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Covisint Corporation (COVS)
F3Q 2014 Earnings Conference Call
January 23, 2014 04:45 PM ET
Ed Yuen – Investor Relations
David McGuffie – President & CEO
Enrico Digirolamo – CFO
Michael Nemeroff – Credit Suisse
Rob Owens – Pacific Crest Securities
Kirk Materne – Evercore Partners
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At this time I’d like to turn the conference over to Ed Yuen. You may begin.
Thank you. Before we get started, please note that certain comments made on this call will contain forward-looking statements regarding expectations about future growth and financial results based on Covisint’s current forecast of the aspects of its future business. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from historical performance or current expectations. Risk factors are included in today’s press release and Covisint’s public filings with the SEC. We have posted our earnings press release and presentation to the Investor Relations portion of our website at www.covisint.com.
I will now turn the conference call over to David McGuffie, Covisint’s President and Chief Executive Officer.
Thank you, Ed. Welcome everyone to Covisint’s third quarter fiscal 2014 earnings call. Joining me on today’s call is Rico Digirolamo, our Chief Financial Officer. I’ll begin by discussing our business and financial highlights during the quarter. I will then turn the call over to Rico, who will walk you through our financial results in more detail. Finally, we’ll open the call to take your questions.
Turning to Slide 3, in the third quarter we continued to make significant progress on our major strategic objectives. Our subscription revenue increased 21% year-over-year to $17.6 million. This is strong growth in the most important and profitable part of our revenue. As we have previously discussed, our long term strategy is to make this a larger part of our overall revenue mix and we are progressing positively towards this goal.
Our services revenue was $6.5 million for the quarter. We have less services revenue than anticipated for this quarter partly because some of the work will be rolled over into Q4. But more importantly, we are seeing the investments in our platform pay off as the shift in our revenue mix is happening faster than we have anticipated.
We added 21 new customers to the Covisint platform in the third quarter and 21 agreements with existing customers. This continues a trend of major account expansion based on the capabilities of our platform to solve strategic problems across multiple use cases. The third quarter also featured significant groundwork on our partnership with Cisco. This partnership is a result of one of the most in-depth technical and business due diligence processes we have ever seen. It’s a validation of our platform, our go-to-market teams and technical capability and it will offer access to partners, customers and influencers that we wouldn’t otherwise reach.
Under the agreement, Cisco will embed Covisint technology within the Cisco Exchange platform to provide high value connected industry solutions to Cisco customers worldwide. The combined offerings will be available to customers within the coming weeks to support a variety of enterprise solutions for financial services, energy, healthcare and manufacturing. The platform will include enterprise grade business services that securely provision applications, data devices and processes through powerful cloud user experiences designed for both desktop and mobile users.
The partnership also leverages Covisint’s deep legacy in providing hardened identify management across highly federated operating environments that are typical in Internet of Things initiatives. The first customer uses our plan for the first half of 2014 in North America. This is a key step in our long-term strategy to work with channel partners for the services and distribution of our platform.
In Q3, we continue to aggressively acquire the people, processes and infrastructure needed to operate as a fully independent public company. We have added a seasoned general counsel and HR leadership as well as built out our finance staff. We have made a significant process in implementing the systems that will facilitate our separation from Compuware. As part of this process we have added three new independent Board of Directors members: Sam Inman, Dave Hansen and Philip Lay, three highly respected minds in technology, to Covisint’s Board. Their global experiences in creating and guiding winning strategies for Cloud and other technology companies will significantly contribute to Covisint’s execution as we enter the next phase of our growth as a public company. We are continuing to invest in and deliver new platform capabilities. As you know, the Covisint platform allows our customers to connect, engage and collaborate with our customers, business partners and suppliers. Extending our core confidences of security, integration and presentation this quarter, we released new features around ease-of-use, self administration and mobile alerting.
Our investments over the last three quarters have focused on enabling partners and customers to do more self administration, integration and development on the Covisint platform. We have also soft launched our Covisint predictive analytics solution into certain trial markets. This solution will allow health care organizations facing financial risk and accountability for overall patient health to identify and intervene with those patients at greatest risk for costly health issues, you will hear more about Covisint predictive analytics this quarter.
Turning to slide 4, we show the subscription revenue growth. As I had mentioned earlier, subscription revenues increased 21% year-over-year in the third quarter and for the first three quarters of the year, we have 20% growth year-over-year. We are pleased with the accelerating growth trend for our subscription revenue.