Covisint Corporation Announces Third Quarter Fiscal 2014 Earnings Results

By GlobeNewswire,  January 23, 2014, 04:01:00 PM EDT


  • Subscription revenue of $17.6 million up 21% year-over-year
  • Enterprise business unit revenue up 87% year-over-year
  • 42 new customer agreements signed in Q3
  • Signs Cisco partnership agreement; focus on Internet of Everything

DETROIT, Jan. 23, 2014 (GLOBE NEWSWIRE) -- Covisint Corporation (Nasdaq:COVS), provider of a leading cloud engagement platform, today announced financial results for the third quarter of its fiscal 2014 ended December 31, 2013.

"Covisint continues to produce strong gains in subscription revenue, with a 21% increase year-over-year in Q3," said David McGuffie, President and CEO of Covisint. "We are pleased with our subscription revenue growth, which was driven by both new and existing customer agreements. We expect that subscription revenue will continue to become a larger part of our revenue mix going forward, as the investments we have made in the platform for delivering repeatable, frictionless deployments is paying off for our customers."

Third Quarter 2014 Financial Highlights

Revenues: Revenue in the subscription and support segment increased 21% year-over-year to $17.6 million. Services revenue was $6.5 million, which was 30% lower year-over-year. Revenues for the third quarter increased by 1% year-over-year to $24.1 million.

Gross Profit: During the third quarter, GAAP gross profit was $10.4 million. GAAP gross margin for Q3 was 43%.

Non-GAAP gross profit for the third quarter of 2014 was $12.3 million. Non-GAAP gross margin was 51% for the quarter.

Earnings: In the third quarter, GAAP diluted earnings per share were ($0.22) compared to ($0.01) in the same quarter last year. Non-GAAP diluted EPS was ($0.10) compared to ($0.09) in the same quarter last year.

Third Quarter Fiscal 2014 Business Highlights

In the third quarter, Covisint:

  • signed a strategic agreement with Cisco. Under the agreement, Cisco will embed Covisint technology within the Cisco exchange platform to provide high-value solutions to customers worldwide;
  • announced a Covisint-sponsored webinarIs Your ACO's Data Secure and Integrated?, focused on keys to securing and sharing health information in the cloud. The webinar featured experts in security, cloud and healthcare discussing solutions to the data integration and security roadblocks faced by healthcare providers and payers;
  • announced the availability of the newest features of the Covisint platform. This new release enables enterprises to rapidly meet users' emerging mobility expectations for access to digital information and services whenever they want, wherever they want and on any device they choose;
  • released the results of a new study that highlights how the car-buying public perceives automotive value related to cloud-based, connected services. The Covisint-sponsored study reveals that, unlike traditional product and feature sets that are at highest value when new, the value of connected services starts at, essentially, zero, and grows over the lifetime of the vehicle. This concept turns automakers' past subscription pricing models and defined contract periods on their collective head;
  • released a study on software-as-a-service and cloud adoption priorities in the enterprise that showed how organizations struggle to obtain visibility and governance into SaaS usage, security and performance; and,
  • growth in the Enterprise business unit, providing solutions to enterprises outside of the automotive and healthcare verticals, revenue grew 87% on a year-over-year basis.

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Covisint monitors non-GAAP measures of non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and adjusted EBITDA. Each of these financial measures excludes the impact of certain items and, therefore, has not been calculated in accordance with GAAP. These non-GAAP financial measures exclude the impact of stock award compensation expense, the amortization of intangible assets and amounts incurred for capitalized internal software costs.

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 income or expenses, as well as the related tax effects, that are excluded in non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and adjusted EBITDA. 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 with 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 4:45 ET today to discuss these results. The U.S. toll free dial-in for the conference call is 1.800.230.1074 and the international dial-in number is 1.612.234.9960. No passcode is required. A live webcast of the conference call will also be available on the investor relations page of the company's website at investors.covisint.com. A conference call presentation is also available on the site.

For those unable to participate in the conference call, a replay will be available after the conclusion of the earnings call on January 23, 2014, through January 30, 2014. The U.S. toll-free replay dial-in number is 1.800.475.6701 and the international replay dial-in number is 1.320.365.3844. The replay passcode is 313361.

Covisint

Covisint provides a leading cloud engagement platform for creating and enabling new mission-critical external business processes. Our solutions enable organizations to connect, engage, and collaborate with the critical external audiences that define their success--including customers, business partners and suppliers. Covisint allows its clients to establish a secure, reliable, integrated presence in the cloud, and it provides the kind of engaging information experiences that people everywhere have come to expect. Learn more at www.covisint.com.

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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's 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 for our solutions; the seasonality of our business; our ability to manage our growth; the continued growth of the market for our solutions; competition from current competitors and new market entrants; our ability to penetrate new vertical markets; unpredictable macro-economic conditions; the loss of any of our key employees; the length of the sales and implementation cycles for our solutions; increased demands on our infrastructure and costs associated with operating as a public company; failure to protect our intellectual property; changes in current tax or accounting rules; 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.

COVISINT CORPORATION AND THE COVISINT OPERATIONS OF COMPUWARE CORPORATION
CONSDENSED AND CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
   AS OF DECEMBER 31, 
  2013 2012
 ASSETS     
 CURRENT ASSETS:     
 Cash   $ 54,770  $ -- 
 Accounts receivable, net   18,990  20,103
 Deferred tax asset, net   1,382  2,119
 Other current assets   6,267  5,681
 Due from parent and affiliates   2,046  --
 Total current assets   83,455  27,903
     
 PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION   3,460  2,658
     
 CAPITALIZED SOFTWARE AND OTHER INTANGIBLES ASSETS, NET   23,523  24,278
     
 OTHER:     
 Goodwill   25,385  25,385
 Deferred costs   7,336  10,666
 Deferred tax asset, net   135  --
 Other assets   858  1,594
 Total other assets   33,714  37,645
     
 TOTAL ASSETS   $ 144,152  $ 92,484
     
 LIABILITIES AND SHAREHOLDERS' EQUITY     
     
 CURRENT LIABILITIES:     
 Accounts payable   $ 2,114  $ 1,342
 Accrued commissions   1,586  1,371
 Deferred revenue   15,575  15,683
 Accrued expenses   3,617  3,171
 Total current liabilities   22,892  21,567
     
 DEFERRED REVENUE   13,935  20,377
     
 ACCRUED EXPENSES   21  547
     
 DEFERRED TAX LIABILITY, NET   2,891  5,301
 Total liabilities   39,739  47,792
     
 SHAREHOLDERS' EQUITY:     
 Common stock   --  --
 Parent company's net investment   --  44,692
 Additional paid-in capital   133,391  --
 Retained deficit   (29,019)  --
 Accumulated other comprehensive loss   41  --
 Total shareholders' equity   104,413  44,692
     
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 144,152  $ 92,484
     
 
COVISINT CORPORATION AND THE COVISINT OPERATIONS OF COMPUWARE CORPORATION
CONDENSED, COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
 (Unaudited)
         
  THREE MONTHS ENDED NINE MONTHS ENDED
  DECEMBER 31, DECEMBER 31,
         
  2013 2012 2013 2012
REVENUE  $ 24,109  $ 23,801  $ 72,735  $ 65,020
COST OF REVENUE 13,660 12,173  41,096  34,022
GROSS PROFIT 10,449 11,628  31,639  30,998
  43% 49% 43% 48%
OPERATING EXPENSES:        
 Research and development 3,533 480  9,362  898
 Sales and marketing 8,484 6,510  26,610  18,504
 General and administrative 6,724 4,787  21,338  13,867
 Total operating expenses  18,741 11,777  57,310 33,269
         
INCOME (LOSS) BEFORE INCOME TAX PROVISION  (8,292)  (149)  (25,671)  (2,271)
         
INCOME TAX PROVISION 22 31  59  88
         
NET INCOME (LOSS) $ (8,314) $ (180) $ (25,730) $ (2,359)
         
DILUTED EPS COMPUTATION        
Numerator: Net income $ (8,314) $ (180) $ (25,730) $ (2,359)
Denominator:        
 Weighted-average common shares outstanding 37,363 30,003  32,599 30,003
 Dilutive effect of stock awards  --   --   --   -- 
 Total shares  37,363  30,003  32,599 30,003
Diluted EPS $ (0.22) $ (0.01) $ (0.79) $ (0.08)
         
 
COVISINT CORPORATION AND THE COVISINT OPERATIONS OF COMPUWARE CORPORATION
NON-GAAP CONDENSED, COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
         
  THREE MONTHS ENDED NINE MONTHS ENDED
  DECEMBER 31, DECEMBER 31,
         
  2013 2012 2013 2012
REVENUE  $ 24,109  $ 23,801  $ 72,735  $ 65,020
COST OF REVENUE 11,812 10,897 35,345 30,530
GROSS PROFIT 12,297 12,904  37,390  34,490
  51% 54% 51% 53%
OPERATING EXPENSES:        
 Research and development 4,391 4,726 13,070 12,745
 Sales and marketing 7,289 6,368 21,223 18,112
 General and administrative 4,229 4,423 13,429 12,820
 Total operating expenses  15,909 15,517  47,722 43,677
         
INCOME (LOSS) BEFORE INCOME TAX PROVISION  (3,612)  (2,613)  (10,332)  (9,187)
         
INCOME TAX PROVISION 22 31  59  88
         
NET INCOME (LOSS) $ (3,634) $ (2,644) $ (10,391) $ (9,275)
         
DILUTED EPS COMPUTATION        
Numerator: Net income $ (3,634) $ (2,644) $ (10,391) $ (9,275)
Denominator:        
 Weighted-average common shares outstanding 37,363 30,003  32,599 30,003
 Dilutive effect of stock awards  --   --   --   -- 
 Total shares  37,363  30,003  32,599 30,003
Diluted EPS $ (0.10) $ (0.09) $ (0.32) $ (0.31)
         
 
COVISINT CORPORATION AND THE COVISINT OPERATIONS OF COMPUWARE CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP
(In Thousands, Except Per Share Data)
(Unaudited)
         
  THREE MONTHS ENDED NINE MONTHS ENDED
  DECEMBER 31, DECEMBER 31,
  2013 2012 2013 2012
Gross profit  $ 10,449  $ 11,628  $ 31,639  30,998
 Gross margin 43% 49% 43% 48%
Adjustments:        
Stock compensation expense - cost of revenue 137 1 735 2
 % of total revenue 1%  -- % 1%  -- %
Cost of revenue - amortization of capitalized software 1,711 1,275 5,016 3,490
 % of total revenue  7%  5%  7%  5%
         
Adjusted gross profit  $ 12,297  $ 12,904  $ 37,390  34,490
 Adjusted gross margin  51%  54%  51%  53%
         
         
         
  THREE MONTHS ENDED NINE MONTHS ENDED
  DECEMBER 31, DECEMBER 31,
  2013 2012 2013 2012
Cost of revenue 13,660 12,173  41,096  34,022
Adjustments:        
Stock compensation expense 137 1 735 2
Cost of revenue - amortization of capitalized software 1,711 1,275 5,016 3,490
         
Cost of revenue, non-GAAP 11,812 10,897 35,345 30,530
         
  THREE MONTHS ENDED NINE MONTHS ENDED
  DECEMBER 31, DECEMBER 31,
  2013 2012 2013 2012
Research and development 3,533 480  9,362  898
Adjustments:        
Capitalized internal software costs (1,016) (4,247) (4,364) (11,848)
Stock compensation expense 158 1 656  1
         
Research and development, non-GAAP 4,391 4,726 13,070 12,745
         
  THREE MONTHS ENDED NINE MONTHS ENDED
  DECEMBER 31, DECEMBER 31,
  2013 2012 2013 2012
Sales and marketing 8,484 6,510  26,610  18,504
Adjustments:        
Stock compensation expense 1,118 52  5,154  120
Amortization of customer relationship agreements 77 90  233  272
         
Sales and marketing, non-GAAP 7,289 6,368 21,223 18,112
         
  THREE MONTHS ENDED NINE MONTHS ENDED
  DECEMBER 31, DECEMBER 31,
  2013 2012 2013 2012
Administrative and general 6,724 4,787  21,338  13,867
Adjustments:        
Stock compensation expense  2,495  342  7,869  982
Amortization of trademarks  -- 22 40 65
         
Administrative and general, non-GAAP 4,229 4,423 13,429 12,820
         
  THREE MONTHS ENDED NINE MONTHS ENDED
  DECEMBER 31, DECEMBER 31,
  2013 2012 2013 2012
Net income (loss) (8,314) (180) (25,730) (2,359)
Adjustments:        
Capitalized internal software costs (1,016) (4,247) (4,364) (11,848)
Stock compensation expense  3,908  396  14,414  1,105
Amortization of intangibles 1,788 1,387 5,289 3,827
         
Net income (loss), non-GAAP (3,634) (2,644) (10,391) (9,275)
         
  THREE MONTHS ENDED NINE MONTHS ENDED
  DECEMBER 31, DECEMBER 31,
  2013 2012 2013 2012
Diluted EPS (0.22) (0.01) (0.79) (0.08)
Adjustments:        
Capitalized internal software costs (0.03) (0.14) (0.13) (0.39)
Stock compensation expense 0.10 0.01 0.44 0.04
Amortization of intangibles 0.05 0.05 0.16 0.12
         
Diluted EPS, non-GAAP (0.10) (0.09) (0.32) (0.31)
         
 
COVISINT CORPORATION AND THE COVISINT OPERATIONS OF COMPUWARE CORPORATION
CONSDENSED, COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
 (Unaudited)
  NINE MONTHS ENDED
  DECEMBER 31,
  2013 2012
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:    
 Net income (loss) $ (25,730) $ (2,359)
 Adjustments to reconcile net income (loss) to cash provided by operations:    
 Depreciation and amortization 6,423 4,738
 Deferred income taxes 43 (91)
 Stock award compensation 14,413 1,105
 Other  -- 60
Net change in assets and liabilities, net of effects from currency fluctuations:    
 Accounts receivable 6,464 677
 Other assets 1,891 2,182
 Accounts payable and accrued expenses (376) (323)
 Deferred revenue (5,730) (6,004)
 Net cash provided by operating activities  (2,602) (15)
     
CASH FLOWS USED IN INVESTING ACTIVITIES:    
 Purchase of:    
 Property and equipment (1,936) (636)
 Capitalized software (4,364) (11,848)
 Net cash used in investing activities  (6,300) (12,484)
     
CASH FLOWS USED IN FINANCING ACTIVITIES:    
 Net investment from parent company  -- 12,881
 Cash payments from parent company 53,208  --
 Cash payments to parent company (57,942)  --
 Proceeds from Initial Public Offering 68,448  --
 Initial public offering costs (1,397)  (382)
 Net proceeds from exercise of stock awards 332  --
 Net cash used in financing activities  62,649 12,499
     
EFFECT OF EXCHANGE RATE CHANGES ON CASH 57  --
     
NET CHANGE IN CASH AND CASH EQUIVALENTS  53,804  --
     
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 966  --
     
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 54,770 $ --
     
CONTACT: Media Contact
         Brad Schechter, bschecht@covisint.com, 313.227.1290

         Investor Relations Contact
         866.319.7659, investors@covisint.com

Source: Covisint

This article appears in: News Headlines

Referenced Stocks: COVS


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