NEWS RELEASE
26533 Evergreen Rd., Suite 500 • Southfield, Michigan 48076
(800) 229-4125
For Immediate Release
February 4, 2016
Covisint Corporation Announces Third Quarter Fiscal 2016 Financial Results
DETROIT - February 4, 2016 -- Covisint Corporation (Nasdaq: COVS), the leading Cloud Platform for building Identity and Access Management (IAM) and Internet of Things (IoT) solutions, today announced financial results for the third quarter of fiscal 2016, which ended December 31, 2015.
"While Covisint’s total revenue for the quarter was in line with our expectations, we are disappointed with our results for subscription revenue. I remain confident that the steps we are taking are the right ones, however, results from the transition we embarked upon last year are taking longer to materialize,” said Covisint Chairman and CEO, Sam Inman. “We continue to make excellent progress in other areas of the business. In particular, we have made much more progress in a shorter period of time than we expected in enhancing the Covisint Cloud platform. We are also pleased with the progress we have made in redefining our brand and positioning our company in the marketplace.”
Third Quarter Fiscal 2016 Financial Highlights
Revenue
| |
| • | Total revenue was $19.2 million, a decrease of 12% compared to $21.8 million in the prior year period. |
| |
| • | Subscription revenue was $15.3 million, a decrease of 3% compared to $15.7 million in the prior year period. Subscription revenue increased 9% excluding subscription revenue related to exited business. |
| |
| • | Services revenue was $3.9 million, a decrease of 36% compared to $6.1 million in the prior year period. The decline is primarily attributable to the Company’s stated strategy to shift this business to certified service partners. |
Profitability
| |
| • | GAAP gross margin was 54%, compared to 54% in the prior fiscal quarter and 34% in the prior year period. |
| |
| • | Non-GAAP gross margin was 58%, compared to 59% in the prior fiscal quarter and 42% in the prior year period. |
| |
| • | GAAP net loss was $4.1 million or ($0.10) per diluted share, compared to net loss of $7.0 million or ($0.18) per diluted share in the prior year. |
| |
| • | Non-GAAP net loss was $3.8 million or ($0.09) per diluted share, compared to net loss of $4.3 million or ($0.11) per diluted share in the prior year. |
Balance Sheet
| |
| • | The Company had $37.6 million in cash, cash equivalents at December 31, 2015, compared with $41.7 million at September 30, 2015. |
Third Quarter Fiscal 2016 Business Highlights
| |
| • | Selected by a leading European Automotive OEM as their global standard for identity management. Through this new five-year, non-cancellable agreement, this customer will use Covisint's cloud identity management services as the core technology behind their digital transformation initiative, enabling faster and more secure information exchange across their ecosystem of over 100,000 people, systems and things. |
| |
| • | Chief Security Officer, David Miller presented on securing the Internet of Things at Gartner Symposium/ITExpo. During the session titled “Simply Securing the IoT as Connectivity Complexity Continues to Mount”, Miller discussed how leveraging a secure cloud platform unlocks the value of IoT for complex, connected product initiatives. |
| |
| • | Spoke on securing the connection between the cloud and car at the Connected Mobility Summit. The session addressed the security and privacy challenges to be expected as vehicles become part of the Internet of Things. Additionally, visitors were able to see live demonstrations on how the Covisint platform has enabled Hyundai’s Blue Link system in a Hyundai Sonata Eco. |
Use of Non-GAAP Financial Measures
In addition to reporting financial results in accordance with generally accepted accounting principles (“GAAP”), Covisint monitors non-GAAP measures, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share. Each of these financial measures excludes the impact of certain items (the impact of stock award compensation
expense, the amortization and impairment of intangible assets and amounts incurred for capitalized internal software costs) and, therefore, has not been calculated in accordance with GAAP.
Covisint monitors these non-GAAP measures to evaluate its ongoing operational performance and enhance an overall understanding of its past financial performance. Covisint believes that these non-GAAP metrics help illustrate underlying trends in its business that could otherwise be masked by the effect of the expenses that are excluded in non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share. Furthermore, Covisint uses these measures to establish budgets and operational goals for managing its business and evaluating its performance. Covisint also believes that these non-GAAP measures provide additional tools for investors to use in comparing its recurring core business operating results over multiple periods against other companies in its industry.
The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the non-GAAP financial measures discussed in this press release to the most directly comparable GAAP financial measures is included with the financial statements contained in this press release. Management uses both GAAP and non-GAAP information in evaluating and operating its business internally and as such has determined that it is important to provide this information to investors.
Conference Call and Webcast Information
Covisint management will hold a conference call at 5:00 p.m. (Eastern time) today to discuss these results. The U.S. toll free dial-in for the conference call is 1-877-407-4018, and the international dial-in number is 1-201-689-8471. No passcode is required. A live webcast of the conference call will also be available on the company's website at investors.covisint.com.
For those unable to participate in the conference call, a replay will be available after the conclusion of the earnings call on February 4, 2016, through February 11, 2016. The U.S. toll-free replay dial-in number is 1-877-870-5176 and the international replay dial-in number is 1-858-384-5517. The replay passcode is 13628057.
About Covisint Corporation
Covisint is the leading Cloud Platform for building Identity and Internet of Things (IoT) applications, and enables the identification, authorization and connection of complex networks of people, processes, systems and things.
Covisint's open, developer-friendly, enterprise-class Cloud Platform facilitates the rapid development and deployment of the Internet of Things (IoT), Identity Management (IdM) and Connected Supply Chain solutions - enabling customers to securely identify, authenticate and connect users, devices, applications and information. Covisint has been successfully operating globally at enterprise scale for more than 12 years. Today, the Covisint Platform enables more than 3,000 organizations to connect with more than 212,000 business partners and customers, and supports more than $4 billion in ecommerce transactions annually. Learn more at http://www.covisint.com/.
Forward-looking Statements
This press release contains forward-looking statements, including statements regarding Covisint's future financial performance, market growth, the demand for Covisint's solutions, and general business conditions. Any forward-looking statements contained in this press release are based upon Covisint's historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. These forward-looking statements represent Covisint's expectations as of the date of this press release. Subsequent events may cause these expectations to change, and Covisint disclaims any obligation to update the forward-looking statements in the future. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, our ability to attract new customers; the extent to which customers renew their contracts; the extent we are able to maintain pricing with our customers at renewal; the continued growth of the market for our solutions; the success of our channel partner and certified partner strategies; competition from current competitors and new market entrants; unpredictable macro-economic conditions; the loss of any of our key employees; the length of the sales for our solutions; and other risk and uncertainties. Further
information on potential factors that could affect actual results is included in Covisint's reports filed with the SEC.
Investor Relations Contact
866.319.7659
investors@covisint.com
Media Contact
Brad Schechter
Vice President, Corporate Marketing, Covisint
248.483.2097
bschecht@covisint.com
For Sales and Marketing Information
Covisint Corporation, 26533 Evergreen Road, Suite 500, Southfield, MI 48076, 800-229-4125
http://www.covisint.com
COVISINT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
|
| | | | | | | |
| | December 31, 2015 | | March 31, 2015 |
| ASSETS | | | |
| CURRENT ASSETS: | | | |
| Cash |
| $37,615 |
| |
| $50,077 |
|
| Accounts receivable, net | 9,628 |
| | 15,348 |
|
| Deferred tax asset, net | 41 |
| | 16 |
|
| Prepaid expenses | 2,461 |
| | 3,160 |
|
| Other current assets | 1,866 |
| | 4,209 |
|
| Total current assets | 51,611 |
| | 72,810 |
|
| PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION | 8,642 |
| | 8,809 |
|
| CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET | 10,600 |
| | 10,646 |
|
| OTHER: | | | |
| Goodwill | 25,385 |
| | 25,385 |
|
| Deferred costs | 733 |
| | 1,736 |
|
| Deferred tax asset, net | 1,350 |
| | 1,528 |
|
| Other assets | 367 |
| | 928 |
|
| Total other assets | 27,835 |
| | 29,577 |
|
| TOTAL ASSETS |
| $98,688 |
| |
| $121,842 |
|
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
| CURRENT LIABILITIES: | | | |
| Accounts payable |
| $5,038 |
| |
| $7,703 |
|
| Accrued commissions | 2,814 |
| | 3,286 |
|
| Deferred revenue | 12,180 |
| | 18,029 |
|
| Accrued expenses | 2,154 |
| | 3,344 |
|
| Deferred tax liability, net | 1,495 |
| | 1,597 |
|
| Total current liabilities | 23,681 |
| | 33,959 |
|
| DEFERRED REVENUE | 1,642 |
| | 3,914 |
|
| ACCRUED LIABILITIES AND OTHER | 2,542 |
| | 2,622 |
|
| Total liabilities | 27,865 |
| | 40,495 |
|
| COMMITMENTS AND CONTINGENCIES | | | |
| SHAREHOLDERS' EQUITY: | | | |
| Common Stock | — |
| | — |
|
| Additional paid-in capital | 161,418 |
| | 157,004 |
|
| Retained deficit | (90,417 | ) | | (75,633 | ) |
| Accumulated other comprehensive loss | (178 | ) | | (24 | ) |
| Total shareholders' equity | 70,823 |
| | 81,347 |
|
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
| $98,688 |
| |
| $121,842 |
|
COVISINT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED DECEMBER 31, | | NINE MONTHS ENDED DECEMBER 31, |
| | 2015 | | 2014 | | 2015 | | 2014 |
| REVENUE |
| $19,162 |
| |
| $21,755 |
| |
| $56,037 |
| |
| $65,077 |
|
| COST OF REVENUE | 8,822 |
| | 14,384 |
| | 27,068 |
|
| 43,976 |
|
| GROSS PROFIT | 10,340 |
| | 7,371 |
| | 28,969 |
| | 21,101 |
|
| | 54 | % | | 34 | % | | 52 | % | | 32 | % |
| OPERATING EXPENSES: | | | | | | | |
| Research and development | 3,100 |
| | 2,865 |
| | 9,890 |
|
| 8,564 |
|
| Sales and marketing | 8,564 |
| | 7,006 |
| | 23,223 |
|
| 24,781 |
|
| General and administrative | 2,699 |
| | 4,455 |
| | 10,516 |
|
| 14,112 |
|
| Total operating expenses | 14,363 |
| | 14,326 |
| | 43,629 |
| | 47,457 |
|
| OPERATING LOSS | (4,023 | ) | | (6,955 | ) | | (14,660 | ) | | (26,356 | ) |
| Other income (expense) | 3 |
| | 15 |
| | (28 | ) | | 54 |
|
| LOSS BEFORE INCOME TAXES | (4,020 | ) | | (6,940 | ) | | (14,688 | ) | | (26,302 | ) |
| INCOME TAX PROVISION | 52 |
| | 21 |
| | 96 |
| | 79 |
|
| NET LOSS |
| ($4,072 | ) | |
| ($6,961 | ) | |
| ($14,784 | ) | |
| ($26,381 | ) |
| | | | | | | | |
| DILUTED EPS COMPUTATION | | | | | | | |
| Numerator: Net loss |
| ($4,072 | ) | |
| ($6,961 | ) | |
| ($14,784 | ) | |
| ($26,381 | ) |
| Denominator: |
|
| | | | | | |
| Weighted-average common shares outstanding | 39,791 |
| | 38,423 |
| | 39,400 |
| | 37,962 |
|
| Dilutive effect of stock awards | — |
| | — |
| | — |
| | — |
|
| Total shares | 39,791 |
| | 38,423 |
| | 39,400 |
| | 37,962 |
|
| Diluted EPS |
| ($0.10 | ) | |
| ($0.18 | ) | |
| ($0.38 | ) | |
| ($0.69 | ) |
| |
| |
| | | | |
COVISINT CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(In Thousands, Except Per Share Data)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED DECEMBER 31, | | NINE MONTHS ENDED DECEMBER 31, |
| | 2015 | | 2014 | | 2015 | | 2014 |
| Gross profit |
| $10,340 |
| |
| $7,371 |
| |
| $28,969 |
| |
| $21,101 |
|
| Gross profit % | 54 | % | | 34 | % | | 52 | % | | 32 | % |
| Adjustments: | | | | | | | |
| Stock compensation expense—cost of revenue | 15 |
| | (1 | ) | | 68 |
|
| 583 |
|
| % of total revenue | — | % | | — | % | | — | % | | 1 | % |
| Cost of revenue—amortization of capitalized software | 802 |
| | 1,728 |
| | 2,611 |
|
| 5,103 |
|
| % of total revenue | 4 | % | | 8 | % | | 5 | % | | 8 | % |
| Adjusted gross profit |
| $11,157 |
| |
| $9,098 |
| |
| $31,648 |
| |
| $26,787 |
|
| Adjusted gross profit % | 58 | % | | 42 | % | | 56 | % | | 41 | % |
| |
| |
| | | | |
| | | | | | | | |
| | | | |
| | THREE MONTHS ENDED DECEMBER 31, | | NINE MONTHS ENDED DECEMBER 31, |
| | 2015 | | 2014 | | 2015 | | 2014 |
| Cost of revenue |
| $8,822 |
| |
| $14,384 |
| |
| $27,068 |
| |
| $43,976 |
|
| Adjustments: | | | | | | | |
| Stock compensation expense | 15 |
| | (1 | ) | | 68 |
| | 583 |
|
| Cost of revenue - amortization of capitalized software | 802 |
| | 1,728 |
| | 2,611 |
| | 5,103 |
|
| | | | | | | | |
| Cost of revenue, non-GAAP |
| $8,005 |
| |
| $12,657 |
| |
| $24,389 |
| |
| $38,290 |
|
| |
| |
| | | | |
| | | | | | | | |
| | THREE MONTHS ENDED DECEMBER 31, | | NINE MONTHS ENDED DECEMBER 31, |
| | 2015 | | 2014 | | 2015 | | 2014 |
| Research and development |
| $3,100 |
| |
| $2,865 |
| |
| $9,890 |
| |
| $8,564 |
|
| Adjustments: | | | | | | | |
| Capitalized internal software costs | (1,039 | ) | | (869 | ) | | (2,565 | ) | | (2,298 | ) |
| Stock compensation expense | 23 |
| | 55 |
| | 76 |
| | 149 |
|
| | | | | | | | |
| Research and development, non-GAAP |
| $4,116 |
| |
| $3,679 |
| |
| $12,379 |
| |
| $10,713 |
|
| |
| |
| | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
|
| | | | | | | | | | | | | | | |
| | | | | | | | |
| | THREE MONTHS ENDED DECEMBER 31, | | NINE MONTHS ENDED DECEMBER 31, |
| | 2015 | | 2014 | | 2015 | | 2014 |
| Sales and marketing |
| $8,564 |
| |
| $7,006 |
| |
| $23,223 |
| |
| $24,781 |
|
| Adjustments: | | | | | | | |
| Stock compensation expense | 69 |
| | 424 |
| | 410 |
| | 1,369 |
|
| Amortization of customer relationship agreements | — |
| | 77 |
| | — |
| | 294 |
|
| | | | | | | | |
| Sales and marketing, non-GAAP |
| $8,495 |
| |
| $6,505 |
| |
| $22,813 |
| |
| $23,118 |
|
| |
| |
| | | | |
| | | | | | | | |
| | THREE MONTHS ENDED DECEMBER 31, | | NINE MONTHS ENDED DECEMBER 31, |
| | 2015 | | 2014 | | 2015 | | 2014 |
| General and administrative |
| $2,699 |
| |
| $4,455 |
| |
| $10,516 |
| |
| $14,112 |
|
| Adjustments: | | | | | | | |
| Stock compensation expense | 410 |
| | 1,221 |
| | 1,785 |
| | 3,470 |
|
| | | | | | | | |
| General and administrative, non-GAAP |
| $2,289 |
| |
| $3,234 |
| |
| $8,731 |
| |
| $10,642 |
|
| |
| |
| | | | |
| | | | | | | | |
| | THREE MONTHS ENDED DECEMBER 31, | | NINE MONTHS ENDED DECEMBER 31, |
| | 2015 | | 2014 | | 2015 | | 2014 |
| Net loss |
| ($4,072 | ) | |
| ($6,961 | ) | |
| ($14,784 | ) | |
| ($26,381 | ) |
| Adjustments: | | | | | | | |
| Capitalized internal software costs | (1,039 | ) | | (869 | ) | | (2,565 | ) | | (2,298 | ) |
| Stock compensation expense | 517 |
| | 1,699 |
| | 2,339 |
| | 5,571 |
|
| Amortization of capitalized software and other intangibles | 802 |
| | 1,805 |
| | 2,611 |
| | 5,397 |
|
| Net loss, non-GAAP |
| ($3,792 | ) | |
| ($4,326 | ) | |
| ($12,399 | ) | |
| ($17,711 | ) |
| |
| |
| | | | |
| | | | | | | | |
| | THREE MONTHS ENDED DECEMBER 31, | | NINE MONTHS ENDED DECEMBER 31, |
| | 2015 | | 2014 | | 2015 | | 2014 |
| Diluted EPS |
| ($0.10 | ) | |
| ($0.18 | ) | |
| ($0.38 | ) | |
| ($0.69 | ) |
| Adjustments: |
| |
| | | | |
| Capitalized internal software costs | (0.02 | ) | | (0.02 | ) | | (0.07 | ) | | (0.06 | ) |
| Stock compensation expense | 0.01 |
| | 0.04 |
| | 0.06 |
| | 0.14 |
|
| Amortization of capitalized software and other intangibles | 0.02 |
| | 0.05 |
| | 0.07 |
| | 0.14 |
|
| Diluted EPS, non-GAAP |
| ($0.09 | ) | |
| ($0.11 | ) | |
| ($0.32 | ) | |
| ($0.47 | ) |
COVISINT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
|
| | | | | | | |
| | NINE MONTHS ENDED DECEMBER 31, |
| | 2015 | | 2014 |
| CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: | | | |
| Net loss |
| ($14,784 | ) | |
| ($26,381 | ) |
| Adjustments to reconcile net loss to cash provided by (used in) operations: | | | |
| Depreciation and amortization | 5,144 |
| | 7,091 |
|
| Deferred income taxes | 64 |
| | (8 | ) |
| Stock award compensation | 2,339 |
| | 5,571 |
|
| Net change in assets and liabilities, net of effects from currency fluctuations: | | | |
| Accounts receivable | 5,684 |
| | 7,626 |
|
| Other assets | 4,611 |
| | 2,713 |
|
| Accounts payable and accrued expenses | (2,600 | ) | | 105 |
|
| Deferred revenue | (8,101 | ) | | (11,134 | ) |
| Net cash (used in) operating activities | (7,643 | ) | | (14,417 | ) |
| CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: | | | |
| Purchase of: | | | |
| Property and equipment | (3,772 | ) | | (1,975 | ) |
| Capitalized software | (2,565 | ) | | (2,298 | ) |
| Proceeds from asset disposals | 33 |
| | — |
|
| Net cash (used in) investing activities | (6,304 | ) | | (4,273 | ) |
| CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: | | | |
| Cash payments from former parent company | — |
| | 23,999 |
|
| Cash payments to former parent company | — |
| | (13,879 | ) |
| Vendor financing payments | (548 | ) | | — |
|
| Net proceeds from exercise of stock awards | 2,074 |
| | 2,404 |
|
| Net cash provided by financing activities | 1,526 |
| | 12,524 |
|
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | (41 | ) | | (45 | ) |
| NET CHANGE IN CASH | (12,462 | ) | | (6,211 | ) |
| CASH AT BEGINNING OF PERIOD | 50,077 |
| | 49,536 |
|
| CASH AT END OF PERIOD |
| $37,615 |
| |
| $43,325 |
|
