORPORATION |
Condensed Consolidated Statements of Operations |
Amounts in Thousands (except per share data) |
(Unaudited) |
Three Months Ended | ||||||||
December 31, | ||||||||
2015 | 2014 | |||||||
REVENUE: | ||||||||
Software licenses | $ | 3,147 | $ | 3,175 | ||||
Maintenance | 3,602 | 3,409 | ||||||
Professional services | 306 | 377 | ||||||
Total revenue | 7,055 | 6,961 | ||||||
COSTS AND EXPENSES: | ||||||||
Cost of software licenses | 689 | 861 | ||||||
Cost of maintenance and services | 598 | 892 | ||||||
Sales and marketing | 5,748 | 7,988 | ||||||
Engineering and product development | 1,827 | 2,523 | ||||||
General and administrative | 2,234 | 2,141 | ||||||
Impairment of goodwill and long lived intangible assets | - | 32,009 | ||||||
Total costs and expenses | 11,096 | 46,414 | ||||||
LOSS FROM OPERATIONS | (4,041 | ) | (39,453 | ) | ||||
Other income (expense) | (24 | ) | 9 | |||||
LOSS BEFORE INCOME TAXES | (4,065 | ) | (39,444 | ) | ||||
Income tax benefit | 101 | 2,568 | ||||||
NET LOSS | $ | (3,964 | ) | $ | (36,876 | ) | ||
Net loss per share - Basic | $ | (0.34 | ) | $ | (3.31 | ) | ||
Net loss per share - Diluted | $ | (0.34 | ) | $ | (3.31 | ) | ||
Weighted Average Shares Outstanding - Basic | 11,635 | 11,136 | ||||||
Weighted Average Shares Outstanding - Diluted | 11,635 | 11,136 | ||||||
Non-GAAP Disclosure - Reconciliation of Net Loss to Net Loss Excluding the Effects of Certain Items: | ||||||||
GAAP Net Loss | $ | (3,964 | ) | $ | (36,876 | ) | ||
Add-back Impairment of Goodwill & Long-Lived Assets | - | 32,009 | ||||||
Add-back Amortization of Intangibles & IP | 572 | 580 | ||||||
Add-back Share-Based Compensation | 1,023 | 1,741 | ||||||
Add-back Severance | 134 | 10 | ||||||
Subtotal of additions | 1,729 | 34,340 | ||||||
Net (Loss) Income (non-GAAP) | $ | (2,235 | ) | $ | (2,536 | ) | ||
Net (loss) income per share - Basic | $ | (0.19 | ) | $ | (0.23 | ) | ||
Net (loss) income per share - Diluted | $ | (0.19 | ) | $ | (0.23 | ) | ||
Weighted Average Shares Outstanding - Basic | 11,635 | 11,136 | ||||||
Weighted Average Shares Outstanding - Diluted | 11,635 | 11,136 |
DATAWATCH CORPORATION |
Condensed Consolidated Balance Sheets |
Amounts in Thousands |
(Unaudited) |
December 31, | September 30, | |||||||
2015 | 2015 | |||||||
Cash and cash equivalents | $ | 33,023 | $ | 35,162 | ||||
Accounts receivable, net | 5,107 | 7,081 | ||||||
Prepaid expenses and other current assets | 2,274 | 2,013 | ||||||
Total current assets | 40,404 | 44,256 | ||||||
Property and equipment, net | 954 | 614 | ||||||
Intangible and other assets, net | 13,302 | 14,061 | ||||||
$ | 54,660 | $ | 58,931 | |||||
Accounts payable and accrued expenses | $ | 3,193 | $ | 4,202 | ||||
Deferred revenue - current portion | 8,427 | 8,452 | ||||||
Deferred tax liability- current portion | - | 274 | ||||||
Total current liabilities | 11,620 | 12,928 | ||||||
Other long-term liabilities | 378 | 461 | ||||||
Total long-term liabilities | 378 | 461 | ||||||
Total shareholders' equity | 42,662 | 45,542 | ||||||
$ | 54,660 | $ | 58,931 |
Use of Non-GAAP Financial Information
We define non-GAAP income (loss) from operations as U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) operating loss plus non-cash amortization associated with the purchase of certain intellectual property and other intangible assets, non-cash stock compensation costs and severance costs. We discuss non-GAAP income (loss) from operations in our quarterly earnings releases and certain other communications as we believe non-GAAP income (loss) from operations is an important measure that is not calculated according to U.S. GAAP. We use non-GAAP income (loss) from operations 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 income (loss) from operations 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.
Non-GAAP income (loss) from operations is a non-GAAP financial measure and should not be considered in isolation or as a substitute for financial information provided in accordance with U.S. 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 income (loss) from operations 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 above entitled “Non-GAAP Disclosure - Reconciliation of Net Loss to Net Loss Excluding the Effects of Certain Items” reconciles the Company’s U.S. GAAP income (loss) from operations to the Company’s non-GAAP income (loss) from operations.